Macdonald v Kavshan Pty Ltd; Villarica v Kavshan Pty Ltd

An increase in value

1. There is evidence that each property increased in value from the date of contract to September 2015 by some 50 per cent.
2. Ms Power, who appeared for the Purchasers, submitted that I should conclude that the Vendor was motivated to rescind the contracts in order to take advantage of that increase in value by being free to sell the properties. Ms Power pointed to the timing of the purported rescission (seven days after the Registration Date) and a statement evidently made to one of the Purchasers by an agent of the Vendor in January 2015 that, in that person's opinion, the Vendor's purported rescission "could only be about the money as the land has significantly increased in price in that area."
3. There are a number of answers to this submission.
4. The first is that it is not relevant to the case now propounded by the Purchasers. Although, in their statements of claim, they plead, irrelevantly as things have developed, that the Vendor "would derive a substantial windfall by rescinding the Contract as the [Vendor] would then be able to enter into a new contract for the sale…at a substantially increased price" (at par 17), they have, in terms, abandoned a claim (initially made in statements of claim at pars 27 and 28) that the Vendor was in breach of its obligation (under cl 29.4 of the contract) to "do whatever is reasonably necessary" to cause the Plan to be registered by the Registration Date.
5. The second is that, contrary to Ms Power's submissions before me, these alleged circumstances cannot possibly be relevant to the proper construction of the contract as, if they arose (and I make no finding about this), they arose well after the date of contract. They are thus not circumstances known to the parties at the time of the contract and therefore not circumstances that can have any role to play in the proper construction of the contract: for example, Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited [2015] HCA 37; 89 ALJR 900 at [46] - [52].
6. Accordingly, I must pay no regard to the submissions. They should not have been made.

The proper construction of the contract - cll 29 and 53

1. On the question of construction of the contract, Ms Power pointed to cl 29 which forms part of the standard conditions contained in the 2005 edition of the Law Society of NSW and Real Estate Institute of NSW "Contract for the Sale of Land".
2. Relevantly cl 29 provides: "29 Conditional contract 29.1 This clause applies only if a provision says this contract or completion is conditional on an event. … 29.4 If anything is necessary to make the event happen, each party must do whatever is reasonably necessary to cause the event to happen. … 29.8 If the parties cannot lawfully complete without the event happening - 29.8.1 if the event does not happen within the time for it to happen, either party can rescind; … 29.9 A party cannot rescind under clauses 29.7 or 29.8 after the event happens."
3. Mr Fernandes, who appeared for the Vendor, accepted that, because completion of the contract was conditional on registration of the Plan, cl 29.1 was engaged.
4. Mr Fernandes also accepted that, by reason of cl 29.9, the Vendor was not, on the effective dates of the purported decision (9 and 12 January 2015), entitled to rescind under cl 29.8 because, by then, "the event" (for the purpose of cl 29.9), namely, registration of the Plan, had "happened".
5. However, as I have said, the Vendor did not purport to rescind under cl 29.8; it purported to rescind under special condition 53.4.
6. Thus there arises the question of the relationship between the rights of rescission referred to in cl 29.8 and in special condition 53.4.
7. Ms Power submitted that special condition 53 "engaged" cl 29 and that, accordingly, special condition 53.4 is "subject to standard cl 29".
8. I do not agree. Special condition 53 makes no reference to cl 29. While the effect of special condition 53.1 is that cl 29 is engaged (see cl 29.1) I see no reason to read special condition 53 (especially special condition 53.4) as being subject to cl 29.
9. As Mr Fernandes pointed out, the restriction on the right to rescind contained in cl 29.9 is expressed only to be in relation to a rescission under cl 29.8 (or 29.7). It is not expressed to be, and I can see no reason why it would be, relevant to a rescission under special condition 53.4.
10. Clause 29 and special condition 53 must, of course, be read together. However I see no tension between them. They both confer a right of rescission on either party if, as happened, the Plan was not registered by the Registration Date.
11. The right under cl 29.8 subsisted only until the Plan was registered but was otherwise not subject to any time limit. In the events that have happened, it was available to the Vendor until 6 January 2015, but not thereafter.
12. The right under special condition 53.4 was only available for 14 days after the Registration Date but, on its terms, endured during that period whether or not the Plan was registered. In the events that have happened, it was available until 13 January 2015.
13. Thus, as I read the provisions, the rights conferred by them were not co-extensive but were congruent.
14. I see no tension between them.
15. If that conclusion be wrong, and there is in truth a tension between the two provisions, my opinion is that special condition 53.4 must prevail.
16. Clause 29 forms part of the standard form provisions of the contract.
17. Special condition 53.4, on the other hand, represents the bargain reached by the parties as to the very matter now under consideration; the entitlement of the parties to rescind if the Plan was not registered by the Registration Date. This demonstrates, objectively, that the parties applied their minds to the particular circumstance now in controversy and agreed that, if the Plan was not registered by the Registration Date, either could rescind within 14 days. The language used reveals that their intention was that this right could be exercised whether or not the Plan was registered in the meantime.
18. In that regard Mr Fernandes drew my attention to the familiar observations of Lord Bingham of Cornhill in Homburg Houtimport BV v Agrosin Private Ltd [2004] 1 AC 715 at [11]: "…it is common sense that greater weight should attach to terms which the particular contracting parties have chosen to include in the contract than to pre-printed terms probably devised to cover very many situations to which the particular contracting parties have never addressed their minds."
19. Mr Fernandes also drew attention to the fact that in Bedroff Pty Ltd v Rennie [2002] NSWSC 928 at [59] Young CJ in Eq (as his Honour then was) applied this principle to this very standard condition and said: "However, clause 29.7.1 is inconsistent with special condition 4, and the latter, being a typed clause, would prevail over a printed clause unless the context showed that some other construction should be applied. The context does not so require."
20. This area of the law was dealt with generally in K Lewison and D Hughes, The Interpretation of Contracts in Australia, (2012, Lawbook Co) at 7.04.
21. Application of these principles, in the circumstances of this particular contract, compels the conclusion that, to the extent that cl 29 and special condition 53.4 are in conflict, the latter prevails.

Implication of words to special condition 53.4?

1. Ms Power sought to answer these propositions by submitting that I should read into special condition 53.4 the words, "and remains unregistered" so that special condition 53.4 would read: "In the event that the Plan is not registered by the Registration Date and remains unregistered then either party may rescind the Contract by notice in writing to the other party within 14 days of the Registration Date whereupon the provisions of Clause 19 hereof shall apply." [Emphasis in original]
2. Ms Power submitted that, so read, special condition 53.4 would be consistent with cll 29.8 and 29.9.
3. That may be right, but I cannot see upon what basis I could read those words into special condition 53.4.
4. In her written submissions, Ms Power suggested the words should be "[i]mplied by the need to give business efficacy to the Contracts" and referred to such cases as BP Refinery (Westernport) Pty Limited v Shire of Hastings (1977) 180 CLR 266.
5. But those cases deal with the implication of terms into a contract; not the implication of words into an express term so as, in effect, to rewrite it.
6. In her oral submissions Ms Power, tentatively, put the submission on the basis of rectification of the contract. However, that matter was not pleaded and is not available to the Purchasers.
7. Ms Power then submitted the words should be read into the clause as a matter of construction. I do not see how I could so construe special condition 53.4. Adding the words would make a significant difference to the effect of the clause. I see no basis to conclude that the parties mistakenly omitted these words from special condition 53.4 (cf Fitzgerald v Masters (1956) 95 CLR 420 at 426-7) or to conclude that "something has gone wrong with the language" in special condition 53.4 (see Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 at [25]).
8. I see no other basis upon which to construe special condition 53.4 in the manner contended for by Ms Power.

Conclusion

1. In my opinion, the Vendor was entitled to rescind the contract as it did.
2. It could not have, on 9 or 12 January 2015, rescinded under cl 29.8. But it did not purport to do so.
3. In my opinion, for the reasons I have set out, the Vendor's entitlement to rescind under special condition 53.4 survived registration of the Plan. That is either because that right was independent of (and not inconsistent with) any right it had under cl 29.8 or, assuming cl 29.8 and special condition 53.4 to be inconsistent, because that right prevailed.
4. Either way, the contracts are now at an end.
5. The Purchasers are not entitled to specific performance, damages or any other remedy.
6. The proceedings should be dismissed.
7. On behalf of the Vendor Mr Fernandes sought a special order as to costs on the basis of an offer of compromise made on 22 February 2016 under Uniform Civil Procedure Rules 2005 (NSW) r 20.26.
8. The Vendor offered to dispose of the proceedings upon the basis of a judgment being entered in its favour; it paying the Purchasers $10,000 on account of their costs, dissolution of an injunction said to have been granted at the outset of these proceedings, release of the Purchasers from any obligation arising from an undertaking as to damages they then gave, and, implicitly, the Vendor paying its own costs of the proceedings.
9. The offer was expressed to be open for a calendar month, to 22 March 2016.
10. By reason of UCPR r 42.15A, if an offer is made under r 20.26 and is not accepted, and the offeror achieves a result "no less favourable" than the terms of the offer then, unless the Court otherwise orders, the party making the offer is entitled to indemnity costs from the day after the making of the offer.
11. The Vendor has achieved a result "no less favourable" than the offer.
12. Ms Power submitted that, nonetheless, I ought exercise my discretion not to order indemnity costs because, although the offer had the characteristics to which I have referred, it was, in substance, an invitation by the Vendor to the Purchasers to capitulate. I see some substance in that submission. However, I think that the offer contained sufficient compromise to warrant me making the usual order and not exercising my discretion otherwise.
13. Accordingly, I make the following orders: 1. Each proceeding is dismissed. 2. The plaintiffs are to pay the defendant's costs in each proceeding on the ordinary basis to 22 February 2016 and on an indemnity basis thereafter. 3. I release all parties from undertakings given to the Court during the course of these proceedings. 4. I dissolve any injunctions made in the proceedings.

Amendments 07 June 2016 - Plaintiff's solicitor's details corrected 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: 07 June 2016