CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH
AND DEFENCES TO ACTION FOR BREACH – PEFORMANCE –
where plaintiff
agreed to sell land to first defendant – where first defendant purported
Source
Original judgment source is linked above.
Catchwords
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACHAND DEFENCES TO ACTION FOR BREACH – PEFORMANCE –where plaintiffagreed to sell land to first defendant – where first defendant purportedto terminate the contract for breachof a confidentiality clause – whereplaintiff sues defendants for wrongful termination of the contract and seeksspecific performance– where defendants allege plaintiff was not ready,willing and able to perform the contract due to a mortgage over the property– whether plaintiff ready, willing and able to perform the contractCONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACHAND DEFENCES TO ACTION FOR BREACH – CONDITIONS –where plaintiffagreed to sell land to first defendant – where first defendant purportedto terminate the contract for breachof a confidentiality clause – whereplaintiff sues defendants for wrongful termination of the contract and seeksspecific performance
– whether first defendant validly terminated the
contract due to breach by plaintiff of confidentiality provision in the contract
– whether disclosures were made by employees or representatives of the
plaintiff
Dare v Pulham (1982) 148 CLR 658
Mehmet v Benson
[1965] HCA 18
(1965) 113 CLR 295
Orlicki v Brisbane City Council [1961] Qd R
546
Stewart v Kennedy [1890] UKLawRpAC 5
(1890) 15 App Cas 75
Vlasic v Federal Capital Press of Australia Pty Ltd (1976) 9 ACTR
1
Judgment (83 paragraphs)
[1]
The second defendant appeared on his own behalf and for the first defendant
[2]
[1] By a contract dated 20 June 2019 the plaintiff, Lockyer Land Plans Pty Ltd ('Lockyer'), agreed to sell a vacant block of vacant land[1] to the first defendant, Metcoal Trading Pty Ltd ('Metcoal') for $11,000,000. Just prior to the settlement of the contract, Metcoal's solicitors wrote to Lockyer's solicitors purporting to terminate the contract. Lockyer sues Metcoal seeking for specific performance of the contract. Metcoal argues that the contract was validly terminated because Lockyer breached a confidentiality clause in the contract.
[2] The second defendant, Mr Hakos, is sued because he guaranteed Metcoal's obligations under the contract. The guarantee is dated 26 June 2019.
[3] There are only two issues raised in the pleadings. The first is whether Lockyer was ready, willing and able to perform its obligations under the contract. The second is whether Metcoal validly terminated the contract because of breaches by Lockyer of the confidentiality provision in the contract.
[3]
[4] The argument that Lockyer is not ready willing and able to perform the contract is based on Metcoal's claim that Delany Advertising & Media Pty Limited ('Delany Advertising') has a mortgage over the property which secures a debt owed by Lockyer to Delany Advertising and that, pursuant to that mortgage, Delany Advertising has become a mortgagee in possession of the property.[2] The argument is that Lockyer is unable to give clear title.
[5] Lockyer sought to meet that argument by pointing to the fact that, on behalf of Delany Advertising, Mr Delany has given an undertaking that, if the court orders specific performance then Delany Advertising undertakes that it will take all necessary steps to allow Lockyer to comply with that order, including allowing clear title to be transferred to Metcoal.[3] That undertaking by Delany Advertising is conditional upon Lockyer giving a cross-undertaking to repay to Delany Advertising, out of the proceeds of sale, the money which Lockyer owes to Delany Advertising.[4] Lockyer has given that cross-undertaking.[5]
[6] The test of whether a party is ready willing and able to perform the contract is one of substance, and is not to be resolved in any technical or narrow sense.[6] The exchange of undertakings means that, in substance, at the time of settlement Lockyer will be able to provide clear title to Metcoal as the purchaser.
[7] In any event, even in the absence of the exchange of those undertakings, it would be doubtful that I could conclude that the existence of a mortgagee in possession of the property impeded Lockyer's ability to transfer clear title to Metcoal and therefore made Lockyer not ready willing and able to perform the contract. Many transfers of title occur on the basis that the secured creditor is paid out at the time of settlement and that the debtor is then able to transfer clear title. Of course, the situation would be different if the mortgagee in possession had sold or taken steps to sell the property.
[4]
[8] The settlement of the sale was extended to 30 July 2019 with time to remain of the essence. However, on 30 July 2019, Metcoal's lawyers emailed Lockyer's lawyers purporting to terminate the contract. The letter from Metcoal's solicitors was as follows:[7]
[5]
"We refer to our earlier request for an extension of the settlement date to 6 August 2019. We are instructed to withdraw that request.
[6]
It has come to our client's attention that there has been a serious breach of confidentiality in respect to special condition 9 of the contract.
[7]
Pursuant to clause 2.3 of the Deed of Agreement between Metcoal Trading Pty Ltd, Brett Neeson and Lockyer Land Plans Pty Ltd dated 4 July 2019 and special condition 9 of the contract, we are instructed that our client terminates the Contract.
[8]
[9] The next day, 31 July 2019, Lockyer's solicitors wrote to Metcoal's solicitors as follows:[8]
[9]
The above matter was due to settle on 30 July 2019 at our office.
[10]
Your client failed to settle in accordance with the terms of the contract. Our client was ready, willing and able to settle on the due date and in accordance with the terms of the contract.
[11]
We refer to your letter dated 30 July 2019 purporting to terminate the contract due to an alleged serious breach of confidentiality. We reject your client's purported termination and our client denies that it has breached its obligations of confidentiality.
[12]
[10] The confidentiality clause in the contract is as follows:[9]
[13]
9.1 Subject to clause 9.2, each party must up to and following settlement or up to and following the earlier termination of this Contract keep confidential any information about the existence and terms of this Contract (and any draft of this Contract) and any information obtained under or pursuant to this Contract and must not disclose such information to any person except:
[14]
(a) any director, officer, employee, adviser or associated entity of the party that has a clear need to use that information; or
[15]
(b) pursuant to any applicable law or order or rule of any court, regulatory body, government, governmental department or other body, semi-governmental or judicial person or stock exchange.
[16]
9.2 No party will make any public or press announcement or statement concerning this Contract of settlement without the prior approval of the other parties. The parties must in good faith agree at or before settlement on the form of any press announcement or public statement that they will each make."
[17]
[11] Ordinarily, such a confidentiality clause would not be regarded as an essential term. However, there was a separate deed of agreement between the parties, as well as Mr Neeson, Lockyer's director. That deed, dated 4 July 2019, referred to the contract and provided:
[18]
"2.3 Lockyer land plans Pty Ltd furthermore agrees with respect to the confidentiality Clause 9 of the special conditions of its contract between Lockyer land plans Pty Ltd and Metcoal trading pty ltd that if any such breach of confidentiality occurs as a result of any employee or representative of Lockyer land plans Pty Ltd discussing or divulging any information regarding the contract and or its terms and or its conditions without the prior written consent from Metcoal trading pty ltd, then Metcoal trading Pty Ltd can at its discretion terminate the contract. If the contract is terminated no party will have any claim in any way shape or form against Metcoal trading pty ltd and or James Christopher Hakos."[10]
[19]
[12] Metcoal and Mr Hakos contended that Lockyer breached Clause 9.1 because:
[20]
(a) Lockyer's employees or representatives, Ms Nadia Moharaminia, Mr Sayed Jazayeri and Mr Brett Neeson,[11] disclosed to Mr Theo Penemenos details of the contract, the proposed use and details of the business case for the purchase and use of the property; and
[21]
(b) Mr Neeson made disclosures in breach of confidentiality to Divergent Trading and to Allsav Pty Ltd.
[22]
[13] It is necessary to deal with those two groups of disclosures separately.
[23]
Disclosures to Mr Penemenos - Employees or Representatives?
[24]
[14] The first issue which arises in relation to the alleged disclosures to Mr Penemenos is whether Ms Moharaminia (a real estate agent) and Mr Jazayeri (a lawyer) were employees or representatives of Lockyer. On that issue, it is clear that neither Ms Moharaminia nor Mr Jazayeri were employees of Lockyer. There is no evidence that they were Lockyer's employees. In his submissions Mr Hakos quite fairly conceded that Ms Moharaminia, at least, was not an employee.[12] He did not appear to pursue the claim that Mr Jazayeri was a Lockyer employee.
[15] Were Ms Moharaminia and Mr Jazayeri nevertheless representatives of Lockyer? The evidence on that point, or the lack of evidence on that point, is as follows:
[25]
(a) There is no evidence of any formal documents which record that Ms Moharaminia and Mr Jazayeri were representatives of Lockyer. If Ms Moharaminia, a real estate agent, had been appointed to represent Lockyer, then one would expect an appointment in writing,[13] or even a contract which recorded the agency. Similarly, if Mr Jazayeri, a solicitor had been acting for Lockyer, one would expect a written retainer or fee agreement or a note that he acted for one of the parties on the contract.
[26]
(b) There are no informal documents, such as emails, which record that Ms Moharaminia and Mr Jazayeri acted as representatives of Lockyer; if a real estate agent and/or a solicitor were acting as representatives of Lockyer, one would expect an email or message to, even indirectly, evidence the relationship;
[27]
(c) Mr Neeson, a director of Lockyer, gave evidence that neither Ms Moharaminia or Mr Jazayeri were employees or representatives of Lockyer;[14]
[28]
(d) Ms Moharaminia's written evidence was that she was not involved in the negotiations and was not the agent of or the representative of Lockyer in this transaction;[15]
[29]
(e) Ms Moharaminia's oral evidence was that she and Mr Neeson had worked together, but not on this deal; she knew very little about this transaction;[16] she was not paid anything in respect of this deal; and, in fact, there were two other estate agents who were conjunction agents for this transaction (one of whom happened to be Ms Moharaminia's ex-husband);[17]
[30]
(f) Mr Jazayeri's written evidence was that he was not involved in the negotiations leading to the execution of this contract, or the contract by which Lockyer purchased the land, or in relation to the execution of either contract;[18]
[31]
(g) Mr Jazayeri's written evidence was that he was not retained by Lockyer or Mr Neeson or Mr Hakos or Metcoal in relation to any of those transactions, and that he was never an employee of or authorised by Lockyer or Neeson to act for or represent them in any way.[19]
[32]
[16] Mr Hakos, who acted for himself and for the corporate first defendant, cross-examined each of those witnesses. He did manage to extract from Mr Jazayeri an admission that he expected to be paid for the introduction of Mr Neeson to the transaction.[20] But Mr Jazayeri was not shaken on the substantive proposition that he was not involved in any of the negotiations and was not the employee or representative of Lockyer. Similarly, Ms Moharaminia was firm that she was not a representative of Lockyer.
[17] In my view, the evidence does not establish that Ms Moharaminia and Mr Jazayeri were representatives of Lockyer.
[18] There is a further difficulty. Even if Ms Moharaminia and Mr Jazayeri were involved in the negotiations leading to the execution of the contract - which was the thrust of Mr Hakos' cross-examination - that does not go far enough. The defendants' case here is that:
[33]
(b) that contract included a confidentiality clause;
[34]
(c) by a subsequent deed dated 4 July 2019 the confidentiality clause was made an essential term; and
[35]
(d) disclosures were made by Ms Moharaminia and Mr Jazayeri as employees or representatives of Lockyer in breach of the confidentiality clause.
[36]
[19] The focus of that argument is the conduct of the employees or representatives of Lockyer after the execution of the contract. Even if the evidence did establish that Ms Moharaminia and Mr Jazayeri acted for Lockyer leading up to the execution of the contract, and the evidence does not establish that they were the employees or representatives of Lockyer thereafter. I accept the submission by Lockyer that, for Metcoal to succeed it needed to prove that the disclosures in breach of the confidentiality clause were made by persons who were agents or representatives of Lockyer at the time the disclosures were made.
[37]
[20] The defendants did not persist with a claim that Mr Neeson made any relevant disclosures to Mr Penemenos.[21]
[21] The substance of the disclosures alleged to be a breach of the confidentiality clause are identified in the particulars as:
[38]
(a) A communication by Ms Moharaminia to Mr Penemenos on 28 July 2019 that Metcoal had a contract to purchase a property at Bowen for $11,000,000, and the property was to be used by Metcoal as a mining camp for 200 men;
[39]
(b) A communication by Mr Jazayeri to Mr Penemenos on 28 July 2019 that Mr Hakos had a contract to purchase a property at Bowen for $11,000,000.[22]
[40]
[22] As explained above, the evidence does not establish that Ms Moharaminia or Mr Jazayeri were either employees or representatives of Lockyer at the relevant time. That finding is sufficient to overcome the defendants' arguments concerning the disclosures to Mr Penemenos. However, even if I am wrong on that point, it is worth examining the evidence about those communications.
[23] Mr Penemenos' witness statement says this at paragraph 13:
[41]
"I called Sam on the 24th July 2019. I asked Sam if he could give me James's details so I could contact him directly, Sam asked why I wanted this. I had told Sam I was not speaking to Bill for personal reasons. Sam then proceeded to tell me details regarding a deal they had done with James. Sam told me James' plans for the Property including James arranging 200 men on the Property as a mining camp, and the price, I then asked Sam for more details and he suggested I speak with Nadia.
[42]
He also mentioned James had asked him to find portable housing for the sites."[23]
[43]
[24] That statement does not quite match the particulars. In Mr Penemenos' account of the conversation there is no mention of Metcoal or the contract. The 'deal' being referred to is "a deal done with James" and thus presumably a deal involving Mr Jazayeri and Mr Hakos, or perhaps a deal that Mr Jazayeri participated in on behalf of Mr Hakos.
[25] Mr Jazayeri's version of the interaction with Mr Penemenos is as follows:[24]
[44]
"24. Later that day I spoke to Penemenos. I cannot recall if I called him or he called me.
[45]
25. Penemenos said he was travelling between London and Greece and that he wanted to know about the 'property deal with Jim in Bowen', and that he wanted to give another deal to Jim himself. I understood his reference to 'Jim' to be a reference to Hakos. Penemenos said words to the effect that he knew Jim's deal was for $11 million, and the other deal he (Penemenos) had was for $40 million. He asked me for specific details about the contract with Hakos such as the property address, and the title refence number.
[46]
26. In response, I said that I did not know the details he was asking about, I was only involved in making the introduction between Hakos and the seller. This was true. I told him to contact Nadia or Kavvadas as they might be able to help with details. The conversation then ended. It was a short conversation.
[47]
27. Shortly thereafter I then telephoned Kavvadas to tell him what had happened. Kavvadas told me to give Penemenos any information Penemenos asked for. However I did not call Penemenos back because I knew I could not help with the details he was seeking. Penemenos called me again on 25 July 2019 but I did not answer.
[48]
28. I do not know who had told Penemenos about the transaction. It was not me.
[49]
29. I kept a record of my telephone call with Penemenos and with Kavvadas in my diary. Now shown to me and marked 'SJJ-2' are the relevant pages from my diary."
[50]
[26] There is a discrepancy with the dates. The defendants' particulars allege that the relevant conversations occurred on 28 July 2019, but Mr Penemenos says the conversation occurred on 24 July 2019. In my view that discrepancy in detail is not significant and is not said to cause any prejudice.[25]
[27] Resolving the substantive conflict in the testimony is not easy. I gained the impression that both witnesses were doing their best to accurately state what they recalled of a conversation that occurred nearly two years ago.
[28] The factors that persuade me that I should accept Mr Jazayeri's version are as follows. First, Mr Jazayeri's account is at least partially supported by a contemporaneous note in his diary. Mr Penemenos' version is not similarly supported.
[29] Second, there is a (perhaps understandable) vagueness to Mr Penemenos' account of what was said. The words "Sam told me James' plans for the property", without identifying what those plans were, suggests that there is no genuine recollection of what was actually said but rather a summary or reconstruction of what it is thought was said.
[30] Third, Mr Penemenos' witness statement was prepared in December 2020.[26] That was some 17 months after the relevant conversation in July 2019. It is difficult to accept that a relatively mundane conversation like this would be accurately recalled after all that time.
[31] For those reasons, I am not prepared to find that the confidentiality clause was breached by Mr Jazayeri, even if he had been Lockyer's employee or agent.
[32] Mr Penemenos gives this account of his conversation with Ms Moharaminia:[27]
[51]
"I then contacted Nadia, both by text message and via phone, again both through whatsapp. I spoke with Nadia in and around the 26th July 2019. Nadia confirmed she and her boss worked together and they established a good relationship with James. She proceeded to tell me details of the transaction. The details had been very in-depth. Price, location, and what James had planned for the site. She was very detailed with what she had told me and was very adamant that her boss and her had full control over James."
[52]
[33] Again, the words: "She proceeded to tell me details of the transaction", without identifying the details that were communicated, suggest that there is no genuine recollection of what was said but rather a summary or reconstruction of what was said.
[34] Further, the text messages between Ms Moharaminia and Mr Penemenos do not suggest that Ms Moharaminia was willing to supply details of the transaction - even if she had knowledge of those details. The text messages end with Mr Penemenos making two unanswered requests for information.
[35] Ms Moharaminia denied supplying any information and, having regard to the content of the text messages, I accept her evidence on that.
[53]
Disclosures to Divergent Trading and to Allsav Pty Ltd?
[54]
[36] Before dealing with the alleged disclosures to Divergent Trading and to Allsav Pty Ltd, it is necessary to re-visit clause 9.1 of the contract. The relevant obligation in clause 9.1 is that each party must keep confidential any information about the existence and terms of the contract and any information obtained under or pursuant to the contract. Thus, the focus is to prevent disclosure of:
[55]
(a) the existence or terms of the contract and information; and
[56]
(b) any information obtained under or pursuant to the contract.
[57]
[37] On 27 July 2019, a few days before the proposed day for settlement, Mr Neeson sent an email to Mr Bill Kavvadas.[28] The email included two invoices. The first invoice was an invoice by an entity described as 'Divergent Trading Services Pty Ltd' addressed to 'Metcoal Pty Ltd'. There is some doubt about the entity that sent the invoice. Mr Neeson said, in the course of his cross-examination by Mr Hakos, that there was no such entity.[29] And, there is no evidence that the entity to whom the invoice was addressed, Metcoal Pty Ltd, is a company that exists although perhaps the intention was to refer to the first defendant here.
[38] In any event, the invoice is for "Workforce Accommodation and Sundry Buildings including Transport to Lot 952 Bruce Highway, Bowen". The invoice identifies 63 proposed buildings, mainly "ensuited" accommodation buildings, but also some site offices, kitchens and the like. The price quoted is $7,249,000, although the invoice ends with "Please make all monies payable to" which is followed by a completely blank space. There is therefore no bank or other details which would enable payment of the invoice.
[39] It is a mystery as to why such an invoice would be created by Mr Neeson on behalf of a non-existent company, and with no payment details. Mr Neeson said he merely did it as an example.[30] But that does not make sense. He certainly did not explain what it was an example of or why an example was prepared. I think Mr Hakos was correct in his submission that Mr Neeson's evidence on this aspect was unsatisfactory.
[40] The important question, though, is whether the invoice comprises a disclosure of confidential information in breach of the confidentiality clause. If the entity Divergent Trading Services Pty Ltd does not exist, and Mr Hakos did not contest that, then there cannot have been a disclosure to any person. And, there is no evidence that the invoice, even if it was prepared by a real entity, discloses the existence of the contract, or its terms, or any information obtained under or pursuant to the contract. It is true that the contract is for the supply of buildings to an address that is the property address - Lot 952 Bruce Highway, Bowen. But disclosure of that address does not disclose the existence of the contract or its terms. The entity to whom the invoice was addressed, Metcoal Pty Ltd, may or may not be a different entity to the purchaser.
[58]
[46] Metcoal failed to settle. That failure entitled Lockyer to elect to affirm or terminate the contract.[31] Lockyer elected to affirm, and did so promptly - within a day of Metcoal's purported termination.
[47] Specific performance, though a discretionary remedy, will be granted in respect of an executory contract where the defendant has refused to complete, and the contract is capable of being performed, unless the exercise of the discretion would perpetuate an injustice or there is some other good reason for refusing the remedy.[32] Specific performance is available to a seller of land as readily as to a purchaser.[33]
[48] I will make an order for specific performance in substantially the same form as the latest version handed to me in the course of the hearing.
[2] Delany Advertising became mortgagee in possession pursuant to a court order by consent made on 8 October 2019: Exhibit 3, Mr Delany's witness statement, annexure RDD-1.
[61]
[3] Exhibit 3, Mr Delany's witness statement, at [6].
[62]
[4] Exhibit 3, Mr Delany's witness statement, at [6].
[63]
[5] Exhibit 6, Mr Neeson's witness statement, at [27].
[25] Latitude is allowed where the evidence is said to be outside the particulars; the question is whether the discrepancy causes injustice or embarrassment to the opposite party: Vlasic v Federal Capital Press of Australia Pty Ltd(1976) 9 ACTR 1; see also Dare v Pulham[1982] 148 CLR 658 at 664 ("a disconformity between the evidence and the particulars... will not disentitle a party to a verdict based on the evidence.") But see also Orlicki v Brisbane City Council[1961] Qd R 546.
[80]
[27] Exhibit 9, Statement of Theodore Penemenos, [14].
[33] M P Moynihan, Butterworths, Court Forms, Precedents and Pleadings - Queensland, (February 2020) [61,050].
Parties
Applicant/Plaintiff:
Lockyer Land Plans Pty Ltd
Respondent/Defendant:
Metcoal Trading Pty Ltd & Anor [2021] QSC 138
Cases Cited (2)
(1982) 148 CLR 658
(1965) 113 CLR 295
[41] Importantly for present purposes, the invoice does not establish that the supplier was told anything about the existence of a contract, or its terms, or information obtained under or pursuant to the contract.
[42] The second invoice is from Allsav Pty Ltd. That company is a genuine supplier of sheds. Their quote is addressed to 'Metcoal Pty Ltd' for 50 workers accommodation buildings delivered to site - the property address. The quote is for $4,840,000. Again, the only disclosure one can conclude from the invoice is that the entity 'Metcoal Pty Ltd' sought a price for accommodation buildings to be delivered to that site. The invoice does not provide evidence that anything was disclosed about the existence of the contract, or its terms, or information obtained under or pursuant to the contract.
[43] Mr Hakos appeared to assume that, in the conversations leading to the invoice, the supplier was told that the first defendant, Metcoal Trading Pty Ltd, was purchasing the land, and was purchasing the land on specific terms. There is no evidence of the actual conversations with the supplier. As I understood it, Mr Hakos asked me to infer from the invoice that the relevant information about the contract was disclosed. But there are no facts or circumstances that enable me to draw that inference.
[44] There are any number of reasons why a person might seek an invoice like this. For example, a potential purchaser could seek an invoice or a quote even before he signed a contract to purchase land. A site manager, or a lessee, or a licensee, or another person with an interest other than an ownership interest in the land, might seek an invoice or a quote. In short, a mere invoice for the potential supply of accommodation to the property does not offend the confidentiality provision.
[45] It follows that none of the alleged breaches of confidentiality have been made out, and that Metcoal did not have a right to terminate on that footing.