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[2003] NSWSC 872
plaintiff. Declaration that the vendors' notice to complete dated 17 June 2003 is invalid; declaration that the purchaser is not obliged to complete unless and until the vendors obtain and furnish a s.149D...
The court held that a short-form agreement reached and recorded on 5 December 2002 had to be read in light of the surrounding circumstances. Those facts showed both parties understood that the vendors would obtain and provide a s.149D building certificate before the purchaser could be required to settle. Because that condition precedent had not been satisfied, the vendors' notice to complete dated 17 June 2003 was invalid. The court refused a coercive order forcing particular works, but declared an implied obligation on the vendors to do all necessary acts on their part to obtain the certificate and restrained further notices to complete until the certificate was furnished. Costs were ordered for the plaintiff on the party/party basis (paras 19, 29-31, 32).
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Pane Enterprises (the purchaser) contracted in May 2002 to buy a commercial property from Peronace and Brandalise (the vendors). The principal contract (Law Society form) contained ordinary completion provisions (clause 15 and special condition 3.1) but said nothing about a building certificate (para 5–6). After discovery of unauthorised building works on the property, dispute arose about rectification and compensation; ultimately the parties attended court on 5 December 2002 and reached short minutes recorded in consent orders. Those short minutes provided that the purchaser would complete the purchase within four working days of the vendors providing a s.149D building certificate (paras 1, 6). The vendors later purported to terminate the contract (12 February 2003), and then to issue a notice to complete on 17 June 2003. The purchaser commenced the present proceeding seeking declarations that the 17 June 2003 notice to complete was invalid, that the 5 December 2002 agreement obligated the vendors to obtain a building certificate before settlement, an order compelling the vendors to do whatever was necessary to obtain that certificate, and an injunction restraining further notices to complete until a certificate was furnished (paras 2–4).
No linked legislation citations have been extracted yet.
Barrett J was required to construe the short-form 5 December 2002 agreement in its commercial and factual context to decide whether the parties intended that provision of the certificate by the vendors be a condition precedent to the purchaser's obligation to complete (paras 6–9, 19). Evidence included contemporaneous conversations at court (affidavits from the parties and their solicitors) and later letters exchanged with the Council (paras 12–16, 21–24). The judge found that the surrounding circumstances showed both parties accepted that the vendors obtaining and furnishing the building certificate was a necessary precursor to settlement (paras 17–19). Consequently the 17 June 2003 notice to complete was invalid because the condition precedent had not been satisfied (para 29). Barrett J declined to make a mandatory order forcing the vendors to carry out undefined demolition works, but declared an implied obligation on the vendors to take all things necessary on their part to obtain the certificate (para 30). Costs were awarded to the plaintiff on the party/party basis (para 32).
The central analytic move was construction of the 5 December 2002 agreement against the actual background in which it was made. Barrett J identified a genuine ambiguity: the short minutes could be read narrowly as only fixing the timing for completion once a certificate was produced, or more broadly as making production of a certificate by the vendors a precondition to any obligation by the purchaser to complete (paras 7–9). The contract had already matured past its original completion date so the usual mechanism (cl 15 and special condition 3.1) for fixing completion could have been used by the vendors at any time (para 8). That commercial reality made it unlikely that the short minutes were merely a device creating an alternative mechanism for imposing a completion date, and instead favoured the construction that the parties intended the vendors to obtain a certificate before the purchaser could be required to settle (para 9).
To resolve the textual ambiguity Barrett J invoked orthodox principles permitting evidence of surrounding circumstances where meaning is unclear (para 10, citing Codelfa, Reardon Smith and Brambles). He examined contemporaneous conversations recorded in affidavits from both parties and their counsel. Those accounts converged on the point that both sides regarded a building certificate as necessary to settle: the purchaser's solicitor said the purchaser "cannot settle without a Certificate" and undertook that the purchaser would settle within four days of being given a clear building certificate, while the vendors' representatives agreed they could obtain such a certificate by removing the unauthorised works and asked that settlement occur within four days of certificate issue (paras 12–18). Barrett J held these elements left him "in no doubt" that the parties accepted the obtaining and furnishing of a building certificate by the vendors as a precondition to compelling completion (para 19).
Finally, when considering remedies Barrett J accepted that enforcing precise demolition steps by mandatory order would involve unacceptable court supervision and could require judicial monitoring of undefined works. Instead he declared that the agreement is subject to an implied term that the vendors must do all things necessary on their part (following the approach in Secured Income) to obtain the certificate, and restrained further notices to complete until the certificate was furnished (para 30–31).
Before this decision, the orthodox approach to contract construction in New South Wales required that if the language of an agreement is ambiguous, courts may have regard to surrounding circumstances and shared assumptions to ascertain commercial purpose (Codelfa; Reardon Smith; Brambles), principles explicitly applied here (para 10). The doctrine permitting implied terms of the kind that obligate a party to use reasonable endeavours or to do all things necessary to enable performance has long-standing High Court pedigree (Secured Income), also invoked here as authorising the judicial recognition of an implied obligation that a party take steps necessary on their part to allow the contract to operate (para 30).
Barrett J's decision sits comfortably within that established framework. Its notable contribution is a clear application of those principles to short-form, court-noted agreements created in the heat of an interlocutory court conference. It confirms that even concise, hurriedly drafted settlement terms (short minutes) will be construed in light of contemporaneous communications and the commercial context. It also emphasises limits on equitable coercive remedies where the acts required are undefined and would require intrusive supervisory orders; a declaratory approach with an implied obligation can be a suitable alternative (paras 28–31).
Para 9: "By the time the 5 December 2002 agreement came into being, the vendors were already in a position where they could impose an obligation to complete ... by giving a notice of at least 14 days." Translation: At the time the short agreement was reached, the vendors already had a simple way to force completion under the original contract; that makes it unlikely the short agreement was just a new way to set a completion date.
Para 10 (quotation of Ipp A-JA): "If the language of a contract is ambiguous, evidence of surrounding circumstances is admissible ..." Translation: When the words are unclear, the court can look at what the parties knew and intended at the time to understand what the words meant.
Para 19: "I am in no doubt that the obtaining by the vendors of a building certificate was accepted by the parties as something that had to happen before the purchaser could be compelled to complete." Translation: The judge found, on the evidence, the parties agreed the vendor had to get and hand over the certificate before the buyer had to settle.
Para 29: "The plaintiff has established ... a declaration that the vendors' notice to complete dated 17 June 2003 is invalid ... because a condition precedent ... had not been satisfied." Translation: The judge declared the vendors' attempt to insist on settlement in June 2003 was ineffective because the precondition (the certificate) had not been met.
Para 30: "It would ... be appropriate to make a declaration ... that the agreement ... is subject to an implied term ... of the 'all things necessary on their part' kind." Translation: Rather than ordering specific works, the court declared the vendors must do whatever reasonably necessary on their side to get the certificate.
This decision is relevant where:
If all these elements exist, courts will look beyond terse wording to the factual matrix and may hold that a condition precedent exists and that the obliged party must take reasonable steps (or be subject to an implied obligation) to enable performance.
This judgment itself cites and distinguishes an immediately preceding interlocutory judgment of Bryson J (Pane Enterprises Pty Ltd v Peronace [2003] NSWSC 310) and explains why that earlier decision did not determine the construction issue now under consideration (paras 25–28). Barrett J applied established authorities (Codelfa, Reardon Smith, Brambles) to admit surrounding circumstances and endorsed use of Secured Income-type implied obligations to avoid intrusive supervisory orders (paras 10, 30). Practitioners should take from Barrett J that trial judges will carefully interrogate contemporaneous negotiations and appearances at court, and will not treat concise short minutes as immune from contextual construction. Where mandatory performance would require detailed judicial oversight, courts may prefer declaratory relief plus an implied obligation. Subsequent decisions that involve short-form settlement terms or condition precedent disputes are likely to follow the same analytic pathway: identify ambiguity, admit contemporaneous background, assess shared assumptions, and balance available remedies against the practicality of judicial supervision.
Practitioners should ensure short settlement terms expressly record whether a certificate or other event is intended as a condition precedent, and, if so, specify the obliged party's duties (eg, reasonable endeavours) and the consequences of failure, to avoid later factual contest about implied obligations and to limit the need for court construction (paras 28–30).
CITATION : Pane Enterprises v Peronace [2003] NSWSC 872 HEARING DATE(S) : 04/09/03 JUDGMENT DATE : 24 September 2003 JURISDICTION: Equity Division JUDGMENT OF : Barrett J DECISION : Plaintiff entitled to declarations
CATCHWORDS : CONVEYANCING - construction of contract - no question of principle AJDJ Pty Ltd v Pacific West Developments Pty Ltd [2002] ANZ ConvR 267 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 CASES CITED : Oshlack v Richmond River Council (1998) 193 CLR 72 Pane Enterprises Pty Ltd v Peronace [2003] NSWSC 310 Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 Pane Enterprises Pty Limited - Plaintiff PARTIES : Frank Peronace - First Defendant Christina Louise Brandalise - Second Defendant FILE NUMBER(S) : SC 3436/03 COUNSEL : Mr S.T. White - Plaintiff Mr D.M. Loewenstein - Defendant SOLICITORS : Nescis Lawyers - Plaintiff Gray & Perkins - Defendants
IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION
3436/03 - PANE ENTERPRISES PTY LIMITED v FRANK PERONACE & ANOR JUDGMENT 1 The plaintiff is the purchaser and the defendants are the vendors under an uncompleted contract dated 23 May 2002 for the sale and purchase of an office and warehouse property at Belmore. This is the third proceeding that has been initiated by the purchaser against the vendors in respect of the contract. The first proceeding was 5762 of 2002 in this Division. It was commenced on 3 December 2002. On the first return date, 5 December 2002, the court made certain orders by consent and, in doing so, noted the parties' agreement as follows: "The Plaintiff agrees to complete the purchase of the property [described] pursuant to the contract between the parties on 23 May 2002 within 4 working days of the Defendants providing to them a section 149D of the Environmental Planning and Assessment Act Building Certificate in respect of the said property."
On 3 April 2003, the summons filed on 3 December 2002 was dismissed and the vendors were ordered to pay the purchaser's costs. 2 On 12 February 2003, the vendors purported to terminate the contract on the footing that the purchaser had evinced an intention not to complete in accordance with what the vendors believed to be the requirements of the whole of the contractual provisions then binding on the parties, including those arising from the agreement of 5 December 2002. The letter from the vendors' solicitors by which the purported termination was effected read in part as follows: "[Y]ou have provided us with a series of correspondence which indicates that your client will not settle within 4 days of being presented with a building certificate without making a claim for compensation in relation to the loss of the unauthorised terrace area. This is clearly a repudiation of the agreement made on 5 December 2002 and an effort to vary the same. As previously advised, we are instructed to accept your clients conduct as repudiation of the agreement made on 5 December 2002 and we hereby give you notice that our clients have now terminated the contract dated 23 May 2002 as varied on 5 December 2002." 3 This led to the second proceeding, being 1519 of 2003 in this Division, in which the purchaser sought orders and declarations that the purported termination by the vendors was invalid. That proceeding was determined by Bryson J on 17 April 2003 in favour of the purchaser: Pane Enterprises Pty Ltd v Peronace [2003] NSWSC 310. 4 The present proceeding was commenced by summons filed by the purchaser on 24 June 2003, following issue by the vendors on 17 June 2003 of a purported notice to complete. By its summons, as amended on 4 September 2003, the purchaser claims:
(a) a declaration that the purported notice to complete dated 17 June 2003 is invalid;
(b) a declaration that the parties' agreement noted by the court on 5 December 2002 "obligates the Vendors to obtain a Building Certificate as a pre-condition to settlement";
(c) an order that the vendors do all things necessary to obtain a building certificate "pursuant to the agreement of 5 September 2002"; and
(d) an order that the vendors be restrained from issuing any notice to complete pursuant to the contract for sale "unless and until" the vendors have provided the purchaser with a building certificate in respect of the property. 5 The first step in addressing these claims is to look at the contract dated 23 May 2002. It is in accordance with the Law Society's 2000 edition. The section of the first page reserved for variable particulars defines "Completion date" as "70th day after the contract date (clause 15)". Clause 15 says: "The parties must complete by the completion date and, if they do not, a party can serve a notice to complete if that party is otherwise entitled to do so."
Special Condition 3.1 says: "If completion has not taken place by the completion date either party may at any time thereafter give to the other party not less than 14 days notice to complete this contract and by such notice time shall become the essence of the contract."
There is also a special condition making completion conditional on the purchaser's obtaining development consent to the use of the property for the manufacture and wholesaling of ice cream. There is evidence, however, that this condition was later abandoned by the parties. It played no part in the argument before me. 6 The contract dated 23 May 2002 says nothing about a building certificate. That subject did not play any part in the parties' contractual arrangement until introduced on 5 December 2002 through the subsequent agreement noted in the consent orders to which reference has already been made. 7 The present dispute turns wholly on the meaning and effect, in its context, of the agreement of 5 December 2002. The purchaser contends that, upon its proper construction, that agreement means that the vendors are not entitled to insist upon completion (and are therefore precluded from issuing a notice to complete) unless and until they have obtained from the Canterbury City Council and furnished to the purchaser a building certificate in respect of the property. The vendors, for their part, say that the agreement of 5 December 2002 deals with no more than the timing of completion and that its effect was simply to supplement or qualify clause 15, special condition 3.1 and the definition of "completion date" by adding a stipulation that, whatever else might be said about the time at which completion was to occur, the purchaser was obliged to complete within four working days after issue of the relevant certificate (assuming one ever issued). On the vendors' view of matters, no obligations as to the obtaining of a certificate were, by the 5 December 2002 agreement, incurred by the vendors. 8 By the time the agreement of 5 December 2002 was made, more than 70 days had elapsed from the date of the principal contract. At that point, therefore, clause 15 was no longer capable of prescribing the completion date in a prospective way since the date it identified had already passed. But clause 15 (as supplemented by special condition 3.1) was still alive in the sense that the situation envisaged by its opening words ("If completion has not taken place by the completion date …") had arisen, with the result that clause 15 had already operated to enable either party to serve a notice to complete (if "otherwise entitled to do so"), with special condition 3.1 confirming that right, specifying the minimum period of notice that might be given and specifying the effect that the notice was to have. In summary, therefore, the position immediately before 5 December 2002 was that each party was (unless for some collateral reason disqualified from doing so) entitled to serve a notice requiring completion on a day at least 14 days after service and thereby making time of the essence of the contract. 9 Injected, as it was, into that pre-existing contractual context, could the agreement of 5 December 2002 have meant merely that, if the vendors produced a building certificate (it being for them alone to decide whether or not they would do so), the purchaser was bound to complete within the following four business days? Even apart from surrounding circumstances, there are substantial difficulties in the way of a conclusion that that was the real intention of the parties. By the time the 5 December 2002 agreement came into being, the vendors were already in a position where they could impose an obligation to complete on the purchaser simply by giving a notice complying with clause 15 and special condition 3.1. They did not need to go to the trouble and expense of obtaining a building certificate from the Council as a means of committing the purchaser to a completion date: all it took was the simple step of giving a notice of at least 14 days. Against that background, it is not consistent with commercial reality to regard the 5 December 2002 agreement as no more than a means by which the vendors might fix a completion date to which the purchaser was obliged to adhere. 10 The purchaser submits that attention should be paid to the circumstances surrounding the creation of the 5 December 2002 agreement in order to resolve the doubt as to its meaning that emerges from the analysis I have just outlined. That doubt constitutes, in my view, an ambiguity which may be approached in accordance with principles outlined by Ipp A-JA in Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 as follows: "It is nowadays a trite proposition that, if the language of a contract is ambiguous, evidence of surrounding circumstances is admissible for the purposes of construing the contract: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352. Where ambiguities exist, mutually known facts establishing the commercial purpose of the contract, the genesis of the transaction, the background and the context in which the parties are operating will be admissible: Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 at 995 to 996; [1976] 3 All ER 570 at 573-575, per Lord Wilberforce). On this basis, the shared beliefs of the parties as to their respective rights as they existed immediately before the contract was entered into are admissible, such beliefs constituting common assumptions: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (at 353-354)." 11 To the same effect is the observation of Heydon JA that "… pre-contractual conduct is only admissible on questions of construction if the contract is ambiguous and if the pre-contractual conduct casts light on the genesis of the contract, its objective aim, or the meaning of any descriptive term: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347-352."
As Heydon JA also observed, however, post-contractual conduct is only admissible on the question of whether a contract was formed, as distinct from the question of what it means. 12 Mr White of counsel, who appeared for the purchaser, took me to the events which led up to the making of the 5 December 2002 agreement. It is appropriate to outline them briefly. 13 The proceedings that culminated in the current orders of 5 December 2002 followed the purchaser's discovery that unauthorised building work (both demolition and construction) had been undertaken upon the property. The purchaser, in purported reliance on the contract, made a claim for compensation of $45,000 in respect of the cost of rectifying the unauthorised work. About three weeks before the proceedings were instituted, the purchaser offer to settle on the basis that $30,000 would be held in trust pending issue of a building certificate by Canterbury City Council. That offer was not accepted. Further attempts to find an agreed solution were unsuccessful. The vendors purported to serve a notice to complete. Before the expiration of the period specified in the notice, the purchaser filed a summons seeking, among other relief, a declaration that it was entitled to make a claim for compensation. 14 Evidence was given by several witnesses about conversations on 5 December 2002 at court before the proceedings were called. The first defendant (one of the vendors) says in an affidavit of 24 March 2003: "On 5 December 2002 I attended at this court at the return of the plaintiff's summons in the aforesaid proceedings with Counsel and Mr Andrew Cameron, a Solicitor from McLaughlin & Riordan. At this time after the matter was mentioned in court, it was adjourned to allow the parties to have discussions. During these discussions I instructed my solicitor to inform the plaintiff's solicitor that, for the purpose of resolving the dispute, that Christina Brandalise and I would be willing to obtain a building certificate by removing the unauthorised work on the upstairs terrace area, as this would be an inexpensive and quick way of obtaining a building certificate. I believe my Solicitor relayed these instructions to the plaintiff's solicitor. After about 5-10 minutes my Solicitor told me words to the following effect:- 'The Purchaser has instructed his Solicitor that they have no objection to completing upon you obtaining a building certificate by removing the work.' I then said: 'You're joking, why have they taken us to Court and now changed their minds. This is ridiculous, they have delayed the matter for so long and now they say this. So they now say they will settle without compensation if we remove the work at the upstairs area.' My solicitor then said further words to me. I then said:- 'OK, agree to giving them a building certificate but leave it open, because if Council tells me that they only require a couple of fire extinguishers to be installed or something that easy, I don't mind doing that and leaving the place as it is. Tell them OK then, but they must settle within 4 days of us getting the building certificate from Council.' My solicitor then returned to the plaintiff's solicitor before returning shortly thereafter and saying to me words to the following effect:- 'OK, they will agree to four days but settlement will not be able to take place between 20 December 2002 and 13 January 2003 as the solicitor's office is closed due to the Christmas break. There's not much we can do about that except try to have the building certificate issued before 20 December .' Me:- 'Alright then.' " 15 Mr Nesci, the solicitor for the plaintiff (purchaser), gave the following account in his affidavit of 7 April 2003: "6. The Defendants were represented by Mr. Cameron Senior ('Mr. Cameron Senior') of Counsel and Mr. Andrew Cameron ('Mr. Cameron') as the instructing Solicitor. Mr. Cameron approached me and said: 'Could we have a discussion?' I readily accepted. The following conversation took place between me and Mr. Cameron although Mr. Cameron Senior was also present: Mr Cameron: 'Your client does not have a leg to stand on in his claim for compensation.' Me: 'That is not the way I see it based on the authorities. In any event, isn't the stumbling block for a settlement the provision of a Building Certificate?' Mr Cameron: 'I agree that that is the issue.' Me: 'Well, why does your client, one day say that he is going to provide one and then he changes his mind, changes solicitor, goes back on his word that he would provide one and then you issue a Notice to Complete.' Mr Cameron: 'I issued a Notice to Complete because you do not have a right to make a claim for compensation.' Me: 'We are going around in circles. The reality of the situation is that I cannot settle without a Certificate. I would have thought that it probably would be cheaper for your client to get the Certificate or do as has been suggested, set aside the money under the claim for compensation and then my client can do the work after settlement and that will be the end of the story.' Mr Cameron: 'My clients would prefer to do the work. I have already communicated with the Council and my clients can do the work in no time and we may even be able to settle next week.' Me: 'All I need is 4 clear days to settle from the time that you provide me with a clear Building Certificate.' Mr Cameron: 'Are you then prepared to settle within 4 days after we provide you with a clear Building Certificate?' Me: 'Those are my instructions but to make 100% sure, I will check with my client.' 7. I then left the conference room adjacent to the Court and went and spoke to my client for a few minutes. When I returned, I had the following conversation: Me: 'You provide us with a Building Certificate and we will settle pursuant to the Contract within 4 days. You say that you can get the Certificate quickly but my experience with Councils is that they are a lot slower than they promise. I do not wish to be caught in a situation where you have the Certificate within the period that my office closes therefore I want the period from 20 December 2002 to 13 January 2003 excluded.' Mr Cameron: 'I will get instructions.' I then left the room. 8. A few minutes later, Mr Cameron beckoned me to go and talk to him and said: 'My client is agreeable. I will get Counsel to draft the Terms of Settlement.' " 16 Mr Cameron, the vendors' solicitor, said in an affidavit of 24 March 2003: "On 5 December 2002 I attended at this honourable court at the return of the Plaintiff's summons in proceedings no. 5762 of 2002. After the matter was mentioned before Her Honour Burgin J at 2.00pm the matter was adjourned to allow the parties to hold discussions to explore resolution of the matter. At the time of the discussions with the plaintiff's solicitor I had a conversation with the plaintiff's solicitor Mr Nesci where we used words to the following effect:- Me: 'My client would prefer to remove the non complying work as Council has stated that they will issue a building certificate upon the non complying work being removed.' Mr Nesci: 'OK, I'll get instructions and come back to you.' After about 5 minutes Mr Nesci returned to where I was standing outside the court with Counsel and said to me words to the following effect:- 'My client does not care either way they will settle if the work is removed.' Me: 'Is that so, I thought it was supposed to be the best room of the place'. Mr Nesci: 'No, they don't care either way, as long as your clients get the building certificate they will settle.' Me: 'So to be clear about it, they will settle without making any claim for compensation if the building certificate is obtained by removing the work in the upstairs area.' Mr Nesci: 'Yes, that's right, they don't care either way as long as you give them a building certificate they will settle.' Me: 'I'll let my clients know and get back to you.' I then approached my clients and relayed these instructions to them. In response Frank Peronace said: 'Alright, we'll get a certificate by removing the work but they must settle within 4 days of the building certificate being obtained.' I then approached Mr Nesci and said to him words to the following effect: 'My clients will only agree if settlement will occur within 4 days of the building certificate being obtained.' Mr Nesci returned to me shortly thereafter and said words to the effect: 'My clients will agree to settling within four days of the building certificate being obtained as long as settlement does not take place between 20 December 2002 and 13 January 2003 as my office is closed between these date.' I then received instructions from my clients to agree to this matter and confirmed my instructions with Mr Nesci." 17 There are several notable features about these conversations. The first defendant (a vendor) reports his solicitor, Mr Cameron, as having told him that the purchaser had instructed its solicitor that it had "no objection to completing upon you obtaining a building certificate by removing the work ".
Mr Nesci, the purchaser's solicitor, says that he said to Mr Cameron: "The reality of the situation is that I cannot settle without a Certificate" [emphasis added],
and that Mr Cameron said: "Are you then prepared to settle within 4 days after we provide you with a clear Building Certificate?"
to which Mr Nesci, after obtaining instructions, replied, "You provide us with a Building Certificate and we will settle pursuant to the Contract within 4 days". 18 Mr Cameron's account has Mr Nesci saying, on behalf of his client (purchaser): "… as long as your clients [vendors] get the building certificate they [purchaser company] will settle" [emphasis added],
which Mr Cameron clarified by obtaining Mr Nesci's concurrence in the following: "So to be clear about it, they will settle without making any claim for compensation if the building certificate is obtained by removing the work in the upstairs area" [emphasis added]. 19 These elements of the conversations that led up to the agreement of 5 December 2002 (particularly the italicised parts) leave me in no doubt that the obtaining by the vendors of a building certificate was accepted by the parties as something that had to happen before the purchaser could be compelled to complete. The obtaining of such a certificate by the vendors and their furnishing of it to the purchaser was seen on both sides as an essential precursor to settlement. It was in that state of mutual belief bearing upon the parties' commercial purposes that the agreement of 5 December 2002 was composed and concluded. 20 I pass now to a different matter. The defendants submitted that elements of the judgment of Bryson J delivered on 17 April 2003 dealt definitively with the question of construction of the 5 December 2002 agreement now in issue between the parties. It is instructive to review events after 5 December 2002 for the limited purpose of providing an understanding of the background against which the proceedings determined by Bryson J arose. For reasons I have stated, evidence of events after 5 December 2002 cannot be relied upon in seeking the true meaning of the agreement made on that date. 21 In evidence is correspondence between the vendors' solicitors and Canterbury Council about the non-complying building work on the property. In particular, there is a letter of 6 December 2002 in which the solicitors stated, after referring back to correspondence of the preceding September and November, that their clients had decided to "accept the Council's invitation of demolishing the unauthorised work and rectifying the building to satisfy your requirements". That of course followed immediately upon the agreement of 5 December 2002. In a letter to the Council dated 15 January 2003, the vendors' solicitors complained that their clients were continuing to incur significant expenses "as a result of them being unable to obtain a building certificate over the non-complying work". There was thus a recognition that absence of the certificate was a barrier to the vendors' ability to complete. 22 In a letter of 31 January 2003 to the purchaser's solicitors, the vendors' solicitors said: "We have advised our clients that they may either elect to remove the unproved [sic] work or carry out the work as set out in Council's letter dated 22 January 2003 and upon them obtaining a building certificate and presenting same to your client that your client will be obliged to settle as a result of the agreement made on 5 December 2002." 23 By a letter of 5 February 2003, the vendors' solicitors sought confirmation from the purchaser's solicitors "that your client will complete the contract upon our client presenting it with a building certificate from Counsel [sic] after the non-complying work is removed and a building certificate is obtained". The purchaser's solicitors' reply of 6 February 2003 said in part: "We reiterate that if a building certificate is produced then we have an obligation to settle in accordance with the Terms of Settlement namely 4 working days." 24 This letter went on, however, to reserve the purchaser's rights in respect of any claim for compensation under the contract in consequence of demolition or similar work undertaken by the vendors in order to obtain the building certificate. This culminated in a letter of 12 February 2003 from the vendors' solicitors to the purchaser's solicitor reading in part as follows: "… you have provided with a series of correspondence which indicates that your client will not settle within 4 days of being presented with a building certificate without making a claim for compensation in relation to the loss of the unauthorised terrace area. This is clearly a repudiation of the agreement made on 5 December 2002 and an effort to vary the same. As previously advised, we are instructed to accept your clients' conduct as repudiation of the agreement made on 5 December 2002." 25 Against that background, I turn to Bryson J's judgment. His Honour stated at paragraph 30 the issue in dispute before him: "In substance the dispute is that the vendors contend and the purchaser denies that the position taken by the purchaser in its solicitors' correspondence about the possibility of a claim for compensation being made if the vendor ever does produce a certificate under s.149D and thereby obliges the purchaser to complete within four working days, as required by the agreement in the Short Minutes, amounts to repudiation of the purchaser's obligations under the Contract of Sale, a repudiation which the vendors were entitled to accept and did accept on 12 February 2003." 26 This, together with some other passages in his Honour's judgment, are said by the vendors to preclude the outcome for which the purchaser contends in the present proceeding. The other passages are: "In view of the Agreement in the Short Minutes, the vendors' election to demolish the works and the vendors' need to obtain a s.149D Certificate, the vendors are under a practical necessity, if they are to be entitled to completion, to demolish the illegal works and otherwise to satisfy Council's requirements" (paragraph 32). "The agreement in the Short Minutes did not set aside the parties' rights under the contract, but dealt only with the manner and circumstances in which the purchaser was to be obliged to settle within four days. Settlement was to be 'pursuant to the contract' and no part of the contract was set aside by that agreement" (paragraph 43). "My conclusion is that it is not the case that it was an express term, or an implied term of the agreement of 5 December 2002 that the purchaser would waive any right to compensation which might thereafter come into existence, according to whatever events might attend the vendors' obtaining a s.149D Certificate" (paragraph 46).
(I leave to one side the third sentence of paragraph 55 of the judgment which, although relied upon by the vendors as laying down some proposition helpful to them, is clearly no more than a restatement of what was said in the consent orders.) 27 I do not regard any of the statements quoted as even approaching an adjudication upon the question now before me, that is, the question whether provision of a building certificate by the vendors to the purchaser became, by the agreement of 5 December 2002, an event in the absence of which the purchaser was not obliged to complete. In particular, his Honour's statement in the above extract from paragraph 43, insofar as it dealt with the content of the 5 December 2002 agreement, said no more than that the agreement dealt with "the manner and circumstances in which the purchaser was to be obliged to settle within four days". There was no attempt or intention to construe the agreement. In the extract from paragraph 32, the reference to "the vendors' need to obtain a s.149D Certificate", if relevant at all to the present controversy, points towards a construction under which there was a necessity for the vendors to obtain the certificate. Such a necessity would be consistent with a construction making the obtaining of the certificate a necessary precursor to completion. 28 In summary, the judgment of Bryson J has no bearing on the determination of the issue in these proceedings and, from the point of view of rational and coherent operation of the parties' contract, the agreement of 5 December 2002 must be given some significance beyond a mere time stipulation of the kind that the vendor could in any event have made essential by notice to complete. The conversations leading up to the agreement show that the parties intended that there should be no obligation of the purchaser to complete unless and until the vendors obtained the certificate and furnished it to the purchaser. It was submitted on behalf of the vendors that, had that been the intended meaning, a more elaborate form using a significantly greater number of words would have been employed. I disagree. The words were obviously composed in some haste at court. While the drafting may have been more elegant and comprehensive if undertaken at greater leisure, the ambiguity in the form in fact adopted could have been resolved by the addition of very few words at the end (viz, "but not otherwise" or "but shall otherwise not be required to complete"). Such a brief addition would have put beyond doubt what the antecedent discussions show to have been the intention behind the clause in any event. 29 The plaintiff (purchaser) has established an entitlement to the relief sought in paragraph 1 of the amended summons, that is, a declaration that the vendors' notice to complete dated 17 June 2003 is invalid. This is because a condition precedent to the purchaser's obligation to complete had not been satisfied. I do not think the second declaration (referring to an obligation of the vendors to obtain a certificate) should be made. The position is, rather, that the purchaser is not obliged to complete unless and until the vendors obtain the certificate and furnish a copy to the purchaser. It would be appropriate to make a declaration in those terms. 30 The third order sought by the plaintiff is a mandatory order directing the defendants to "do all things necessary to obtain a Building Certificate pursuant to the Agreement of 5 December 2002". I do not consider such an order to be warranted, particularly in light of what I have said about the second declaration. There is also the point that an order in the form sought would involve an unacceptable degree of supervision by the court, particularly since some essentially undefined demolition work may be part of what needs to be done to obtain a certificate. It would, however, be appropriate to make a declaration to the effect that the agreement of 5 December 2002 is subject to an implied term (binding on the vendors) of the "all things necessary on their part" kind most often associated with the decision of the High Court in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596; see also AJDJ Pty Ltd v Pacific West Developments Pty Ltd [2002] ANZ ConvR 267. 31 The fourth order sought in the summons should be made. It is an adjunct to both the declaration in paragraph 1 of the amended summons and a declaration of the kind I have indicated should replace the declaration in paragraph 2. 32 Although I have indicated that the relief to be granted will not be precisely as sought, the plaintiff has still been successful in a way that warrants an order for costs in its favour according to the ordinary rule that costs follow the event. The plaintiff seeks costs on the indemnity basis but I can see no basis on which the defendants can be said to have been guilty of "relevant delinquency": Oshlack v Richmond River Council (1998) 193 CLR 72. The agreement of 5 December 2002 was ambiguous. The defendants were entitled to put the plaintiff to the test, so far as the plaintiff's contentions as to its true meaning were concerned. Costs should be awarded to the plaintiff on the party/party basis. 33 I direct that short minutes giving effect to this judgment be brought in within fourteen days. **********
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Pane Enterprises
Peronace
Declaration that the vendors' notice to complete dated 17 June 2003 is invalid; declaration that the purchaser is not obliged to complete unless and until the vendors obtain and furnish a s.149D building certificate; declaration that the 5 December 2002 agreement is subject to an implied term that the vendors do all things necessary on their part to obtain the certificate; injunction restraining vendors from issuing a notice to complete until certificate furnished; costs to plaintiff on party/party basis (paras 29-31, 32).