Lawrence v Ciantar; Ciantar v Lawrence [2019] NSWSC 464 | Case summary

Supreme Court of NSW|2019-02-05|Before: Henry J, Windeyer J

Foster's Brewing Group Ltd [1994] 2 VR 32 WIN Corporation Pty Ltd v Nine Network Australia Pty Ltd (2016) 341 ALR 467 Texts Cited: JW Carter, Contract Law in Australia (7th ed, 2018, LexisNexis Butterworths) NC Seddon, RA Bigwood, Cheshire & Fifoot Law of Contract (11th ed, 2017, LexisNexis Butterworths) Category: Principal judgment Parties: Wayne Lawrence (Plaintiff/Cross-Defendant) Paul William Ciantar (First Defendant/Second Cross-Claimant) Alice Sammut (Second Defendant/First Cross-Claimant) Representation: Counsel: J Kelly SC w D McDonald-Norman (Plaintiff/Cross-Defendant) E Peden w J Mee (First and Second Defendants/First and Second Cross-Claimants)

Solicitors: Hedges Legal (Plaintiff/Cross-Defendant) McLean & Associates (First and Second Defendants/First and Second Cross-Claimants) File Number(s): 2017/336803

Background

On 25 July 2013, Warringah Council (Council) approved development application DA 2013/0397 for a three-lot sub-division at the Property (DA) with the proposed development described as demolition works and sub-division of land. The approval required the development works to be carried out in compliance with the approved plans, which included amongst other things, the installation of drainage pipes for drainage works, the construction of a retention tank and a driveway, and the sub-division.
Mr Ciantar and Ms Sammut wanted to sell the Property and advertised it for sale, identifying that it had DA approval to subdivide into three blocks.
Mr Lawrence inspected the Property on 2 March 2014, following which he, Mr Ciantar and Ms Sammut entered into negotiations for Mr Lawrence to purchase the Property and undertake what were described as the "sub-division works". It was not disputed that references to "sub-division works" in this and other correspondence meant the works required to be undertaken in accordance with the DA and approved plans. Those works are also referred to as the DA works in these reasons.
During the negotiations in relation to a possible sale of the Property, Mr Lawrence was made aware that Mr Ciantar and Ms Sammut had a mortgage over the Property with Suncorp in the amount of $1 million, and that the costs of the demolition and sub-division works contemplated by the approved development were estimated to be around $435,000.
By 29 August 2014, the proposal being discussed between the parties was a form of joint venture arrangement pursuant to which Mr Lawrence offered to construct and complete the physical works of the sub-division in return for a one-third equity share in the Property.
Mr Lawrence prepared a draft agreement and requested his solicitors, Walker Hedges & Co, forward it to the solicitors for Mr Ciantar and Ms Sammut, T H Walker. This was done on 22 September 2014 under cover of a letter which stated that the parties had "reached agreement to enter into a joint venture for the development" of the Property.
What followed was an exchange of correspondence between the solicitors for Mr Lawrence and Mr Ciantar and Ms Sammut before the parties entered into a written agreement on 12 November 2014. As some of this correspondence is relevant to construing the agreement entered into on 12 November 2014, I have referred to it in some detail below.
On 25 September 2014, Mr Lawrence's solicitor wrote providing more detail regarding Mr Lawrence's proposal for a joint venture arrangement for the development of the Property by way of sub-division, and thereafter the sale of the lots created upon registration of that sub-division. The letter identified eight points regarding the proposal, including the following: "(d) There is a development approval to a sub-division of the property into three blocks, the conditions of which development approval require certain works to be carried out on the property before the Council will release the sub-division plan. The estimated costs of those subdivision works excluding works associated with the; repositioning of a sewer man hole; upgrading of the stormwater pipe through to the back boundary of the property; and the upgrading of the existing stormwater detention tank, is approximately $445,000.000. As his contribution to the joint venture, our client [Mr Lawrence] will be responsible for the costs of the sub-division works, excluding the aforesaid three items up to the amount of $445,000.00. (e) In consideration of our client [Mr Lawrence] paying the cost of the sub-division works up to a maximum sum of $445,000.00 our client is to be granted a one-third equitable share of ownership in the whole of the property, subject to the mortgage loan to Suncorp."
The solicitor for Mr Ciantar and Ms Sammut replied on 8 October 2014 adopting the paragraph numbering in Mr Lawrence's solicitor's letter dated 25 September 2014 and agreeing to a number of the points made. In response to points (d) and (e), the letter stated: "(d) The agreed estimated cost is $435,000.00. (e) It was agreed that in consideration of your client paying the cost of the subdivision works estimated to be $435,000.00 then your client is to be granted a 1/3 share of ownership in the whole of the property subject to the mortgage loan to Suncorp. The estimated cost of $435,000.000 is only an estimate. If costs exceed $435,000.000 then your client is to bear the excess. It was agreed that it would be your client's [Mr Lawrence's] obligation to complete the work. Your client will achieve a 1/3 equity in the net value of the properties only on completion of all works to be specified by a Private Certifier and within a timetable to be agreed."
Mr Lawrence's solicitor replied by letter dated 17 October 2014 noting and agreeing to a number of the points made, including the estimated costs of the work being $435,000. In response to point (e), the letter said: "(e) Noted and agreed as to the estimated costs of the works being $435,000.00 and that, in return for paying for the costs of those works, our client will receive a 1/3 share of ownership in the whole of the property subject to the mortgage to Suncorp. In relation to the statements that our client is liable for the total costs and, if such costs exceed $435,000.00, our client will be liable for the total amount, our client instructs that he will agree to that proposition but on the basis that either the agreed sum of $435,000.00 or, if the actual cost of the works exceeds that, then the amount of the actual costs is to be a loan by him to the joint venture which is to be repaid prior to any profit distributions being made in line with the repayments to be made to your clients of the contributions to the joint venture."
In response to a request for proof that Mr Lawrence had $435,000 available to pay for the costs of the sub-division works, the letter noted that Mr Lawrence had been licensed as a builder for in excess of twenty-five years and went on to say: "He is offering to undertake performance of building work as required under the terms of development approval at his own cost and expense and is undertaking the liability for same …Our client is undertaking the liability for performing the works and, if he does not comply with that obligation, he will be in breach of his contractual obligation. Your clients will have the security of that and the fact that our client will be committing funds to performance of the works from the beginning and, therefore, your clients' property will be enhanced by the value of those works."
On 24 October 2014, Mr Ciantar and Ms Sammut's solicitor sent a letter in response (24 October letter), summarising the agreement reached to date and outstanding points. In response to point (e), the letter stated in bold that: "It was agreed that in consideration of your client paying the cost of subdivision works estimated to be $435,000.00 then your client is to be granted a 1/3 share of ownership in the whole of the property subject to the mortgage loan to Suncorp. The estimated cost of $435,000.00 is only an estimate. If the costs exceed $435,000.00 then your client is to bear the excess. It was agreed it would be your client's obligation to complete the work. Your client will receive a 1/3 equity in the net value of the properties only on completion of all works to be specified by a Private Certifier and within a timetable to be agreed. The excess is to be at the cost of Mr Lawrence but if a four lot subdivision is achieved, then the excess will be borne equally by the three parties."
The letter also noted that the parties were agreed that their equity contributions would be treated as loans and specified the order of priority for repayment of those loans from the sale of properties after the sub-division was completed and funds became available. A draft joint venture agreement was enclosed with the letter for comment and identified the purpose of the venture as being to develop the Property in accordance with the DA but did not include any of the other terms that had been agreed between the parties or outstanding items that were outlined in 24 October letter.
On or about 29 October 2014, Mr Lawrence, Mr Ciantar and Ms Sammut met without their lawyers. They decided not to proceed with the draft joint venture agreement having identified some issues with it, including concerns about registering a business and GST, and agreed to proceed with an arrangement on the terms they discussed at the meeting.
At that meeting, a handwritten letter dated 29 October 2014 was prepared by the parties and then sent by Mr Ciantar and Ms Sammut to their solicitor. Mr Lawrence also received a copy of the letter. That letter stated that the parties had agreed to proceed on "the following basis in similarity to what you have set out in" the 24 October letter and then listed details of the agreement in seven paragraphs.
In cross-examination, Mr Lawrence could not recall why the handwritten letter was drafted by the parties in circumstances where they had been represented by lawyers. He rejected the proposition that he suggested they prepare an informal document over which he would have control. Mr Ciantar and Ms Sammut did not give any evidence on this issue. Whatever the reason, the parties proceeded on that basis and a typed version of the details contained in the handwritten letter was prepared. In his evidence, Mr Lawrence describes this typed document as a summary of the terms and conditions that had been agreed in meetings held between himself, Mr Ciantar and Ms Sammut.
On or around 12 November 2014, Mr Lawrence, Mr Ciantar and Ms Sammut met, reviewed and executed the typed document (the 12 November Agreement), which Mr Lawrence again describes in his evidence as a "summary". In view of its importance in the proceedings, it is necessary to set out the terms of the 12 November Agreement in full: "This agreement is between: - Wayne Lawrence - Paul Ciantar - Alice Sammut The parties named above have agreed to proceed on the following basis in similarity to what was set out in TH Walker's letter dated 24/10/14. 1. A share transfer for 1/3 share of 5 Angophora crescent Forestville, that document will be executed by the above parties and the original will be jointly held by TH Walker and Steven hedges and a copy shall be provided to each party. 2. A unregistered second mortgage as to the works of $435,000 which is applicable to the existing D/A approval, which will be executed by the relevant parties. 3. A caveat is to be provided in favour of the Mortgage listed in point 2. By signing this agreement Paul Ciantar and Alice Sammut consent to the lodgement of a caveat by Wayne Lawrence on the title to the property at 5 Angophora Crescent, Forestville in support of this agreement to secure any monies by Wayne Lawrence or his nominees. 4. On completion of the works and the certificate which supports those works are completed in accordance with the D/A the original transfer will be provided to Wayne Lawrence and Registered, appointing Wayne Lawrence as 1/3 owner of the sad property [sic]. 5. In reference to the other issues which we believe to be separate to paragraphs 1-4 the parties will within the 3 months of signing the documents referred to in 1-4 will be in a position to execute the document as to any variation should be agreed as to the original D/A i.e. the fourth block 6. The parties have agreed that the said works in the D/A as described in the sum of $435,000 that Wayne Lawrence shall proceed to carry out as described below prior to any major works described in the D/A. - Removal of the carport - Breezeway - Removal of surplus weeds and bushes in preparation of the construction certificate and any other works that would not conflict with the issue of a construction certificate as described under councils requirements. - Establish the requirements as to any variations in the manhole, and the 150mm drain pipe - Wayne Lawrence to provide the first of two checks [sic] of $10,000 payable to the 5 Angophora crescent mortgage account at Suncorp bank. 7. The parties will prior to proceeding with the construction works within 3 months or at a time manually [sic] agreed upon reach any further variation or agreement. Signed by each of the parties Wayne Lawrence Paul Ciantar Alice Sammut"
On 23 December 2014, Mr Lawrence's solicitor sent the caveat contemplated by the 12 November Agreement to the solicitor for Mr Ciantar and Ms Sammut. The caveat described the nature of the interest as an equitable charge of the land, which was to "secure moneys advanced…for the performance of works upon the property at the request of the registered proprietors pursuant to an oral agreement entered into between the parties to charge the property as security for payment of moneys so advanced".
The letter dated 23 December also stated that a draft of an agreement setting out the proposed terms of the venture that the parties were entering into would be forwarded for review. As circumstances transpired, that draft agreement did not eventuate.
From 15 January 2015, Mr Lawrence's contractor licence was under restriction which meant that he was unable to enter into contracts caught by the Home Building Act with a value over $20,000.00 (incl GST): see Home Building Act s 4.
On 16 January 2015, Mr Ciantar and Ms Sammut's solicitor returned the signed caveat to Mr Lawrence's solicitor.
During January and February 2015, Mr Lawrence obtained a quote for electrical work on the Property and communicated with MJM Consulting Engineers in relation to the engineering of the driveway and the drainage design required for the DA.
Sometime prior to 20 March 2015, Mr Lawrence submitted a principal certifying authority form to the Council notifying them that sub-division work was proposed and due to commence on 20 March 2015. The form identified Mr Lawrence as the builder.
On 26 March 2015, the parties met at the offices of Mr Ciantar and Ms Sammut's solicitor and signed a document dated 26 March 2015 which was identical in terms to the 12 November Agreement. In these reasons, I refer to that document as the 26 March Agreement.
On that day, the parties also executed a deed of loan, a transfer for a one-third share and mortgage in relation to the Property in favour of Mr Lawrence. The mortgage was granted as security for amounts owing under the deed of loan. The deed of loan included the following term: "2.1: The Lender [Mr Lawrence] agrees to advance and the Borrowers [Mr Ciantar and Ms Sammut] agree to take the advance of the Principal Sum [being the amount of $435,000.00], which Principal Sum the parties agree is to be used to pay for the subdivision works to be carried out on the Property."
Copies of the executed deed of loan, mortgage, transfer and 26 March Agreement were sent to Mr Lawrence's solicitor under cover of a letter from the solicitor for Mr Ciantar and Ms Sammut dated 8 April 2015. The 8 April letter stated that minutes of the meeting of the parties held on 26 March 2015 would be prepared and record that the due date for completion of the sub-division work and registration of the plan was to be 30 November 2015 and would set out how the debt was to be repaid "on settlement of the project". It appears that those minutes were not prepared.
In April 2015, Mr Lawrence was again in contact with MJM Consulting Engineers in relation to the engineering of the driveway and the drainage design required for the DA.
On 15 June 2015, Mr Lawrence applied to Council for a Construction Certificate in relation to the works required by the DA. In the builder's details section, Mr Lawrence listed his name and builder's license number. The application included copies of documents obtained by Mr Lawrence in relation to the DA for the release of the Construction Certificate, being the drainage design report and driveway plans from MJM Consulting Engineers, an email from Ausgrid Australia regarding power supply, confirmation of the supply of natural gas and an email from MGP Building and Infrastructure Services Pty Ltd regarding the s 73 Compliance Certificate requirements.
On 12 October 2015, Mr Lawrence's solicitor wrote to the solicitor for Mr Ciantar and Ms Sammut seeking an extension of time for completion of the sub-division works by six months to 30 May 2016. In support of the request, the letter referred to delays as a consequence of wet weather, variations to the development terms and conditions and council delays, which in total exceeded twenty-eight weeks.
At the hearing, Mr Ciantar and Ms Sammut's counsel submitted that delays of twenty-eight weeks could not be substantiated, particularly as that figure was predicated on an assertion that wet weather affected the Property for twenty-two weeks. I accept that submission. Mr Lawrence's oral evidence on this issue was not convincing and was also inconsistent with the documentary evidence (including his diaries and a Bureau of Meteorology listing of wet weather over that period) which did not support the existence of twenty-two weeks of wet weather or delays of the type referred to which could have justified an extension of time of twenty-eight weeks as at 12 October 2015.
On 20 October 2015, Mr Lawrence's solicitor wrote seeking a further six-month extension of time for the completion of the "building works" to November 2016. By letter dated 18 December 2015, Mr Lawrence's solicitor asserted that the parties had agreed that the construction period had been extended to 30 May 2016.
On 22 December 2015, the Council issued Mr Lawrence with a construction certificate numbered 2015/0306 in relation to the works referrable to the DA (Construction Certificate). The Construction Certificate described the works as "demolition works and sub-division of land".
There was evidence at the hearing that Mr Lawrence had done some works at the Property, including demolishing the breezeway and deck, undertaking some earthworks and had prepared to demolish a cabin, but it was not clear whether those works were commenced prior to receiving the Construction Certificate on 22 December 2015 or after that time. In his affidavit dated 23 November 2017, Mr Lawrence stated: "I was unable to commence any works with regards to the subdivision until I had the construction certificate for the property".
On 21 January 2016, the parties and their solicitors met to discuss Mr Lawrence's request for an extension of time to complete the works. The parties agreed that Mr Lawrence would provide details and specifications of the work to be completed within the extended timetable. On 25 February 2016, Mr Lawrence provided information relating to work he had done to engage contractors, apply for a Construction Certificate and engage surveyors to draw up plans for a four lot sub-division.
Around this time, the parties were discussing the option of amending the DA to provide for a four-lot sub-division. Mr Ciantar and Ms Sammut applied to Warringah Council to remove a tree for this purpose. The Council refused that application on 20 April 2016.
At the request of Mr Ciantar and Ms Sammut, on 15 June 2016 Mr Lawrence's solicitor wrote to Council regarding the refusal of the application to remove the tree. There does not appear to have been any further dealings with Council in relation to that matter following that letter, nor evidence that the parties were pursuing the option of amending the DA to provide for a four lot sub-division until a letter from Mr Ciantar and Ms Sammut's lawyer sent over a year later.
On 21 June 2016, Mr Lawrence, as "developer", applied to Sydney Water for a s 73 Compliance Certificate.
The evidence before the Court did not indicate that any works relating to the DA and approved plans had been undertaken at the Property by or on behalf of Mr Lawrence during the period from 16 June 2016 to 24 January 2017.
On 25 January 2017, Mr Ciantar and Ms Sammut wrote to Mr Lawrence raising concerns that "the works being undertaken [to finalise the sub-division at the Property] have been prolonged unnecessarily". The letter also asked for accounting and other information in relation to the works undertaken to date and an outline of a schedule for any incomplete work not yet undertaken.
This was followed by a letter from Mr Ciantar and Ms Sammut's new solicitor, McLean & Associates, to Mr Lawrence's solicitor on 22 February 2017 noting the concern that the works Mr Lawrence had been engaged to undertake and finalise had been unsatisfactorily protracted and requested financial and other records in relation to the work undertaken at the Property.
On 15 March 2017, Mr Lawrence's solicitor responded asserting that Mr Lawrence had completed all works required to be done "pursuant to the terms of the agreement with the exception of the installation of the stormwater detention [sic] tank and concrete driveway", and that Mr Lawrence was and had been for some time ready to proceed with finishing the works but had not done so under the instruction of Mr Ciantar and Ms Sammut as they wished to pursue a four-block sub-division.
There was a dispute at the hearing as to whether Mr Lawrence had completed all the sub-division works with the exception of the driveway and installation of the stormwater retention tank as at the date of that letter. In cross-examination, Mr Lawrence conceded that he had not.
Further, there is no evidence before the Court that supports the statement in the 15 March 2017 letter that Mr Ciantar and Ms Sammut instructed Mr Lawrence not to proceed with the DA works as they wished to pursue a four-block sub-division.
Mr Ciantar and Ms Sammut's solicitor responded on 20 March 2017 noting that the works had not been completed pursuant to the agreement and again asked for the supporting documents. A follow up letter was also sent on 19 April 2017.
On 2 May 2017, Mr Ciantar and Ms Sammut's solicitor wrote again and noted that no response had been received to the various requests for accounting and other documents. The letter advised that Mr Ciantar and Ms Sammut were interested in pursuing a further arrangement with Mr Lawrence to facilitate a sub-division of the Property into four lots as opposed to three and stated that, while further negotiations in relation to a four lot sub-division were foreshadowed, Mr Ciantar and Ms Sammut expected Mr Lawrence to continue with his monthly contributions towards the Suncorp mortgage. No response was received to that letter.
On 17 May 2017, Mr Ciantar and Ms Sammut's solicitor advised that, unless they heard back from Mr Lawrence in relation to the information and documentation requested, they would proceed to infer that the business relationship between the parties had come to an end and would require Mr Lawrence to comply with certain directions in relation to works and materials on the Property by 16 June 2017.
By letter dated 18 May 2017, Mr Lawrence's solicitor responded asserting that the only agreement entered into by the parties comprised the document dated 12 November, together with correspondence passing between the firms in September and October 2014 and raised a number of points said to support that position.
Mr Ciantar and Ms Sammut responded on 2 June 2017 and proposed that Mr Lawrence provide the requested accounting, a proposal for removing the tree for the purposes of a four block sub-division or, if the tree could not be removed, Mr Lawrence's position vis-à-vis a three-lot sub-division.
On 19 July 2017, by letter marked "without prejudice" from their solicitor to Mr Lawrence's solicitor, Mr Ciantar and Ms Sammut indicated that they had been approached by a third party who was interested in purchasing the Property "as is" and invited Mr Lawrence to propose a payout figure or consideration for his withdrawal of the caveat. The request was made without prejudice to the defendants' right to have a quantity surveyor assess the value of the work completed to date should that course become necessary.
Mr Lawrence responded on 28 July 2017 advising that he would require a sum of $1,322,500 in exchange for him terminating the arrangements, providing a discharge of the mortgage, withdrawing the caveat, and acknowledging that his one-third beneficial interest in the Property was extinguished.
By letter from his solicitor dated 23 August 2017, Mr Lawrence asked Mr Ciantar and Ms Sammut whether they wanted to bring the arrangement to an end (in which case the Property would either be sold and the proceeds distributed in accordance with the terms of the arrangements between the parties or Mr Ciantar and Ms Sammut could pay Mr Lawrence $1,322,500), or whether they wanted Mr Lawrence to proceed with the works for a three-block sub-division. As an alternative, Mr Lawrence offered to proceed with a four-block sub-division.
On 2 September 2017, Mr Ciantar and Ms Sammut served a notice of rescission dated 1 September 2017 on Mr Lawrence. The notice of rescission was purported to be given pursuant to the Home Building Act and asserted that: 1. the work required to be undertaken pursuant to the contract, being the November 2014 and March 2015 Agreements, was residential building work for the purposes of the Home Building Act; 2. the November 2014 and March 2015 Agreements did not contain cooling off warnings, which were required to be given to Mr Ciantar and Ms Sammut; and 3. on 30 August 2017, Mr Ciantar and Ms Sammut became aware that the contract should have contained a cooling off warning.
On 12 September 2017, Mr Ciantar and Ms Sammut, by letter from their solicitor to Mr Lawrence's solicitor, sought to terminate the deed of loan and also requested that a lapsing notice be issued in relation to the caveat which they alleged had no further operation.
Mr Lawrence's solicitor responded to that letter on 12 October 2017 asserting that Mr Ciantar and Ms Sammut's conduct amounted to repudiation and advised that Mr Lawrence would be commencing proceedings in this Court.
On 7 November 2017, Mr Lawrence commenced these proceedings by way of summons. The matter first came before the Court in relation to the operation of the caveat over the Property. On 9 November 2017, Lindsay J extended the operation of the caveat until further order. On 14 December 2017, Darke J refused Mr Ciantar and Ms Sammut's application to discharge Lindsay J's order.
Mr Ciantar and Ms Sammut have filed a cross-summons seeking various declarations and an order for rectification, although it is accepted that their claims for relief are largely responsive to Mr Lawrence's case.
As of the hearing date: 1. the works contemplated by the DA and approved plans have been completed, with the major works (including the construction of the driveway, retention tank and drainage works) having been undertaken by a third party builder retained by Mr Ciantar and Ms Sammut under a Home Building Contract dated 12 May 2018; 2. Lot 1 of the Property has been sold off the plan to a third party purchaser; and 3. Mr Lawrence has not advanced the amount of $435,000 to Mr Ciantar and Ms Sammut pursuant to the deed of loan or otherwise.
At the start of the hearing, Mr Lawrence made an application for leave to file an amended summons seeking an alternative order that Mr Ciantar and Ms Sammut hold the Property on constructive trust for him to the extent of his contributions to the development of the Property. Mr Ciantar and Ms Sammut objected, and Mr Lawrence did not pursue his application and so that alternative claim was not pressed.

Mr Lawrence's submissions

Mr Lawrence submitted that there was one contract, which comprised the 12 November Agreement and the 26 March Agreement. He stated that his obligations were limited to contributing the funds to pay for the cost of the DA works and to carrying out forms of works excluded from the definition of residential building work, which means that the contract between the parties was not caught by the Home Building Act. In consideration for contributing the funds and undertaking the limited works, he was to acquire a one-third equity interest in the Property.
He also submitted that the parties did not enter into a building contract, under which he was to be paid $435,000 for carrying out building work, but entered into a joint venture arrangement, under which Mr Lawrence was the "payer" rather than the "payee".
Mr Lawrence referred to a number of matters in the 24 October letter, which he claimed were objective indicators that the parties intended this to be a joint venture arrangement (with Mr Lawrence contributing equity to the value of $435,000) rather than a building contact. These were: 1. the parties' agreement that the estimated market value of the Property was $1.7 million; 2. the Property being subject to an existing mortgage to Suncorp in the amount of $1 million; 3. the parties' agreement that the DA works were estimated to be $435,000; 4. Mr Lawrence being responsible for the cost of the DA works; 5. the agreement as to how the equity contributions of the parties would be paid out in terms of priority once funds were available from the sale of the properties after the subdivision was complete; and 6. a range of other provisions referred to which are said to be typical of joint ventures and inconsistent with a building contract.
Mr Lawrence also relied on the terms of the 12 November and 26 March Agreements as pointing to a joint venture rather than a building contract, including the terms that related to the preparation of an unregistered second mortgage and caveat, the provision for a transfer to Mr Lawrence upon completion of the works and the certificate supporting those works, and Mr Lawrence's initial contribution of $10,000 towards the mortgage in favour of Suncorp.
While accepting that it was poorly drafted, Mr Lawrence argued that the terms of the 12 November Agreement were not ambiguous. He submitted that the only work he was required to carry out were those identified in the first four points under cl 6, being the removal of the carport and breezeway, removal of surplus weeds and bushes (and any other works in preparation for the sub-division that would not conflict with the issue of a construction certificate) and establishing requirements for the manhole and 150mm drain pipe. In these reasons, I refer to the works listed in the first four points under cl 6 of the 12 November Agreement and the 26 March Agreement as the 'preparatory works'.
In Mr Lawrence's submission, cl 6 of the 12 November Agreement prohibited him from carrying out the "major" DA works, which he accepted included the construction of a driveway, retention tank and retaining wall and drainage pipes. He also pointed to cl 7, which had the effect, in his submission, of making it the obligation of all the parties to decide what, when and by whom any future construction works were to be carried out on the Property.
Mr Lawrence also submitted that one must look to "what was contracted to be done, not what was done" in considering whether the 12 November and 26 March Agreements were a contract under the Home Building Act. Here, he said, Mr Lawrence contracted only to carry out the preparatory works and the Court cannot look to any work he completed after the 12 November Agreement was executed.
He further submitted that any conduct after the 26 March Agreement was of no value in construing the contract between the parties as it must be construed in the light of the surrounding circumstances that were known to the parties at the time it was entered into: Centennial Coal Company Ltd v Xstrata Coal Pty Ltd (2009) 76 NSWLR 129 at 147.

Mr Ciantar and Ms Sammut's submissions

Mr Ciantar and Ms Sammut submitted that the relevant contract was partly oral and partly in writing. The written contract comprised a number of documents, including the 12 November Agreement and the 24 October letter to which it refers. They pointed to the caveat lodged in relation to the Property which refers to an oral agreement in support of their submission that oral terms existed between the parties. They also said that the contract was varied by the parties' conduct over the course of their relationship.
Mr Ciantar and Ms Sammut submitted that the proper construction of the contract between the parties obliged Mr Lawrence to carry out and complete the demolition and sub-division works contemplated by the DA that were current at the time of the 12 November Agreement or any further or other variation thereof, with his reward upon completion being an interest in the Property.
They said that the terms of the 12 November and 26 March Agreements were ambiguous. To clarify that ambiguity, the Court should have regard to evidence of the surrounding circumstances to construe that document, noting that such evidence may be relied upon even in the absence of ambiguity. They relied on evidence of the negotiations leading to the formation of the 12 November Agreement as providing the context, aim and purpose of the contract between the parties.
They also submitted that evidence of Mr Lawrence's subsequent conduct was admissible to determine the terms of the contract and argued that it supported their interpretation including, as it did, Mr Lawrence's requests for extensions of time to complete the works, his repeated use of his building licence number in documentation and referring to himself as a "builder" when communicating with third parties.
Mr Ciantar and Ms Sammut also relied on Mr Lawrence's evidence that he carried out building works at the Property by himself and with others, and the evidence he gave in cross-examination, including where he conceded that his role was to do the sub-division. They also point to the assertions in correspondence that Mr Lawrence had undertaken certain works and was ready, willing and able to proceed with the works necessary to obtain the sub-division, and admissions by him that the work was or would be carried out pursuant to the contact between the parties, including in the letter from his solicitor dated 18 May 2017.
Mr Ciantar and Ms Sammut submitted that the obligation on Mr Lawrence to carry out the DA works means that the contact was caught by the Home Building Act. This was because the agreed value of the DA works exceeded the prescribed amount and involved residential building work under the Home Building Act, including as it did electrical work, plumbing work for drainage, the construction of a retention tank, construction of a retaining wall and construction of a driveway.

Did the contract between the parties oblige Mr Lawrence to carry out and complete the DA works?

The contract between the parties

I prefer Mr Ciantar and Ms Sammut's submission that the relevant contract between the parties was partly in writing, comprised of the 12 November Agreement and the 24 October letter to which it refers, and partly oral.
Mr Lawrence's position that the relevant contract was limited to the terms set out in the 12 November Agreement is inconsistent with his own evidence which described both the handwritten letter dated 29 October 2015 and the 12 November Agreement as a "summary" of the terms agreed by the parties.
An objective review of the terms of the 12 November Agreement also supports the defendants' submission and Mr Lawrence's evidence that it was a summary of terms, given its poor drafting and the fact that numerous words and concepts are missing from the document. By way of example: 1. cl 1 does not identify which party was to receive a 1/3 share in the Property; 2. cl 2 does not identify the party in whose favour the second mortgage will be created, and relates this mortgage "to the works of $435,000", which does not make sense in isolation; 3. cl 3 does not specify the value of the "monies by Wayne Lawrence" or whether they are to be paid, advanced or loaned by Mr Lawrence; 4. words are misspelt in cl 4 (as they are in cls 6 and 7) and there is no specificity as to the works or certificate being referred to; 5. cl 5 refers to other unspecified issues and is grammatically difficult to follow; 6. cl 6 refers to "works in the D/A…that Wayne Lawrence shall proceed to carry out as described below prior to any major works described in the D/A", but does not specify what the major works described in the DA are. The clause also goes on to refer to the provision of "checks" [sic] by Mr Lawrence relating to the Suncorp mortgage, which on no view could amount to being part of the works required "in the D/A"; 7. cl 7 refers to "the construction works", a term which is not used elsewhere in the Agreement and could encompass all the works in the DA, including the preparatory works; and 8. the document does not refer to other items referred to in the 24 October letter, including matters which Mr Lawrence accepted were agreed terms of the venture between the parties, including the manner in which equity contributions of the parties were to be treated, how funds from the sale of properties would be applied in order of priority, and the date by which the works were to be completed.
Mr Lawrence's submission that the relevant contract is limited to the terms set out in the 12 November and 26 March Agreement is also not supported by other contemporaneous documents and the conduct of the parties. That evidence points to the existence of other terms, such as the order of priority for repayment of loans made and the date for completion of the work.
The term relating to the priority for repayment is not referred to in the 12 November Agreement but was included in the 24 October letter and was accepted by Mr Lawrence to be a term of the contract between the parties during submissions at the hearing.
The term relating to the date for completion is also not referred to in the 12 November Agreement but is evidenced by the 24 October letter, which refers to the completion of the works within a timetable to be agreed; the letter dated 8 April 2015 which refers to the 26 March 2016 meeting of the parties and the due date for completion of 30 November 2015; and the conduct of Mr Lawrence in seeking extensions of time for completion of the works beyond 12 months to 30 May 2016 and then to 30 November 2016.

Interpretation of the contract

The principles relating to the construction of a contract were set out in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 and can be summarised as follows: 1. in construing a contract, the obligations of the parties are to be "determined objectively", by reference to the "text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose" (at 116); 2. in determining what a reasonable business person would have understood the terms of a contract to mean, the Court will consider "the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract" (at 116); 3. while this may be possible by reference to the contract alone, it may be necessary to consider "events, circumstances and things external to the contract" where they are "known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating" (at 116-117); and 4. often construction is possible by reference to the contract alone (at 116).
Applying those principles to this case, the proper interpretation of the contract between the parties is that Mr Lawrence was obliged to carry out and complete the DA works, either by himself or supervising others, in return for an interest in the Property.
Mr Lawrence's interpretation, which was he was only required to undertake the preparatory works and that he would obtain a one-third interest in the Property in circumstances where he had not carried out or completed construction of the DA works and had not advanced $435,000 to Mr Ciantar or Ms Sammut is not, in my opinion, consistent with the terms of the 12 November Agreement when one considers its text, context and purpose or what a reasonable businessperson would understand the terms to mean.
Starting with its text, it was accepted at the hearing that the 12 November Agreement was not well drafted, having been prepared by the parties themselves and without aid from their solicitors. Mr Lawrence's counsel described the drafting as "inelegant" and having a "homemade touch". He also accepted that cl 6 included an "amateurish garbled sentence", a "jumble" and that the "grammar in the chapeau leaves a lot to be desired".
It was also accepted at the hearing that cl 6 of the 12 November Agreement obliged Mr Lawrence to carry out the preparatory works. The question is, when read as a whole, did it also oblige Mr Lawrence to carry out, either by himself or through others, the major DA works in order to obtain a one-third equity in the Property? In my view, it did.
As a matter of construction, cl 6 should be read as requiring Mr Lawrence to carry out all the DA works, with an immediate obligation on him to carry out the preparatory works prior to the "major works" described in the DA. The clause refers to the "said works in the D/A as described in the sum of $435,000 that Wayne Lawrence shall proceed to carry out", thereby supporting the first object of the clause being to identify who should carry out the totality of the DA works, which was Mr Lawrence.
Cl 6 then goes on to state "as described below prior to any major works described in the D/A", thereby identifying the other object of the clause being to identify what works Mr Lawrence should complete first, namely the preparatory works and the payments in support of the mortgage, prior to carrying out the major DA works.
I accept that cl 6 does not prescribe a date by which Mr Lawrence was to carry out the major DA works and cl 7 could be interpreted as not requiring him to proceed to start the major DA works for 3 months or if the parties agreed any further variation or agreement. This does not mean, and I do not accept the submission of Mr Lawrence's counsel that the words in clauses 6 and 7 provide that, the only works which Mr Lawrence was contractually obliged to carry out, either at that time or at all, were the preparatory works.
In my opinion, those clauses do not limit the scope of Mr Lawrence's contractual obligations such that he was only responsible for completing the preparatory works and that he would receive a one-third interest in the Property once all the DA works were completed by someone other than him and he funded those DA works. The clauses simply canvass the timing of the works to be carried out and completed by Mr Lawrence, with the preparatory works to be undertaken first and the major DA works to follow after 3 months, with the possibility of a variation being agreed between the parties that the works may change. The evidence does not support there having been any variation to the nature of the works to be undertaken but indicates the parties varied the timing for completion of the DA works from 30 November 2015 to 30 May 2016.
I also reject Mr Lawrence's submission that the terms of the 12 November Agreement, including cl 6, are unambiguous despite being difficult to follow. There is ambiguity in the terms of the 12 November Agreement. That ambiguity arises from the poor drafting outlined in paragraph [82] above and the difficulty in ascertaining the meaning of its terms in the absence of a consideration of the evidence of the surrounding circumstances leading up to the 12 November Agreement known to the parties. That evidence is relevant to understanding the context, aim and subject matter of the contract, and is admissible.
Evidence of surrounding circumstances known to the parties may, in some circumstances, be used to construe a contract: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179; Cherry v Steele-Park (2017) 96 NSWLR 548 at 562. The position was summarised by Barrett AJA in WIN Corporation Pty Ltd v Nine Network Australia Pty Ltd (2016) 341 ALR 467 at 477: "Evidence of prior negotiations is admissible to the extent that it establishes objective facts known to both parties and the subject matter of the contract. Conversely, evidence reflecting the subjective intentions of the parties is, in accordance with long-standing authority, necessarily inadmissible for the purpose of determining the meaning of the contract (unless it demonstrates knowledge of surrounding circumstances). In recent times, the High Court has revisited the distinction between impermissible recourse to the parties' subjective intentions and expectations and permissible regard to objective matters known to the parties. In Victoria v Tatts Group Ltd (2016) 328 ALR 564; 90 ALJR 392; [2016] HCA 5 (Victoria) at [51], the Court unanimously approved the formulation of principle advanced by three members of the Court (French CJ, Nettle and Gordon JJ) in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) (2015) 256 CLR 104; 325 ALR 188; [2015] HCA 37 (Mount Bruce) (at [46]-[51]) that, as a general principle of construction, the rights and liabilities of parties under a contractual provision fall to be determined by objective consideration of its text, context and purpose. The relevant enquiry is to be conducted on the footing of what a "reasonable businessperson" would have apprehended the terms to mean in light of the particular language used by the parties, the circumstances addressed by the contract and its commercial purpose. Although the Court was of the view that this process would not uncommonly be possible without reference to evidence of surrounding circumstances, it acknowledged that regard could be had to such evidence if, for example, it assisted in establishing the objective facts known to the parties and thereby elucidated with greater precision the commercial purpose or subject matter of the contract". [Footnotes omitted.]
The correspondence between the parties and their solicitors during the negotiations prior to signing the 12 November Agreement, including the 24 October letter, provides evidence of objective facts known to the parties. It is also evidence of the communicated negotiating position of the parties from time to time, a reflection of the commercial purpose of the contract and constitutes "specific information as to the genesis of the transaction". It is, therefore, admissible to assist in interpreting the contract between the parties: Cherry v Steele-Park (2017) 96 NSWLR 548 per Leeming JA at 569; Boreland v Docker [2007] NSWCA 94 per Beazley JA (as her Honour then was); International Air Transport Association v Ansett Australia Holdings Limited (2008) 234 CLR 151 per Gleeson CJ at 160.
Evidence of the prior negotiations relied upon by Mr Ciantar and Ms Sammut is also relevant and admissible in accordance with the principle enunciated by the High Court in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 (at 352) that: "The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning."
This is to be contrasted with evidence of a party's uncommunicated subjective intention or understanding of what the contract meant: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179. Evidence of what Mr Lawrence believed the relevant facts to be and what he understood the contract to mean, such as the matters outlined in paragraph 68 of his affidavit sworn 6 April 2018, is not admissible.
The admissible evidence of the surrounding circumstances shows that the genesis of the 12 November Agreement was Mr Lawrence's approaching Mr Ciantar and Ms Sammut in response to their advertising the Property for sale with a DA in place, in circumstances where Mr Ciantar and Ms Sammut were not themselves going to carry out the DA works.
The evidence also shows that Mr Lawrence was a licensed builder since at least 1973 and that, prior to entry into the 12 November Agreement, Mr Lawrence held himself out to Mr Ciantar and Ms Sammut to be a licensed builder and someone who was experienced in undertaking sub-divisions, had his own equipment and who could construct the sub-division and complete the physical works within six to twelve months. For example: 1. Mr Lawrence's offer to purchase the Property in a letter dated 3 March 2014 (to the real estate agent acting on behalf of Mr Ciantar and Ms Sammut, Trent Brewer at Ray White Group, Terry Hills) stated that he: "would be seeking to commence works as soon as possible and as required complete those said works within 6 months subject to weather conditions and unforeseen obstacles within the subdivision itself… I have been conducting subdivisions and developments since 1967. I am a licensed builder but in the last 30 years have been concentrating on subdivisions. I have my own equipment to enable that there are no delays in commencing the said works forthwith"; 1. the proposal from Mr Lawrence dated 29 August 2014 provided that Mr Lawrence was to "construct the subdivision under a 'Contract of works' with the normal requirements that fall within those works within 12 months" and "in an amount agreed as $435,000", with Mr Lawrence receiving a "one-third equity share in the Property on completion of the physical works of the subdivision"; 2. correspondence between the parties which referred to "Wayne to build houses or renovate on all blocks and sell" (see the email dated 4 September 2014 from Mr Ciantar which was forwarded to Mr Lawrence on 8 September 2014); it being Mr Lawrence's obligation to complete the sub-division works (see the letter dated 8 October 2014), and Mr Lawrence offering to undertake performance of the building work as required by the DA and undertaking the liability for performing the works (see letter dated 17 October 2014); and 3. the draft agreement prepared by Mr Lawrence and sent to Mr Ciantar and Ms Sammut on 22 September 2014 which referred to Mr Lawrence as the "Builder", the "Contract for the said works as agreed $445,000" and that the "Contract Works will form the equity 1/3 share in the" Property. It also described the works as consisting of "obtaining the Construction Certificate…commencement of all the works and completion of all the works as per the Construction Certificate", the completion of the works was when "physical work has been completed and ready for final inspection by Council" and "the Contract for the works will be 12 months". The draft agreement also referred to the possibility that the DA would be amended to include a fourth lot, and an amendment to the retention tank and the boundaries of each lot.
The material referred to above, in which Mr Lawrence refers to himself as the "builder" and paying for and doing "the subdivision works", is consistent with the aim and purpose of the transaction being that Mr Lawrence would be responsible for carrying out and completing the DA works (which were estimated to cost $435,000) in order to receive a one-third interest in the Property. It is not consistent with Mr Lawrence having to simply put up the funds to pay for the DA works and only undertaking the preparatory works.
There is also the 24 October 2014 letter which included at page 3 of the letter the following: "It was agreed that in consideration of your client paying the cost of subdivision works estimated to be $435,000.00 then your client is to be granted a 1/3 share of ownership in the whole of the property subject to the mortgage loan to Suncorp. The estimated cost of $435,000.00 is only an estimate. If the costs exceed $435,000.00 then your client is to bear the excess. It was agreed it would be your client's obligation to complete the work. Your client will receive a 1/3 equity in the net value of the properties only on completion of all works to be specified by a Private Certifier and within a timetable to be agreed."(emphasis added)
Some of the earlier correspondence between the parties, being the letters dated 8 October 2014 and 17 October 2014, may not provide for a clear acceptance of the notion that it would be Mr Lawrence's obligation to complete the DA works. However, they do not clearly reject that possibility and the 12 November Agreement is expressed to proceed in similarity to what was set out in 24 October letter, which clearly provided for such an obligation by the statement "It was agreed it would be your client's obligation to complete the work". The "work" referred to, and for which Mr Lawrence had the obligation to complete, is the DA works, the estimated cost of which was $435,000.
An interpretation of the contract between the parties, and cl 6 of the 12 November Agreement, which provides for the obligation to carry out the DA works on Mr Lawrence in order for him to achieve a one-third equity interest is entirely consistent with, and similar to, the 24 October letter.
The objective indicators relied upon by Mr Lawrence are not inconsistent with this interpretation. What Mr Lawrence brought to the arrangement between the parties was his expertise as a builder and developer of sub-divisions, not as a financier.
The language used by the parties in the 12 November Agreement and the commercial purpose and objects to be secured by that Agreement are also consistent with Mr Lawrence's contractual obligation being to carry out and complete the sub-division works in accordance with the DA at an agreed cost of $435,000 in return for an interest in the Property and it not being the responsibility of Mr Ciantar and Ms Sammut. A reasonable businessperson would not, in my opinion, have understood the terms of the contract between the parties to be otherwise.
Mr Lawrence's submission that the contract between the parties was a joint venture arrangement and he was not there as a builder/developer to carry out the DA works is also inconsistent with the contemporaneous documentary evidence, being the handwritten letter dated 29 October 2014, which indicates that the parties had eschewed a joint venture agreement due to concerns with registering a business for GST.
Mr Lawrence relies on the 26 March Agreement as confirming he was only required to carry out the preparatory works. The 26 March Agreement is in identical terms to, and so should be interpreted in a manner consistent with, the 12 November Agreement. The 26 March Agreement should also be considered in the light of the 8 April 2015 letter, which identified that the parties had agreed at the 26 March meeting the date of completion of the works as 30 November 2015, and the subsequent conduct and communications of the parties referred to below.
In that context, the 26 March Agreement should be construed as a restatement of the parties' intent to proceed along the lines previously agreed, being in essence to undertake a three lot sub-division of the Property with Mr Lawrence contractually obliged to carry out and complete the sub-division works at the agreed value of $435,000 in return for his one-third share of the Property, rather than limiting Mr Lawrence's contractual obligation to carry out the preparatory works only and provide funding for the balance of the DA works.

Post 26 March Agreement conduct

Evidence of post-contractual conduct cannot usually be used to construe the terms of a contract: Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 at 582 per Gummow, Hayne and Kiefel JJ.
Where the conduct "provides evidence of facts, the assertion of which is against the interests of one party, it may be admissible as an admission by that party"; but "to the extent that the evidence reveals an opinion as to a question of law rather than fact, the admission may be irrelevant or valueless": Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150 at [121] per Basten JA (with whom Gleeson JA agreed; see also per Beazley P at [79]).
It has also been recognised that evidence of post-contractual conduct may be relevant and admissible to interpreting a contract or finding its terms where a contract is not wholly in writing: Lyn International Pty Ltd v Marcolongo [2011] NSWCA 303 at [141]; NC Seddon, RA Bigwood, Cheshire & Fifoot Law of Contract (11th ed, 2017, LexisNexis Butterworths) at 449.
The issue in the present case is not whether the parties had come to an agreement, but what the terms of that agreement were. That is a question of fact. As I have previously found, the contract between the parties was not wholly in writing.
Evidence of Mr Lawrence's conduct and communications subsequent to the 26 March Agreement is admissible as evidence of facts, the assertion of which is against his interests. That evidence also supports the defendants' submission that the contract between the parties obliged Mr Lawrence to undertake and complete construction of the DA works. It also points overwhelmingly to the conclusion that Mr Lawrence accepted and conducted himself on the basis that the contract between the parties (as at 12 November 2014 and 26 March 2015) provided for him to be responsible for the cost and carrying out of the DA works, and that his obligations were not limited to the provision of funds and carrying out the preparatory works.
On 15 June 2015 Mr Lawrence, as the "builder", applied to the Council for a Construction Certificate. If Mr Lawrence's contractual obligation was, at that time, limited to carrying out the preparatory works only, there would have been no reason for him to apply for that certificate, which was not needed for the preparatory works but was required to undertake the major DA works. In Mr Lawrence's own words, the Construction Certificate was needed "to commence the subdivision works" and he was "unable to commence any works with regards to the subdivision until he had" that certificate.
Mr Lawrence also sought extensions of time to complete the 'sub-division work'. Had it been the case that Mr Lawrence was not required to carry out the DA works, there would have been no need for him to seek an extension of time for their completion.
Mr Lawrence first requested an extension of time on 12 October 2015, to extend the date of completion to 30 May 2016. He subsequently made a second request to allow for completion by November 2016. Based on the evidence, I conclude that the time for completion of the DA works was varied by agreement between the parties to 30 May 2016 but not to November 2016.
The day on which this was agreed was not the subject of any pleading and I accept the time may not be very clear on the evidence, but it is not essential to identify the precise point in time at which it came about: PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd (2007) 20 VR 487 at 489; Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 97,326 at 8.
There was also evidence that Mr Lawrence was carrying out the works required by the sub-division. Mr Lawrence accepted in cross-examination that he was there to "do a sub-division and supervise a sub-division", being to do and supervise the DA works which would enable the sub-division to proceed [T51:11]. He also accepted that he personally undertook work in installing electrical poles [T64:1]; earthworks [T67:34]; installed storm water pipes [T68:47-8] and prepared the ground for the driveway [T70:28-33].
Further, in various letters Mr Lawrence, through his solicitors, positively asserted that he had carried out the DA works on the Property and had the responsibility to do so. The letter from Mr Lawrence's solicitor to Mr Ciantar and Ms Sammut' solicitor dated 18 May 2017 stated: "the terms of the [A]greement are quite clear, our client has undertaken to perform works necessary to obtain the subdivision approval to three blocks only and thereupon obtain from the Council release of the deposited plan to allow registration of same at LPI NSW The cost of those works, no matter what they may be, is our client's liability. If by performing any of the works himself, our client can reduce the cost of the work that is to his benefit…"
In a letter dated 28 July 2017 from Mr Lawrence's solicitor to Mr Ciantar and Ms Sammut's solicitor, it was asserted that: "Pursuant to the terms of that Contract our client was granted a mortgage to secure the agreed value of works which he was to perform at his cost and expense and our client to this day holds that mortgage, albeit unregistered, but as you note, secured by way of a Caveat against title to the property… Again, pursuant to the terms of the Contract, our client commenced development work…our client has completed all works required under the terms of the development approval for a three-block subdivision with the exception of construction of the driveway and stormwater detention take. … Our client remains ready, willing and able to complete the construction works required for the driveway and the stormwater detention tank, however, if he does so that will mean that the property will be limited to a three-block subdivision and not be able to be amended to the four-block subdivision.
There is no suggestion in that or any other letter that anyone other than Mr Lawrence was to be responsible for carrying out and completing the sub-division works. To the contrary, his evidence was that he accepted he was there to "do the sub-division".
Mr Lawrence submitted that the letter from Mr Ciantar and Ms Sammut's solicitors dated 2 May 2017 represented an affirmation of the terms of the 12 November Agreement, which provided that Mr Lawrence was only contractually obliged to carry out the preparatory works.
I do not accept that the 2 May 2017 letter supports that interpretation. The letter refers to Mr Ciantar and Ms Sammut being interested in pursuing a further arrangement with Mr Lawrence to facilitate a four-lot sub-division, which is not inconsistent with Mr Lawrence having been contractually obliged to carry out, in the meantime, the DA works required for the three-lot sub-division. The letter also came after correspondence in which concerns had been raised about Mr Lawrence's delay in completing the DA works.
Accordingly, I am satisfied that the terms of the contract between the parties, which comprised in part the 12 November Agreement, provided that Mr Lawrence was contractually obliged to carry out and complete, by himself or by supervising others, the DA works in return for which it was intended that he was to receive a one-third interest in the Property, and that the DA works were required to be completed by Mr Lawrence by 30 May 2016.
If I was wrong about my interpretation, I would accept the defendants' alternative submission that the contract between the parties was varied to the effect that Mr Lawrence was obliged, by himself or by supervising others, to undertake and complete construction of the DA works, not just the preparatory works.
A contract may be varied by conduct and can be established by inference or implication: Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd (2007) 20 VR 487 at 489; New South Wales Land and Housing Corporation v Diab [2015] NSWCA 133; Vroon BV v Foster's Brewing Group Ltd [1994] 2 VR 32.
In my view, the evidence of Mr Lawrence's conduct and the communications between the parties after 12 November 2014 (outlined above) supports the defendants' alternative submission that the parties agreed that Mr Lawrence would have the obligation, as the builder and developer with the relevant expertise and skills, to carry out and complete the DA works by himself or by others by 30 May 2016.

Was the contract between the parties caught by the Home Building Act?

The relevant provisions of the Home Building Act are as follows: 6 Application of requirements for contracts (1) Sections 7-7E apply to a contract under which the holder of a contractor licence undertakes: (a) to do, in person, or by others, any residential building work or any specialist work, or (b) to vary any such undertaking to do residential building work or any specialist work or the way in which any such work is to be done. 7 Form of contracts (other than small jobs) (1A) This section applies to a contract only if the contract price exceeds the prescribed amount or (if the contract price is not known) the reasonable market cost of the labour and materials involved exceeds the prescribed amount. The prescribed amount is the amount prescribed by the regulations for the purposes of this section and is inclusive of GST. (1) A contract must be in writing and be dated and signed by or on behalf of each of the parties to it. (2) A contract must contain: … (g) in the case of a contract to do residential building work - a conspicuous statement setting out the cooling-off period that applies to the contract because of section 7BA, … 7BA Cooling-off period: person may rescind a contract for residential building work within 5 days without penalty … (1) A person who contracts with the holder of a contractor licence for residential building work to be done by the holder of the contractor licence may, by notice in writing, rescind the contract: (a) in the case of a person who has been given a copy of the signed contract - at any time before the expiration of 5 clear business days after the person is given a copy of the contract, or (b) in the case of a person who has not been given a copy of the signed contract within 5 days after the contract has been signed - at any time before the expiration of 5 clear business days after the person becomes aware that he or she is entitled to be given a copy of the signed contract. 7D Interests in land under contract (1) A contract does not give the holder of a contractor licence or any other person a legal or equitable estate or interest in any land, and a provision in a contract or other agreement is void to the extent that it purports to create such an estate or interest. (2) Accordingly, the holder of a contractor licence or any other person may not lodge a caveat under the Real Property Act 1900 in respect of an estate or interest prohibited by subsection (1). (3) However, subsection (1) does not apply to a provision in a contract that creates a charge over land if: (a) the land the subject of the charge is land on which the contract work is, or is to be, carried out, and (b) the charge is in favour of the holder of a contractor licence who is a party to the contract, and (c) the charge is created to secure the payment to the holder of the contractor licence by another party to the contract of money due under the contract, but only if a court or tribunal has made an order or judgment that such payment be made, and (d) in the case of a charge over land under the Real Property Act 1900 - the party to the contract against whom the judgment or order is made is the registered proprietor of the land. 10 Enforceability of contracts and other rights (1) A person who contracts to do any residential building work, or any specialist work, and who so contracts: (a) in contravention of section 4 (Unlicensed contracting), or (b) under a contract to which the requirements of section 7 apply that is not in writing or that does not have sufficient description of the work to which it relates (not being a contract entered into in the circumstances described in section 6 (2)), or (c) in contravention of any other provision of this Act or the regulations that is prescribed for the purposes of this paragraph, is not entitled to damages or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, and the contract is unenforceable by the person who contracted to do the work. However, the person is liable for damages and subject to any other remedy in respect of a breach of the contract committed by the person. … Schedule 1 2 Definition of "residential building work" (1) In this Act, residential building work means any work involved in, or involved in co-ordinating or supervising any work involved in: (a) the construction of a dwelling, or (b) the making of alterations or additions to a dwelling, or (c) the repairing, renovation, decoration or protective treatment of a dwelling (3) Each of the following is excluded from the definition of residential building work: (i) supervision only of residential building work: … (iii) by any other person, is all the residential building work is being done or supervised by the holder of a contractor licence authorising its holder to contract to do that work, … (j) demolition work, 3 Definition of "dwelling" (1) In this Act, dwelling means a building or portion of a building that is designed, constructed or adapted for use as a residence (such as a detached or semi-detached house, transportable house, terrace or town house, duplex, villa-home, strata or company title home unit or residential flat). (2) Each of the following structures or improvements is included in the definition of dwelling if it is constructed for use in conjunction with a dwelling: (k) driveways, paths and other pavings, … (l) retaining walls, … (m) agricultural drainage designed or constructed to divert water away from the footings of a dwelling or a retaining wall…

Did the DA works include residential building work within the meaning of the Home Building Act?

The DA works included, amongst other works, the construction of a driveway, the construction of a retaining wall (as part of a retention tank) and drainage works in accordance with approved plans. Those plans included the Indesco plans dated 11 February 2013 lodged with the DA (Indesco plans), and the MJM Consulting Engineers Driveway and Drainage Design plans provided to Council on 15 June 2015, which formed part of the Construction Certificate application (MJM Driveway & Drainage plans).
The work involved in co-ordinating and supervising the construction of the driveway, retaining wall and drainage works in accordance with those plans falls within the definition of residential building work under the Home Building Act as those types of works fall within the definition of dwelling: sch 1, cls 3(2)(k), (l) and (m); but only if the driveway, retaining wall and drainage works were to be constructed for use in conjunction with a dwelling: Home Building Act sch 1 cl 3(2). This is the case whether or not the dwelling was yet in existence: Home Building Act sch 1, cl 3(4).
Mr Lawrence's submission on this issue, that the DA works called for "extensive roadworks" or a private road within and between dwellings, the construction of which was not caught by the Home Building Act, is not supported by his evidence. He conceded in cross-examination that the documents relating to the DA works referred to a driveway as opposed to a private road.
The submission is also inconsistent with the Indesco plans and the MJM Driveway and Drainage plans, both of which refer to a "driveway".
A review of the Indesco plans and the MJM Driveway and Drainage plans indicates that the proposed driveway and drainage works were intended to be constructed for use in conjunction with the existing residence on the Property, as well as the proposed garage and proposed house on Lot 1.
The driveway is identified on those plans as being constructed on the northern side of the Property and is accessible by the proposed houses on proposed lots 1 and 3. The driveway terminates next to the garage alongside the existing residence on proposed lot 2. The drainage pipes are identified on the MJM Driveway and Drainage plans as running alongside and up to the existing residence and the proposed house on proposed lot 1.
I am, therefore, satisfied that the driveway and the drainage works were to be constructed for use in conjunction with a dwelling within the meaning of the Home Building Act.
The Indesco plans relating to the construction of the retention tank are not as clear but show that it was being constructed on the land below proposed lot 2. Presumably, the retention tank was to be used in conjunction with the existing residence and the proposed houses on proposed lots 1 and 3, but I am unable to determine that issue with any certainty based on the evidence and submissions made by the parties.
In any event, having regard to my findings in relation to the construction of the driveway and drainage works, I am satisfied that the DA works included works to be done, or co-ordinated or supervised for, the construction of a dwelling and were, therefore, residential building works as defined by the Home Building Act.
The parties also made submissions regarding the nature of the preparatory works in the event the Court found that the contract between the parties only obliged Mr Lawrence to carry out those more limited works. Having regard to my finding that Mr Lawrence's contractual obligation extended beyond the preparatory works, it is not necessary for me to come to a conclusion on that issue. I have dealt with it briefly below.
Mr Lawrence submitted that the preparatory works were not residential building works as they comprised demolition and other works which did not involve building work of any description within the terms of the Home Building Act.
Mr Ciantar and Mr Sammut submitted that the preparatory works would be caught by the Home Building Act as the definition of residential building work extends to "work of a preparatory nature" and the preparatory works were causally connected to the DA works.
Works of a preparatory nature may come within the definition of residential building work under the Home Building Act if they are works in readiness or preliminary to residential building works: (Grygiel v Baine [2005] NSWCA 218 at [57] (Basten JA); Syed Ahmad Shoaib Ali Pty Ltd v Jandson Pty Ltd [2018] NSWCATAP 228 at [276]).
The preparatory works described in the first two items of the 12 November Agreement, being the demolition of the carport and breezeway, do not, in my view, fall within the scope of preliminary works or works in readiness of the type considered by the cases referred to and would not be caught by the Home Building Act. They are clearly in the nature of demolition work, which is specifically excluded from the definition of residential building work: sch 1 cl 2(3)(j) Home Building Act.
The preparatory works described as part of item 3 and in item 4 however, are in a different category. Item 3 refers to "any other works that would not conflict with the issues of a construction certificate as described under councils requirements" and item 4 states "establish the requirements as to any variations in the manhole and the 150mm drain pipe". They appear, from their description, to be in readiness for, and causally connected to, the DA works - particularly item 4 which relate to drainage works. In addition, they are not items excluded by the definition of 'residential building work' in the Home Building Act.

Did the contract exceed the prescribed amount?

Section 7D of the Home Building Act, which relates to the form of building contracts (other than those for small jobs), applies to a contract if the contract price or the reasonable market value of the labour and materials involved in the works exceeded the amount prescribed by the Home Building Act at that time of $20,000.
Mr Lawrence submitted that there was no contract price and no evidence that the costs of the preparatory works exceeded $20,000. The defendants relied on the referenced work in the 12 November Agreement to the agreed value of $435,000, as evidencing that the contract price was over the $20,000 prescribed amount.
As there was no sum payable to Mr Lawrence, I accept that there was no contract price under a contract of works as contemplated by sch 1 cl 1 of the Home Building Act.
There is material, however, that supports the conclusion that the likely market cost of the DA works exceeded $20,000. The plans identify that construction of the driveway and retention wall and the drainage works were significant components of the DA works, which had an agreed value estimate of $435,000. There is also the initial budget cost plan prepared for Ms Sammut on 14 August 2013, which estimated the cost of the driveway works to be $134,756, and the 2018 building contract to complete the sub-division works, which included construction of the driveway and retention wall, was at a cost of $183,700.
In those circumstances, I am satisfied that the reasonable market cost of the labour and materials involved in the construction of the driveway, retaining wall and drainage works, which were part of the DA works which had to be carried out and completed by Mr Lawrence under the contract, would have exceeded the prescribed amount of $20,000.

Did the contract fall within the terms of s 6 of the Home Building Act?

Mr Lawrence relied on the approach of Windeyer J at first instance in Trend Properties Pty Limited v Casa Maria Pty Limited (Supreme Court (NSW), Windeyer J, 20 August 1998, unrep) (Trend Properties v Casa Maria), which was accepted by the Court of Appeal in Casa Maria Pty Limited v Trend Properties Pty Limited [1998] NSWCA 53, in support of a submission that the 12 November Agreement was not a contract under which Mr Lawrence undertook to do residential building work.
This was because, he submitted, if the contract between the parties obliged Mr Lawrence to "carry out" the major DA works, it did not specify how they were to be carried out and it was open for Mr Lawrence to arrange for someone else to have carried them out under his supervision. As supervision of residential building works by the holder of a contractor licence is excluded from the definition of 'residential building work' under sch 1 cl 2(3)(i)(iii) of the Home Building Act, the Court cannot (according to the plaintiff) be satisfied that the contract was caught by the Home Building Act.
In Trend Properties v Casa Maria Windeyer J concluded, and the Court of Appeal accepted, that a joint venture development agreement was not a contract to do residential building work under the Home Building Act because, at the time the agreement was signed, it did not specify or provide a general outline of what works were to be carried out. There were no plans of the building work which was required to be done and no price to be paid for the work.
In finding that the Home Building Act did not apply in that case, Windeyer J also relied on a term of the agreement that made clear the party was not to do the work itself, but was to have the work done by a licensed builder under its supervision.
The position in this case is very different to the position in Trend Properties v Casa Maria. Unlike the facts in Trend Properties v Casa Maria, the facts in this case support the conclusion that the contract in this case comes within the terms of s 6 of the Home Building Act. This is for the following reasons.
First, unlike the position in Trend Properties v Casa Maria, at the time the 12 November Agreement was executed the nature of DA works to be undertaken pursuant to the agreement was known to the parties. Detailed plans outlining the works to be undertaken had been obtained by that time, including the Indesco plans and sub-division plans prepared for the purposes of obtaining the DA. While updated engineering plans, including the MJM Driveway & Drainage plans, had been prepared under Mr Lawrence's direction after the 26 March Agreement was executed, those plans were generally consistent with the Indesco and sub-division plans, including as they did plans for the driveway, the retaining wall and drainage works at the Property.
Second, while Mr Lawrence was not going to be paid for works in the usual way, he expected to receive a financial reward as the "builder". Here, the parties intended that Mr Lawrence would obtain his financial reward in the form of a one-third equity share in the Property, in return for carrying out and completing the DA works.
Third, as I have found, the proper construction of the contract between the parties was that Mr Lawrence was obliged to pay for, carry out and complete the DA works by 30 May 2016 in order to obtain a one-third equity interest in the Property. There was, therefore, a contractual obligation on Mr Lawrence to do the work, whether by himself or supervising others, and specificity around what was to be done and by when it was to be done.
Fourth, unlike the agreement considered in Trend Properties v Casa Maria, this contract did not expressly provide that Mr Lawrence was not to do the DA works himself and that they were to be done by a licensed builder under his supervision.
Fifth, the evidence indicates that Mr Lawrence proposed and accepted that he would be responsible for undertaking performance of the DA works, and conducted himself accordingly. As noted in paragraphs [101]-[102], [116], and [121]-[122] above, the correspondence between the parties prior, and subsequent, to the 12 November Agreement referred to Mr Lawrence as the "builder", and noted that he would "undertake performance of the building works", it would be "his obligation to complete the works", that he "was unable to commence any works with regards to the sub-division until [he] had the Construction Certificate" and that "he had completed all works required under the terms of the development approval for a three-block sub-division with the exception of construction of the driveway and stormwater detention [sic] tank". He also sought extensions of time to complete the sub-division works. There is also the evidence of him personally carrying out works, as referred to in paragraph [120] above.
In the light of that evidence, I do not accept Mr Lawrence's submission that there was nothing to suggest that he would carry out the DA works himself, and that it should not be inferred that he would so personally.
It may have been possible for Mr Lawrence to have supervised another licensed builder to carry out the work involved in constructing the driveway and retaining wall, the drainage works and the balance of the DA works. If he did, the contract may not have been subject to the Home Building Act as his supervision of the works would likely be caught by the exclusion from the definition of residential building work: sch 1 cl 2(3) Home Building Act.
Yet, other than statements Mr Lawrence made during cross-examination to the effect that he was going to supervise the sub-division works, saying he was to "Like go and do the things and everything. Organise it" and "organise and pay contractors", there was no evidence that Mr Lawrence had, or was in the process of, arranging others to do the major DA works under his supervision.
I was also unimpressed with Mr Lawrence's oral evidence. Aspects of his evidence during cross-examination were unconvincing, such as his attempts to justify the construction of the driveway as a private road contrary to the approved plans, his attempt to justify his request for an extension of time on the basis that there were 22 weeks of wet weather during the relevant period, and his attempt to justify why the contract was not caught by the Home Building Act by asserting that he did not "do houses" but accepting that he did "sub-divisions".
He also failed to answer simple questions about his past work experience, obfuscated on whether he had produced all his past diaries (when it was apparent that he had not produced them despite an earlier notice to produce), could not explain why he changed the reference to his occupation in his affidavits from developer/builder to development consultant and could not state whether he had ever sued someone for an interest in land.
I consider the documentary record to be more accurate than Mr Lawrence's oral evidence, particularly where there was any inconsistency between them.
Further, any suggestion that Mr Lawrence was labouring under a misapprehension about his obligations under the contract or the operation of the Home Building Act is surprising given his experience as a builder and developer for over 30 years, his evidence that he was familiar with the Home Building Act, and the fact that he has been involved in other legal proceedings and given evidence in court more than 10 times. In any event, Mr Lawrence's failure to appreciate the applicability of the Home Building Act is irrelevant to whether the contract between the parties is caught by that Act and does not provide any proper basis to interpret it in the way he contended at the hearing.
Finally, I am not persuaded by Mr Lawrence's submission that his construction of the contract should be preferred because, if I were to find against him, the Home Building Act would render unlawful his claimed interest in the Property and right to damages.
In making that submission, Mr Lawrence said the Court should take into account the state of the law and that the parties are unlikely to have intended to agree to something unlawful or legally ineffective: Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251 at 269. He proposed that a lawful construction of the contract, being one which meant that the Home Building Act did not apply, should be preferred to a meaning which rendered it unlawful: Bayside Council v Corp Constructions Pty Ltd [2017] NSWCA 120 at [71].
In response to that submission, Mr Ciantar and Ms Sammut argued that their interpretation of the contract should be preferred because accepting Mr Lawrence's interpretation would allow unlicensed and uninsured builders to take advantage of home owners and negate the very purpose of the legislative scheme (which is designed to protect such consumers).
I accept that when construing a contract the Court may have regard to the unreasonableness of the result and where the words of a contract are capable of two meanings, one of which is lawful and the other unlawful, the former construction should be preferred: Bayside Council v Corp Constructions Pty Ltd [2017] NSWCA 120 at [71]; L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235; Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251 at 269.
But, unlike those cases, this matter does not involve a situation where I have found that the words of the contract are open to two different meanings. For the reasons previously outlined, there is one interpretation that should properly be given to the contract having looked at the language used, the circumstances addressed, its commercial purpose and objects, the conduct of the parties and what a reasonable bystander would have understood it to mean. This case is also not a situation in which the potential illegality arises due to the need for consent or approval of a third party, as was the case in Bayside Council v Corp Constructions Pty Ltd [2017] NSWCA 120.
The proper interpretation of the contract between the parties at the time it was entered into, being on 12 November 2014, is that Mr Lawrence was contractually obliged to carry out and complete the DA works in return for a one-third share in the Property.
In my view, an agreement under which a person contracts to carry out and complete works in return for a reward is a contract under which that person undertakes to do those works himself or by others unless there is evidence to show they were only supervising the works. Here, there was no such evidence.
At the date of the 12 November Agreement, Mr Lawrence was the holder of a builder license, which was a contractor licence for the purposes of the Home Building Act.
Accordingly and for the above reasons, I am satisfied that the contract between the parties was one under which Mr Lawrence undertook to do residential building work himself or by others and was caught by the terms of s 6(1)(a) of the Home Building Act.
In coming to that conclusion, I recognise that the contract in this case, particularly as it comprises the 12 November Agreement, may appear to be different to the usual contracts for undertaking residential building work. Contracts, however, come in many forms, and the Court must make a determination based on the particular terms agreed and the provisions of the Home Building Act, which exists to protect consumers. The contract in this case included an obligation on Mr Lawrence to carry out and complete the DA works, which included residential building works to a value in excess of $20,000, and was, therefore, caught by the provisions of the Home Building Act.

Was the notice of rescission effective to terminate the contract between the parties?

Mr Lawrence's primary submission was that the defendants' notice of rescission had no legal effect and was void because the Home Building Act did not apply to the 12 November Agreement.
As I have found that the Home Building Act applies, there is a question about the utility of the declaration sought in paragraph 9 of the summons in relation to the notice of rescission. Even if the notice of rescission was invalid under the Home Building Act or otherwise, Mr Lawrence is not entitled to any interest in the Property, specific performance in the terms sought or any damages due to the operation of ss 7D and 10 of the Home Building Act.
As submissions were made in relation to the notice of rescission and in case I am wrong about the application of the Home Building Act, I have set out my reasons in relation to the issues raised by those submissions, including why I consider that Mr Ciantar and Ms Sammut would be able to rely on the notice of rescission.

Under the Home Building Act

At the hearing, Mr Lawrence accepted that the 12 November Agreement between the parties did not meet all the requirements of the Home Building Act, including in s 7(2) which mandates that the contract contain a cooling-off notice.
Mr Ciantar and Ms Sammut were therefore entitled to issue a notice of rescission within seven days of becoming aware that the contract should have contained a cooling-off period notice: s 7BB(2) of the Home Building Act.
During closing submissions, Mr Lawrence submitted that there was an issue with the validity of the notice of rescission as neither Mr Ciantar nor Ms Sammut gave evidence in the proceedings as to when they first became aware that the contract they had with Mr Lawrence should have contained a cooling off period notice.
The notice of rescission was served on Mr Lawrence on 2 September 2017, nearly two years after the 12 November Agreement was executed and well after the parties had started corresponding about their obligations under the contract.
I accept that the notice of rescission was signed by Mr Ciantar and Ms Sammut and included a statement to the effect that they did not become aware that the contract should have included a cooling off warning until 30 August 2017. I also accept that the defendants retained new lawyers in early 2017 and so may have only been made aware at a late stage of the requirement for a cooling off notice under the Home Building Act.
As the validity of the notice of rescission was put in issue by Mr Lawrence, it was, in my view, a matter for Mr Ciantar and Ms Sammut to prove that they became aware that the contract should have included a cooling off warning no later than 7 days prior to the issue of the notice, being by 27 August 2017. In the absence of direct testimony from either of them on that issue and with only the notice itself as evidence, I am not satisfied that Mr Ciantar and Ms Sammut established that the notice of rescission was issued in accordance with the statutory requirements and was valid under the Home Building Act.

Termination for breach

Mr Ciantar and Ms Sammut made an alternative submission that the notice of rescission was effective as, at the time it was issued, they were entitled to terminate due to Mr Lawrence's breach of contract by his delay in failing to complete the works on time, or because he had repudiated the contract by not being ready, willing and able to perform when called upon to do so.
Mr Lawrence contests this and says that there was no basis to terminate as the contract did not mandate that time was "of the essence" regarding his obligation to complete the three lot sub-division. Mr Lawrence also submits that Mr Ciantar and Ms Sammut had affirmed the contract between the parties by their letter dated 2 May 2017 and the contract was continuing.
The defendants accepted that the terms of the contract did not make the date for completion of the DA works an essential term. Rather, they submitted that Mr Lawrence's obligation to complete the DA works was an intermediate term, breach of which gave rise to a right to terminate due to Mr Lawrence's unreasonable delay in performance.
An intermediate term of a contract is a non-essential term, a breach of which may give rise to a right to terminate if the breach is sufficiently serious, goes to the root of the contract or deprives the other party of a "substantial part of the benefit for which it contracted" or causes a "substantial loss of benefit": Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115.
The general rule is that breach of an intermediate non-essential time term of a contract does not give rise to a right to terminate unless a party first serves a notice requiring performance within a reasonable time. The exceptions to this are where there is unreasonable delay in performance or anticipated failure to comply with a notice to perform. Unreasonable delay occurs where the delay evidences a repudiation of the obligation by the promisor: see JW Carter, Contract Law in Australia (7th ed, 2018, LexisNexis Butterworths) [30.54 - 30.56].
As I have found, the parties initially agreed that the date for completion of the DA works was 30 November 2015, which was extended by agreement to 30 May 2016.
The evidence establishes that there was significant delay on the part of Mr Lawrence in carrying out and completing the DA works in time. As at the date of the rescission notice, a period of just under three years had passed during which the DA works ought to have been completed. The delay beyond the extended completion date was a period of just over 14 months, being from 30 May 2016 to 2 August 2017.
That delay also needs to be considered in the context that Mr Lawrence had previously advised that the "sub-division works" could be completed within six to twelve months, the parties had initially agreed a period of 12 months (to 30 November 2015) for Mr Lawrence to compete the DA works, and the parties had then agreed to change that to a period of 18 months (to 30 May 2016) after Mr Lawrence had sought and had been given an extension of 6 months in which to complete the DA works.
It is also relevant that Mr Lawrence sought his initial extension of time based on delays of twenty eight weeks which could not be substantiated and appears to have been excessive.
The evidence also indicates that, as at the date of the rescission notice on 2 September 2017, Mr Lawrence was not in a position to complete the DA works as: 1. he had not undertaken any steps to carry out or complete the major DA works by early 2017, when Ms Ciantar and Mr Sammut wrote making enquiries as to his progress with the works; 2. as at 15 March 2017 and as confirmed by the letter from his solicitor, he had not started work on construction of the driveway or the retention tank; 3. he had not demolished the cabin or built the retaining wall: T71.20; and 4. he did not lead any evidence of any contracts for materials or with other contractors to help perform the DA works required.
Other than assertions in solicitors' correspondence that he was ready, willing and able, there was no evidence from Mr Lawrence that during the period from June 2016 to the date of the notice of rescission he was working towards his end of the bargain, which was to undertake the DA works and seek to complete them within a reasonable time frame.
Even if his solicitor's assertion in 2017 that the DA works had been put on hold due to an instruction relating to the possibility of a four lot sub-division was accurate (which assertion is doubtful for the reason noted in paragraph [50]), Mr Lawrence could have proceeded to complete the work on the retention tank (which he acknowledged in a letter dated September 2015 could be proceeded with before any amendment to the DA) and undertaken the drainage works. He chose not do so and could not adequately explain why during cross-examination.
As noted in paragraph [125], I do not consider that the letter dated 2 May 2017 operated as an affirmation of the contract by Mr Ciantar and Ms Sammut in the way Mr Lawrence contends.
That letter was written following correspondence in which the defendants had made it clear they were concerned about Mr Lawrence's substantial delay in completing the DA works. The letter also repeated their request for accounting and other documents regarding the works undertaken to date, and noted that Mr Lawrence was to continue making monthly contributions to the Suncorp mortgage while the parties negotiated a possible four block sub-division. This was followed by a letter on 17 May 2017 in which the defendants' solicitor indicated that his clients would consider their business relationship with Mr Lawrence to be over if he failed to provide certain information and documents. Rather than affirming, the correspondence put Mr Lawrence on notice of concerns about the significant delays in the performance of his contractual obligations to carry out and complete the DA works and the potential for the contract between the parties ending.
The relevant question is whether the evidence outlined above establishes that Mr Lawrence's delay in completing the DA works was sufficiently unreasonable to evince repudiation by him of his obligations under the contract. I accept the submission of Mr Ciantar and Ms Sammut that it does, particularly in circumstances where Mr Lawrence did not put forward any evidence that, as at 2 September 2017, he was in a position to undertake and complete the DA works in any reasonable time.
Therefore, at the time they issued the notice of rescission, Mr Ciantar and Ms Sammut were entitled to terminate the contract with Mr Lawrence for breach of an intermediate term because of his unreasonable delay.
As Mason CJ said in Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at 262: "Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 stands as authority for the general proposition that a termination of a contract may be justified by reference to any ground that was valid at the time of termination, even though it was not relied on at the time and even though the ground actually relied on is found to be without substance."
Applying the principles from Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359, even though the notice of rescission under the Home Building Act may not have been effective, it may now be relied upon by Mr Ciantar and Ms Sammut as they were entitled to terminate at that time for other reasons.

Comments on the specific performance and damages claims

If I am wrong about the application of the Home Building Act and the defendants' entitlement to rely on the notice of rescission, the wrongful rescission would amount to a repudiation of contract by Mr Ciantar and Ms Sammut. Mr Lawrence has not purported to accept the repudiation and has claimed that the contract is still on foot and that he is entitled to specific performance or damages.
The parties' submissions did not deal with these claims in any detailed way and so my reasons on these matters are necessarily brief.
In my view, an order for specific performance of the contract would not be appropriate in this case.
On my interpretation of the contract, Mr Lawrence is only entitled to a one-third interest in the Property if he carried out and completed the DA works. There is no dispute that he did not complete the DA works and it is accepted that they have been completed by a third party engaged directly by Mr Ciantar and Ms Sammut.
I do not accept Mr Lawrence's submission that he is able to perform the contract as his position is similar to that of a purchaser and all he has to do is "pay for the work", "up to $435,000". The bargain struck by the parties was not simply that Mr Lawrence would fund the DA works. He also had to undertake and complete them.
Further, and consistent with my earlier findings, I do not accept that Mr Lawrence was ready, willing and able to perform his side of the bargain as at the date of the notice of rescission. Mr Lawrence did not adduce evidence by affidavit or otherwise going to his ability to perform and the evidence outlined in paragraphs [196]-[197] indicates that he was not in such a position. Nor is he in a position to perform today.
Having only undertaken a small part of the obligations that he was contracted to perform, Mr Lawrence is now not in a position to complete his essential obligations to carry out and complete the DA works. In those circumstances, he should not be entitled to a specific performance order requiring the defendants to transfer an interest in the Property to him.
Mr Lawrence's alternative claim for damages was submitted to be a claim to the extent of the loss of the bargain (being the one-third interest in the Property) that Mr Lawrence would have secured if not for the defective purported rescission.
Loss of bargain damages is an available remedy for breach of contract in lieu of specific performance. Being ready, willing and able to perform is also relevant to that inquiry and it was necessary for Mr Lawrence to prove that he was in a position to perform his obligations and secure the benefit of the bargain: Tamanna v Zattere; Thakorlal v Zattere; Rabac Pty Ltd v Zattere (2017) 18 BPR 37,139; [2017] NSWSC 1388 at [170] and [191]. As noted above, I do not accept that he has done so.
Mr Lawrence did not articulate the quantum of his loss of bargain damages. Nor did he address the value of his one-third interest at the relevant times for assessing damages in any substantive way.
There was some evidence before the Court of amounts Mr Lawrence paid to Mr Ciantar and Ms Sammut and third parties in relation to the Property; for example, $34,463 towards the Suncorp mortgage and payment of a Bolthouse Electrical invoice in the amount of $12,529. However, there was no clear figure put to the Court of the amount he had advanced or was claiming and the documentary evidence referring to amounts was very unclear. I also note that a claim for a constructive trust to the extent of the Mr Lawrence's contributions to the Property was not pressed at the hearing and no quantum meruit claim was made.
In those circumstances, I am not in a position to come to a conclusion in relation to the quantum of damages Mr Lawrence would receive if I had found in his favour.

Conclusion on the summons

At the hearing, Mr Lawrence accepted that if I found that the contract was caught by the Home Building Act, his claimed one-third interest in the Property and his claims for specific performance and damages were unenforceable due to the operation of ss 7D and 10 of the Home Building Act.
Mr Lawrence also accepted that he has not advanced any of the funds said to support the mortgage in his favour (being the $435,000 referred to in the deed of loan).
It follows from this and my other findings that Mr Lawrence is not entitled to enforce the transfer of the one-third interest in the Property or any interest by way of the mortgage or deed of loan in respect of the Property. It also follows that the notice of rescission has legal effect and Mr Lawrence is not entitled to specific performance of the contract or to seek damages, and his caveat over the Property should lapse.
Accordingly, Mr Lawrence is not entitled to the relief sought, as pressed at the hearing, in paragraphs 1, 4, 5, 6, 7, 8, 9 and 10 of his summons.

Cross summons - rectification claim and other declarations sought

In paragraph 2 of the cross-summons, Mr Ciantar and Ms Sammut seek an order for rectification of the agreement dated 12 November 2014 and/or 26 March 2015 for works to be undertaken at the property (Agreement).
The rectification claim was advanced as an alternative to the primary claim made by Mr Ciantar and Ms Sammut about the proper construction of the Agreement which I have accepted by finding that the contract between the parties contractually obliged Mr Lawrence to carry out and complete the DA works. In those circumstances, there is no utility in making the rectification order.
Even if there was, I would not have made the rectification order in the form sought by the defendants.
The order sought goes beyond the scope of my conclusion on the interpretation of the contract between the parties, providing as it does for Mr Lawrence's obligation to extend to completing the building works for "any further or other variation" of the DA. The contract between the parties contemplated that the parties might vary the DA to provide for a four block sub-division but, at the time of contracting, the parties had not agreed that Mr Lawrence would be obliged to complete any varied works (which may have costs more than $435,000), nor have I found that they agreed to vary them at some later stage.
Further, a party seeking rectification must adduce evidence showing the "actual or true common intention of the parties". Evidence of both the parties' outward expressions and the subjective states of mind is admissible in a rectification claim: Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85 at 117; see also Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603.
While the documentary record provides some evidence of the parties' intentions, in the absence of direct evidence from Mr Ciantar or Ms Sammut, it would be difficult to ascertain their subjective intention to support the rectification claim in the terms of paragraph 2 of the cross-summons.
The declarations sought in paragraphs 1, 3, 4, 5 and 6 of the cross-summons are responsive to Mr Lawrence's summons. Mr Lawrence has failed to obtain the relief he seeks and Mr Ciantar and Ms Sammut have, for the most part, succeeded with their arguments and are entitled to declarations to reflect these reasons.
However, the terms of the declarations currently proposed in the cross-summons do not currently reflect my reasons. For example: 1. the issue in relation to the rectification order also arises in relation to the declaration sought in paragraph 1 as it refers to "any further or other variation thereof"; and 2. the declaration in paragraph 4 of the cross-summons does not reflect my conclusion that the notice of rescission was not effective under the Home Building Act but may now be relied upon by Mr Ciantar and Ms Sammut as they were entitled to terminate at that time for other reasons.
For that reason, I will reserve making any declarations on the cross-summons at this stage and invite the parties to submit draft declarations which reflect these reasons to the Court.

Costs

The general rule is that costs follow the event unless it appears to the Court that some other order should be made: r 42.1 Uniform Civil Procedure Rules 2005 (NSW).
Mr Lawrence did not succeed with the claims he sought in his summons and he should pay Mr Ciantar and Ms Sammut's costs.
Mr Ciantar and Ms Sammut have succeeded with their arguments and are entitled to declarations sought in their cross-summons, subject to some changes to reflect my reasons. Their lack of success on the rectification claim is not material in my view, as it was an alternative claim, very little time was spent on it at the hearing and Mr Lawrence is likely to have only incurred few, if any, additional legal costs in relation to the claim.
In those circumstances, there is no apparent reason why the general rule should also not apply with the result that Mr Lawrence should pay Mr Ciantar and Ms Sammut's costs of the cross-summons. I will, however, reserve making any costs order in relation to the cross-summons until the relevant declarations are made.

Orders

For the reasons given, the Court makes the following orders: 1. Dismiss the plaintiff's summons. 2. The plaintiff to pay the defendants' costs of the summons.
I reserve on the determination of the declarations sought in the cross-summons. This is because, in some cases, the terms of the declarations sought do not reflect these reasons and, given my conclusions, the order for rectification is unnecessary. In that context, I also consider it appropriate to reserve making a cost order on the cross-summons, although my view is that the cross-defendant should pay the cross-claimants' costs as the cross-claimants have succeeded and are entitled to declarations.
I invite the parties to provide draft declarations and an order in relation to costs on the cross-summons to give effect to these reasons to the Court within 14 days. If the parties cannot agree on the terms of the declarations on the cross-summons, the parties have liberty to apply to approach my associate to relist the matter for further submissions on that issue.

Amendments 14 June 2019 - [54] - deleted "Agreement" after "November" [82(a)] - inserted space between "and" and "1/3" [129] - inserted "of" after "evidence" [135] - inserted "with" after "conjunction" [137] - deleted "the construction of" between "that" and "the driveway" [209] - removed the words "pay for the Lawrence" between "Lawrence" and "would" Catchwords - deleted "-" after "conduct" 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: 14 June 2019

Home Building Act 1989(NSW)ss 4, 6, 7, 7BA, 7D, 10

Lawrence v Ciantar; Ciantar v Lawrence

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