MK and JA Roche Pty Limited & Ors v Metro Edgley Pty Limited & Anor

MK and JA Roche Pty Limited & Ors v Metro Edgley Pty Limited & Anor - [2004] NSWSC 744 - NSWSC 2004 case summary — Zoe

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Words or expressions used in this letter beginning with a capital letter and not defined in this letter have the same meaning as is given to those words or expression in the Development Contract." Roche's submissions 24 Roche has submitted that: · Clause 2A(b) provides that if the conditions are not satisfied by the relevant deadline the contract is deemed to be automatically rescinded. · No notice to that effect is required for the rescission to be effective; · A condition precedent is either performed or it is not. There is no doctrine of substantial performance of a condition precedent: Tri-Continental Corporation Limited v HDFI Limited (1990) 21 NSWLR 689 especially at 705D; · It follows that if any one of the conditions precedent is not fully satisfied by the deadline, the agreement is at an end; · Upon the proper construction of the Development Contract and the Fitout deed, Metro Edgley could not give notice extending the period for fulfilment of the conditions precedent after the expiry of the deadline; · As at 18 December 2003 that deadline was 31 March 2004 and it was still the deadline at the end of the day on 31 March 2004 when the conditions precedent remained unsatisfied. That being the only deadline and the conditions not being satisfied, and the agreement providing for automatic termination, it came to an end. · The competing construction would allow the Developer to give a subsequent notice extending the deadline after the applicable deadline had come and gone. It would have to be based on the argument that because the provision gives the Developer the right to notify on more than one occasion up to the Sunset Date, it can give such notice at any time up to the Sunset Date, irrespective of whether an earlier nominated deadline had passed without satisfaction of the conditions; · That construction is untenable because the parties would be left in a state of uncertainty in effect giving the Developer an option to re-enliven an agreement which had terminated and would also make the earlier deadline notification meaningless. Put another way, it could nominate a deadline which would not be met and then later nominate another deadline after expiry of the first which means that its first nomination had no effect; · Moreover the purpose of enabling more than one notice of extension was to allow such notices to be given so as to keep on extending the deadline whilst the provision (that is Clause 2A) was on foot. The issues concerning the deposit 25 The defendants contend that even if the plaintiffs be successful the deposit is not repayable. 26 The plaintiffs have contended that the submission is untenable because: · there has been a failure of consideration or condition; · if there is no express term [which is the contention], then there is clearly an implied term that entitles a refund; · retention of the deposit would be unconscionable and the defendants would be unjustly enriched if permitted to retain it. Discharge of the guarantees 27 The plaintiffs contend that the principal obligation has been purportedly varied without the consent of the Guarantors so that they are not bound and their guarantees are discharged. The central issues of fact 28 The central issues of fact concern whether or not Metro Edgley gave any and if so which notifications to the plaintiffs that the Clause 2A (b) date was further extended to 30 June 2004 29 The defendants/cross claimants contend for a series of alternatives. The convenient course is to recite a non-exhaustive overview of those alternatives in an Appendix "A" to the Judgment. Dealing with the threshold question - The proper construction of clause 2A (b) of the Development Contract - Automatic rescission? 30 The threshold point taken by the defendants raises only issues of principle, the proposition being that notwithstanding the words "deemed to be automatically rescinded" appearing within clause 2A (b) of the Development Contract, upon the proper construction of that clause, Roche had an election to terminate or not to terminate the contract in the event that the conditions precedent be not fulfilled by the relevant date, or the relevant date as extended, and that no such election was never communicated by Roche to the developer. 31 Both parties addressed closely on the proper construction of this clause. The convenient course is to deal with this issue directly. 32 There is of course no doubt but that the meaning and effect of a contractual provision will depend on the particular words of the contract. 33 The area which falls for consideration presently has been the subject of consideration both in the United Kingdom and in Australia over a reasonably extended period. 34 In New Zealand Shipping Co Ltd v Societe` des Ateliers et Chantiers de France [1919] AC 1 Lord Atkinson [at 9] put the matter as follows:

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"Where the event in question is one which cannot occur without default on the part of one party to the contract, the position is clear. The provision is then construed as making the contract not void but voidable: only the party who is not in default can avoid it, and he may please himself whether he does so or not. In the present case the happening of the event (not obtaining the Treasurer's consent) may be brought about by failure on the part of either party to take certain necessary steps (provision of particulars by the vendor or making of application by the purchaser) to obtain the Treasurer's consent, or it may be brought about without any default on the part of either party. In fact, although there was some argument to the contrary, it was, we think, brought about without any default on the part of either party. Such a case is perhaps not quite so clear as the simpler case where the event cannot occur without default on one side or the other. But we are of opinion that the New Zealand Shipping case [1919] AC 1 requires the same construction to be given to the contract in both classes of case. The provision in question is to be construed as making the contract not void but voidable." 40 The conditions precedent provided for in clause 2A (a) of the Development Contract include events which may be brought about by failure on the part of either party to take particular steps or which may be brought about without any default on the part of either party. 41 Subject then to the overriding principle that every case must depend upon the particular words of the contract used it would appear that the reasoning adopted by Latham CJ, Williams and Fullagar JJ in Suttor would require to presently be applied in which event the so-called "automatic rescission" provision presently under examination would require to be construed as making the contract not void but voidable. 42 Concerning the overriding principle it should be noted that in Sandra Investments v Booth (1983) 153 CLR 153: · Gibbs J made the point that it was trite that all cases of the type there before the court required to depend upon the particular words of the contract in question. · Wilson J said: "The important consideration which is fatal to the vendor is that any construction of the contract which would give to both parties the right to avoid it on failure of the condition requiring local authority approval of the subdivision is ousted by express conferral on the purchaser alone of an option to cancel the contract. There is simply no room, consistently with the wording of the 2nd sentence of clause 2 4, for the operation of the principles based on the voidability of the contract that are embodied in the decisions of this Court in Suttor v Gundowda and Gange v Sullivan". 43 There has been made particular focus by both parties on the decision of the New South Wales Court of Appeal in Rudi's Enterprises Pty Ltd v Jay (1987) 10 NSWLR 568. Samuels JA with whose reasons Priestley and McHugh JJA agreed, expressed the view that in Suttor, Latham CJ, Williams and Fullagar JJ and had taken the principles enunciated or affirmed in New Zealand Shipping Company a step further:

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I cannot think that the Court in Suttor intended to lay down the proposition that parties could not stipulate for automatic termination of a contract save upon the occurrence of an event which, objectively, lay beyond their control. Effect must be conceded to the parties' intention. In the present case the parties by assigning detailed roles to each other in the making of the application, plainly relinquished the possibility of exerting influence upon the adjudicator's response to their applications. Accordingly, the grant or refund of consent must be regarded as beyond their control. It is difficult to imagine language which more strongly suggests that it was the parties' intention that the agreement should terminate automatically upon the happening of the stated event. Provided that the principle preventing a blameworthy party from taking advantage of his default is observed, there can be no difficulty in the present case in giving effect to what, to my mind, was the parties' deliberately manifested intention." 45 My own view is that the provisions of the Development Contract presently under consideration may again be distinguished from the particular provisions of the Deed of Sale under consideration in Rudi's Enterprises. Clause 2a (c) imposes only an obligation upon Roche to furnish particular information to Metro Edgley. However in Rudi's Enterprises the relevant provision in clause 7 expressly provided details by which both parties were obliged to carry out the acts necessary on each of their behalf in the endeavour to procure the subject consents. This is no minor matter as it seems to me because the reasoning in Rudi's Enterprises rested upon the express provisions of the Deed having exhausted the parties intervention in the particular process. As explained in the reasons given by Samuels JA, "the agreement contemplated the refusal of any consent only as an event occurring after each of the parties had done what they were required to do to obtain it; or, possibly, following breach and waiver by the party not in default". 46 The absence of an express provision assigning a detailed role to the Developer in terms of what it had to do [in relation to playing such part as may be appropriate in acting or co-operating in some particular way so as to ensure that certain of the conditions precedent were likely to be fulfilled or would be fulfilled] means that one would have to be forced back to questions of implied terms of cooperation. However the field of discourse opened by the reasoning taken in Rudi's Enterprises appears to be concerned with the express provisions of the instrument under consideration. 47 In those circumstances it seems to me that one falls back to the reasoning applied in Suttor. And notwithstanding:

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in my view the so-called automatic rescission provision where engaged is properly construed not as making the contract void but as making the Contract voidable. 48 For those reasons notification of the avoidance was necessary. The 21 May 2004 Letter 49 In my view the 21 May 2004 letter from Roche to Metro Edgley was clearly written on the view that the so-called automatic rescission clause had, as at 31 March 2004, effected an automatic cancellation of the Development Contract. The letter seems to be on all fours with the letter written in Suttor by the defendant's solicitors to the plaintiff's solicitors on 15 January 1948 [described at 81 CLR page 442]. That letter apparently advised that "the consent of the Treasurer was not obtained within the period of two months of the date of the contract and therefore the contract is no longer effective after 20 December 1947". Latham CJ, Williams and Fullagar JJ found that the letter was obviously written on the view that the particular clause had effected an automatic cancellation of the contract when the Treasurer had not consented by 20 December 1947. The second of the defendant's solicitors letters purporting to cancel the contract was only written after the consent in writing of the Treasurer to the transfer had been obtained. Even had it been written earlier, it would not have effected the cancellation.*[see Note at end of Judgment] 50 For those reasons the 21 May letter cannot be taken to have effected an avoidance of the Development Contract [nor as pleaded, an election to rescind the Development Contract]. Waiver: the use of the term 51 This is not an occasion where it is necessary for a detailed jurisprudential analysis of the concept of 'waiver' which "has often been regarded as a flexible term used with different or shifting meanings and has been criticised as a vague": Carter on Contract, LexisNexis Butterworths 2002 [07-180] [cases cited in footnotes 2,3,4,5 and 6]. One is dealing with waiver regarded as a species of election in terms of conduct waiving the right to avoid the Development Contract [or electing against exercise of that right]. The affirmation was by reason of Roche conducting itself in a fashion which was justifiable only on the footing that an election had been made to affirm the contract. That conduct was adverse to the Developer and is appropriately regarded as having been unequivocal in its effect. By that conduct Roche induced the Developer to believe that performance of the contract was insisted upon: cf Sargent v ASL Developments Limited [1974] 131 CLR 634 at 658 per Mason J. 52 It is of course quite plain that:

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"[F]rom a person who was dealing with the building end of things: from 31 March until 21 May everyone - that is, everyone at Multiplex and everyone at the Roches - proceeded as if the contract was alive and well. [Transcript 361] 55 It is unnecessary to chronicle the other evidence before the court establishing this conduct by both parties. It suffices to note that the evidence given by Mr Accordo in his affidavit of 15 July 2004 and confirmed under cross-examination [and in part dealt with in the re-examination] clearly established the carrying out of work which related directly to the Roche fitout following 31 March 2004. 56 In those circumstances Roche had at the least by 21 May 2004, affirmed the Development Contract, hence waiving any anterior entitlement it may otherwise have had to avoid the Contract. Conclusion 57 What then is the correct analysis in terms of the present status of the Development Contract? 58 To my mind the following represents the correct analysis in the particular circumstances: · Roche having had an entitlement on or after 31 March 2004 to avoid the Development Contract, failed to exercise that entitlement; · That entitlement may have continued for a [presumably short] period following 31 March 1994 depending upon whether or not, during that period Roche moved outside simply keeping its options open as by conduct affirming the Contract; · Roche had at the least by 21 May 2004 affirmed the Development Contract hence waiving any anterior entitlement it may otherwise have had to avoid the Contract; · As it happens Roche never even purported to avoid the Contract; · Metro-Edgley [by letter dated 1 June 2004] purported to extend the date for satisfaction of the conditions precedent to 30 September 2004; · Notwithstanding that the 1 June 2004 purported extension of the relevant date advanced the incorrect contention that the relevant date had, by agreement of 2 March 2004, been extended to 30 June 2004, the 1 June 2004 letter constituted a valid extension of the date for satisfaction of the conditions precedent to 30 September 2004. 59 In those circumstances Roche is shown to have waived such anterior entitlement as it may have had to avoid the Contract on the basis of the failure by Metro-Edgley to extend the date by notice in writing on or prior to 31 March 2004 60 In the result the date referred to in clause 2A (b) of the Development Contract has been extended to 30 September 2004 and it is appropriate for the Court to declare accordingly. 61 The above analysis holds good notwithstanding that upon the proper construction of the so-called automatic termination provision, the right [on more than one occasion up to the Sunset Date, to notify an extension of the date by which the Contract was to be deemed automatically rescinded] could only be exercised prior to the expiration of an earlier nominated deadline. 62 These findings likely require the suit to be dismissed. The way forward 63 In the circumstances where the plaintiffs may seek to appeal against the approach taken in the above reasons it is likely appropriate for the court to treat with certain of the remaining issues particularly where findings of fact require to be made. 64 Accordingly, I proceed directly to the disputed issues of particular relevance. Dealing with the evidence 65 Whilst there were a number of witnesses called on the defendants disparate alternative pleaded cases, this is not a case in which it is necessary to examine more than a small amount of the voluminous documentary evidence. Nor is it necessary to do more than to examine the evidence given by the witnesses for the purpose of determining very limited factual issues. The meeting of 2 March 2004 The evidence given by the Roche Brothers 66 Each of Messrs Michael Christopher and William Roche gave evidence denying absolutely that there was any discussion at all at the meeting of 2 March 2004 regarding an extension of time of the conditions precedent. Each of Messrs Michael and Christopher Roche swore in their affidavits that if that topic had been raised, they would have considered it to be an important matter and would have made notes accordingly. Mr William Roche under cross-examination swore that he could say with absolute confidence that there was no statement that Multiplex was extending the time under the clause until the end of June [Transcript 344]. Mr Christopher Roche had taken some notes of the meeting in his diary and one of the reasons why he was confident that nothing was said about extending the conditions precedent on that date was because he had no note of this in his diary. He swore that if Mr O'Regan had said that the time for the satisfaction of the conditions precedent was being extended he would have written that statement down as he would have thought the matter important. [Transcript 327]. 67 Mr Michael Roche had a file note of the meeting. This includes no reference to the time extension question. His evidence under cross-examination included:

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Q. Therefore he's going to extend the time? A. That's correct. [Transcript 173] 77 Here again this acceptance of the notion that Mr O'Regan was "going to extend the time", raises the very same ambiguity to which I have already referred. Dealing with the issue 78 This is one of those cases where the court can only decide on the balance of probabilities aided by the whole of the evidence. There is not a great deal that came forward in terms of a proper foundation for an attack of the credit of any of the witnesses called by either party. Whilst a number of attacks upon the credit of each of the material witnesses called by the opposing parties were mounted on disparate grounds, none of them was of sufficient weight to enable a positive finding on the critical issue. The onus 79 At the end of the day the onus of proving that Mr O'Regan had said words to the effect that Multiplex was at that moment [or words reflecting the notion "hereby"] extending the date for satisfaction of the conditions precedent, rests upon the defendants. In my view the defendants have not established on the balance of probabilities that words to this effect were said. 80 It is particularly difficult to reach a finding of fact in terms of whether anything at all was said on the day regarding an extension of time of the conditions precedent. There are cases where the Court simply is unable, even on the balance of probabilities, to reach a finding of fact one way or the other as between two groups of parties, each swearing by its witnesses to what amounts to a 180 degree diametrically opposite version of the events. This is one of those cases. The matter therefore falls to be decided by looking at which party bears the onus of proving the particular facts. Here that onus rests upon the defendants and has not been discharged. 81 However even if the court had been in a position, which it is not, to accept one or more of the versions given by Messrs O'Regan, Mr Yeo or Mr Boonzaaier on the balance of probabilities, I would have had great difficulty in accepting from their evidence that what had been communicated was sufficiently precise, unambiguous and unequivocal [so as to reflect a statement that the developer would not still proceed to formally give the written notice which was required to be given by the terms of clause]. In short it would have been necessary to be quite clear as by using the words "hereby", or even better, as by stating "we here and now extend [the time] and take it that you will not require the formal written extension to be given". Travelling further into the pleaded issues The way forward 82 It is common ground that the proceedings received special expedition for commercial reasons. 83 Having dealt with the threshold issue of principle and with the central issues of fact it does not seem necessary or appropriate for the Court to proceed further with any of the pleaded issues. It would seem likely that the judgment will lead to consensual short minutes of order. 84 The convenient course is to give the parties an opportunity to take instructions on whether or not consensual short minutes of order can now come forward although of course costs may have to be argued. 85 In any event the appropriate way forward is to invite the parties to indicate whether any and if so which further findings of fact or law are sought on any outstanding matter. In the unlikely event that the Court is persuaded that some particular additional findings are necessary those findings can be handed down in a short supplementary judgment. I certify that paragraphs 1 - 85 and Appendix "A" are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 18 August 2004

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      Susan Piggott
      Associate

18 August 2004 Revised 27 August 2004 Note: As to the last two sentences of paragraph 49, see MK & JA Roche & Ors v Metro Edgley Pty Limited & Anor [2004] NSWSC 780

Parties

Applicant/Plaintiff:

MK and JA Roche Pty Limited & Ors

Respondent/Defendant:

Metro Edgley Pty Limited & Anor

Legislation Cited (1)

Crown Lands Act 1989(NSW)

Cases Cited (8)

CITATION : MK and JA Roche Pty Limited & Ors v Metro Edgley Pty Limited & Anor [2004] NSWSC 744 revised - 27/08/2004 HEARING DATE(S) : 9/08/04, 10/08/04, 11/08/04, 12/08/04 JUDGMENT DATE : 18 August 2004

CATCHWORDS : Contract - Construction - Proper construction of automatic rescission clause in Contract - Avoidance/Affirmation of Contract - Notification of avoidance of Contract - Waiver of rights to avoid Contract - Notification of extension of time for satisfaction of conditions precedent to Contract LEGISLATION CITED : Crown Lands Act 1989 (NSW) Borda v Burgess [2003] NSWSC 1171 Gange v Sullivan (1966) 116 CLR 418 New Zealand Shipping Co Ltd v Societe` des Ateliers et Chantiers de France [1919] AC 1 CASES CITED : Rudi's Enterprises Pty Ltd v Jay (1987) 10 NSWLR 568 Sargent v ASL Developments Limited [1974] 131 CLR 634 Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153 Suttor v Gundowda (1950) 81 CLR 418 Tri-Continental Corporation Limited v HDFI Limited (1990) 21 NSWLR 689 MK & JA Roche Pty Limited (ABN 25 076 529 952) (First Plaintiff) PARTIES : Michael Kevin Roche, Christopher John Roche, William Timothy Roche, Kevin Michael Roche, Gabrielle Mary Roche (Second Plaintiff) Metro Edgley Pty Limited (ABN 37 082 440 042) (First Defendant) Multiplex Limited (formerly Multiplex Constructions Pty Limited (ACN 008 687 063) (Second Defendant) FILE NUMBER(S) : SC 50069/04 COUNSEL : Mr DJ Hammerschlag SC, Mr VF Kerr (Plaintiffs) Mr CR Newlinds SC, Ms RS Francois (Defendants) SOLICITORS : Lane & Lane (Plaintiffs) Clayton Utz (Defendants)

(1966) 116 CLR 418

(1987) 10 NSWLR 568

(1983) 153 CLR 153

(1950) 81 CLR 418

(1990) 21 NSWLR 689

[2004] NSWSC 780