Perpetual Trustee Company Ltd v Meriton Property Management Pty Ltd

Construction of contract 23 Although this dispute was fought on the basis of evidence, both oral and documentary, and from both experts and from the General Manager of the purchaser, and by reference to a number of authorities, on one view the dispute involved no more than the construction of a tolerably clear contract. This view would turn on six propositions:

(1) the contract and in particular clauses 41.7, 41.8 and 48, envisaged that the description of the property sold might vary from that identified by reference to the unregistered plan of subdivision and the unregistered instrument;

(2) the various paragraphs of clause 41.7 were listed disjunctively and were each self-contained provisions;

(3) if a variation fell within a paragraph of clause 41.7, the purchaser could not object, delay completion or rescind the contract and the variation was in this sense a 'permissible variation';

(4) if the variations about which the purchaser objected related to the roadway or the area of additional land, they were permissible;

(5) each of the four disputed variations in fact fell within those two categories, and

(6) the vendor was at all times able and willing to perform the contract which included those variations, but the purchaser was not. 24 The first three propositions were not in dispute. The critical dispute centred on proposition (4), in relation to the four variations which remained in contention. These were dealt with, conveniently, by her Honour in two groups and were addressed in a similar manner in this Court. The first two items involved easement "D", being the easement to park motor vehicles, and the consequential inability of the vendor to give vacant possession over that area of the land, prior to the expiration of the lease in 2006. These variations were entirely restricted to the "additional land" to be transferred pursuant to the boundary change required by the Council. 25 The second two items were identified as the expansion of easement "Y" to cover the whole of the roadway, now wholly on the land to be transferred, with the consequential removal of the more limited right of way known as easement "Z" as contained on the unregistered plan. 26 To the extent that these variations affected the "additional land", the contract provided that the area of land could be increased (or reduced) by an amount less than 5% of the area identified in the contract. However, the contract said nothing about the state or status of any additional land, within the limits of a permissible variation for the purposes of clauses 41.7(a) and 41.8. Thus the contract did not require that any additional land be useable or unburdened. As the Respondent noted, the condition relating to changes in easements (clause 41.7(c)) was restricted to changes in existing easements, noted in the unregistered plan: it had nothing to say about new easements affecting the additional land. If the area of the land was reduced by less than 5%, the contract placed no limit on where the reduction might occur, nor its potential effect on the area which might be useable by the purchaser for development. The purchaser was precluded by the clause from making any objection or rescinding or terminating the contract because of such a reduction. That being so, it is difficulty to see why an increase in the area, but involving land subject to burdens and restrictions on use, should be treated differently. The provision for permissible variations in the area of the land, being variations involving less than 5% of the area of the property, involved no assessment of benefit or detriment to the purchaser. 27 Her Honour dealt with these objections differently, asking whether the easement and inability to give vacant possession were minor changes, treating the additional land as if it were simply part of the original bargain and treating each variation as requiring justification under a separate head of clause 41.7. That approach led to the filing of a notice of contention by the Respondent, seeking to support her Honour's conclusion on the basis that the power to vary easements only related to extant easements, contained in the plan. This complaint has merit, but (as noted in the preceding paragraph) also focuses attention on the fact that nowhere in the contract is any constraint or condition imposed on the additional land, beyond the limitation on its permissible area. 28 Her Honour dealt with these changes in the following passage at [60]: "The movement of the boundary to the south was a requirement of Council. Even if the imposition of the easement arose from the requirement, which I am not satisfied it did, it can hardly be a 'minor' variation to the Instrument. The imposition of this new easement and the inability to convey the land with vacant possession were in my view quite major variations or changes to which the defendant was entitled to object." 29 The reason why, at least on a tentative basis, her Honour did not consider that the easement was a variation "arising from" the required change in the boundary, is not expressly stated, but may reflect a comment made in her Honour's first judgment that the easement arose from the lease to Aust Scan Pty Limited, which was entered into one month after the contract was signed: [2004] NSWSC 1258 at [13]. However, the lease was entirely over land which was land of the vendor not contracted to be sold to the purchaser, and was entered into two months prior to advice from Council that the boundary would need to be relocated to the south. The fact that no-one contemplated the easement or the restriction on use of the additional land, prior to the Council's requirement, is sufficient to demonstrate that the need for the easement "arose from", in any ordinary sense of those words, the Council's requirement to change the boundary. 30 Lest it be thought that some injustice accrued to the purchaser, as a result of the vendor failing to challenge the Council's requirement, the purchaser, on being notified of the requirements, knowing of the lease but without further inquiry as to the status of the land in question, advised the vendor on 7 November 2003 that it did not require any appeal or objection to be taken to the Council's decision, of which, in any event, it had foreknowledge by reason of the Council's letter of 30 October 2003, forwarded to it by the vendor on 5 November 2003. 31 If, contrary to the view expressed above, it were necessary to justify the variation by reference to paragraph (d) of clause 41.7, it is difficulty to see why the variation should not be treated as "minor" for the purposes of the contract. If the area of land had been reduced by less than 5%, the change would have been minor: the increase by which the purchaser obtained additional land which it did not expect to obtain and had not bargained for, but subject to constraints which meant it could not develop the additional land (which it never intended to do), should also be treated as a minor variation. 32 The second category of variations considered by her Honour involved the replacement of the initial easement over one-half of the roadway, as contained on the original plan, being the imposition of an easement to similar effect, providing rights of way over the whole of the roadway, the extension being entirely on the additional land. On any view of it, this variation was permissible. To the extent that the easement provided the basis for the use of the strip of land as a roadway, it was a variation "relating to" the roadway. In addition, because the easement for rights of way was the means of creating the roadway, in conveyancing terms, the change in the easement to accommodate the requirement of the Council that the whole of the roadway be on lot 4 constituted a condition affecting the roadway, imposed by the Council, for the purposes of the last limb of clause 48.2. On either view, the purchaser was not entitled to make any claim, requisition or objection in relation to the new rights of way. 33 If it were necessary, there is a further characterisation which would render the change in the easement a permissible variation. There was, in effect, no substantial change to the easement over the half of the roadway which was part of the land to be transferred as lot 4 on the original plan; the change was to impose a similar easement over the additional land. For the reasons noted above, that change, affecting only the status of the additional land, could not be the subject of objection in any event. To the extent that the part of the roadway on lot 4 was the subject of a new easement, being the composite easement covering the whole of the roadway, the effect on the original lot 4 was no different from the effect of the original easement. At best, it was a minor variation in the form of the easement. 34 The fact that the same conclusion may be reached by a number of routes confirms the validity of the conclusion. 35 The different conclusion reached by the trial judge appears to have been based, at least in part, on a misapprehension as to the effect of the change required by Council. At [62] her Honour stated: "Certainly the rights of way defined as the Roadway in clause 48.1 positioned the Roadway in a very inconvenient position with a right of way 3.6 wide burdening Lot 3 and probably within the Ikea building, but that was the effect of the movement of the boundary and the terms of the Contract." 36 It was common ground in this Court that the requirement of the Council was to move the southern boundary of lot 4 from the centre of the roadway to a position 1 metre to the north of the northern wall of the Ikea warehouse. The location of the roadway on the ground did not change. The suggestion that the roadway moved to the south would have been inconsistent with the separate easement for car parking which was intended to cover 4.5 metres of additional land between the roadway and the Ikea building, and within the new boundary of lot 4. 37 Her Honour rejected the proposition that clause 48.7(e) could be relied upon in the following terms at [63]: "Clause 41.7(e) precluded the defendant from objecting to that change or variation in the location of the Roadway. But that was not the objection the defendant made. The defendant objected to the new easement "Y" that was imposed on the title in the place where the boundary used to be and where the Roadway, as defined in clause 48.1, used to be. The objection the defendant took to the imposition of easement "Y" (with consequential objection to the removal of easement "Z") was not an objection precluded by clause 47.1(e)."

It is clear that her Honour's reasoning is based on the misapprehension that easement "Y" no longer covered the roadway as defined in the contract. 38 Her Honour then proceeded to ask whether the imposition of the easement arose from a requirement of the Council. She held that it did not, but, on the assumption that it did, continued by inquiring whether the change could be categorised as "minor". She stated at [65]: "I am not satisfied that such change or variation could be categorised as minor. This change impacted significantly on the definition or Roadway, as had been agreed between the parties in clause 48.1. Not only that, it made the defendant totally responsible for the whole of the Roadway whereas it agreed to be responsible for only half of it. I regard that as a change that is not minor." 39 As the Appellant contended in this Court, the fact that the change impacted significantly on the definition of the roadway carries with it the conclusion that it was in truth a variation "relating to" the roadway, for the purposes of clause 41.7(e). That characterisation, coupled with the fact that the location of the roadway had not changed, is conclusive of the issue. There was no call to consider whether the variation fell within the category of minor variations arising from the requirements of the Council, for the purposes of paragraph (d) of clause 41.7.

Purchaser unwilling to complete 40 Looking at the matter purely from the point of view of the proper construction of the contract, it is apparent that none of the four objections taken by the Respondent in the present proceedings was a valid objection. Each of the matters complained of was a permissible variation for the purposes of clauses 41.7 and 48 of the contract and each was therefore a matter about which the purchaser "must not make any objection". In relying on those objections, the purchaser was refusing to complete the contract according to its terms and was therefore unwilling to complete the contract for the purposes of clause 39.1. The remaining question is over what period the purchaser maintained that position. 41 At the first trial, the general manager of the Respondent, Mr Peter Spira gave evidence to the effect that the purchaser would be willing to settle if three nominated variations were removed, being the variation which her Honour then addressed at the first trial. Mr Spira gave evidence on 8 December 2004. After the first judgment was delivered on 5 January 2005, the Respondent wrote to the solicitors for the Appellant asking if their client was willing to complete the contract. On 11 January 2005, the solicitors replied by letter which commenced: "Your letter of 5 January 2005 seems to infer that Meriton now maintains all the original objections raised in its facsimile dated 2 June 2004. For the reasons set out in more detail below it is no longer open to Meriton to assert this position. Perpetual says that the only objections now open to Meriton are the three, which were finally in issue before and decided by her Honour and no others. Please confirm by return that your present objection is in fact limited in the way here suggested."

The letter then explained that the vendor was taking steps to remove the basis of the three objections determined in the first proceedings. 42 The purchaser replied on 13 January stating that it "had 7 grounds of objections in its letter of 2 June 2004, all of which are in our view valid". The letter noted her Honour's failure to deal with all of the objections and stated that the purchaser was considering its "appeal options in this regard". At this stage the purchaser was clearly maintaining its position that all seven objections needed to be met before it would settle. 43 By letter dated 27 January 2005, the purchaser adopted a more ambiguous position. Paragraph 1 of the letter stated: "Notwithstanding our other legal rights and remedies, we remain - on a commercial basis … - ready, willing and able to settle upon the Contract should your client deal with the three objections identified in your fax. This is of course subject to the matters dealt with below."

Part 3 of the letter dealt with interest payable on completion, being a reference to the amounts payable under clauses 38 and 39 of the contract, which arguably depended on the validity of the unresolved objections. The purchaser maintained that it was entitled to a payment for the full period from 12 July 2004 until settlement on the basis that there were no "non-interest days" as against it, it having been able and willing to complete at all times. Nevertheless, it proposed a nine month extension to the date of completion. 44 At the hearing of the appeal, when invited to identify the point in time at which the purchaser unconditionally and unequivocally dropped its four remaining objections, which had not been determined in the first proceedings, counsel suggested that the relevant date was either the date of Mr Spira's evidence, namely 9 December 2004 or the date of the last letter, being 27 January 2005. The vendor said the earlier date should be discounted because the purchaser declined, in its letter of 13 January 2005, to confirm that the position taken by its officer in evidence on 9 December was adhered to. Counsel for the vendor also submitted that the letter of 27 January was ambivalent in that regard. 45 In my view the purchaser cannot rely upon the earlier date. The correspondence during January involved a number of lengthy letters in which the vendor was insisting that the purchaser could no longer rely upon the additional objections and the purchaser was resisting that proposition. Thus, on a 11 January 2005, the vendor's solicitors wrote: "In light of all of the above Meriton is not now legally able to reinstate each objection raised in the letter of 2 June 2004. Meriton is now estopped on Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 principles from relying on any objections in the 2 June 2004 letter other than the three objections [addressed by the trial judge]."

In its response of 13 January, the purchaser stated: "Suffice to say for present purposes that Meriton does not agree that it is estopped on Anshun principles, in the manner you have suggested." 46 On 27 January, the purchaser was still disagreeing as to the applicability of the Anshun principles, but identified its willingness to settle on a commercial basis if the three variations dealt with by the trial judge were removed. Its assertion that there were no non-interest days which would reduce its payment, may involve an assertion that its further objections were legally valid, but it is clear that the purchaser was no longer relying upon them as a basis for delaying completion of the contract and accordingly was, on and from that date, able and willing to complete. However, the correspondence does not demonstrate such a willingness at any earlier point in time. Accordingly, for the purpose of calculating the relevant payments, each of the days from 12 July 2004 until 27 January 2005 was a non-interest day. 47 That position was accepted by the vendor in a letter of 1 February 2005. The letter continued: "We accept, however, that Perpetual does have an obligation to pay interest to Meriton on completion under clause 39 of the Contract but that obligation is circumscribed upon the circumstances as set out above. Interest is accruing daily in the sum of $4,580.82."

The letter then calculated an amount for interest payable by the vendor if settlement had taken place on the date of the letter, being a period of five days. In fact, the amount paid into Court, pending settlement of the dispute was $971,133.84, which appears to be a calculation based on a period of 212 days, running until 9 February 2005. The period from 28 January 2005 until 9 February 2005 being 13 days, the appropriate payment to be made by the vendor would appear to be $59,550.66. Accordingly, that amount should be deducted from the amount in fact paid and the balance, together with interest from 11 February to the date of payment, calculated a the Court rate, is the sum due to the vendor.

An alternative approach 48 An alternative approach, relied on by the Appellant, was that, despite its incorrect view of the proper construction of the contract, including clause 41.7 and clause 48, as determined in the first proceedings, it was at all times able and willing to complete the contract once the correct construction was identified. The fact that it was able to do so was demonstrated by its removal of the offending variations, when required by the Court; the fact that it was willing to complete the contract, according to its terms as properly construed, was demonstrated not only by its contemporaneous correspondence during the course of the dispute, but also its action following the first judgment. The relevant principles to be applied were those derived from the judgment of Pearson LJ in Sweet & Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699 at 734 adopted in D.T.R. Nominees Pty Limited v Mona Homes Pty Limited (1978) 138 CLR 423 at 431-432. The principle identified in the latter case in the joint judgment of Stephen, Mason and Jacobs JJ, was stated in the following terms: "No doubt there are cases in which a party, by insisting on an incorrect interpretation of a contract, evinces an intention that he will not perform the contract according to its terms. But there are other cases in which a party, though asserting a wrong view of a contract because he believes it to be correct, is willing to perform the contract according to its tenor. He may be willing to recognise his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contract could not be attributed to him." 49 Her Honour appears to have dismissed this line of authority on the basis that the vendor was not concerned with the construction of the contract, but with its operation or performance in the circumstances of the case. Thus at [46] her Honour stated: "As was said by Stephen, Mason and Jacobs JJ in DTR Nominess [sic] Pty Limited v Mona Homes Pty Limited (at 432), 'there are cases in which a party, by insisting on an incorrect interpretation of a contract, evinces an intention that he will not perform the contract according to its terms'. This was not a case in which the plaintiff contended for a particular construction of the terms of a contract different from that for which the defendant contended. This was a case in which the plaintiff and the defendant well knew that the terms of the Contract allowed the plaintiff to make changes to the Plan and the Instrument that were minor. The case involved findings as to whether the changes were, in fact, minor." 50 Her Honour's approach appears therefore to have been based upon the following propositions:

(1) the principles stated in D.T.R. Nominees only apply in relation to a question of interpretation of a contract;

(2) whether the variations required by the vendor fell within the tolerances permitted by clauses 41.7 and 48 depended solely on questions of fact, and

(3) the existence of a dispute as to the application of a provision to known facts did not allow the vendor to assert that it was willing to complete the contract as properly construed, there being no dispute as to its construction. 51 This reasoning adopts an unduly restrictive approach to the Sweet & Maxwell principles, as reflected in D.T.R. Nominees. The question, as her Honour identified, was whether the conduct of the vendor evinced an intention not to perform the contract according to its terms. D.T.R. Nominees was, as appears from the joint judgment at 432-433, "a case of a bona fide dispute as to the true construction of a contract expressed in terms which are by no means clear". However, it is difficult to see why a precise distinction should be drawn, for the purpose of determining an intention to repudiate, between a case involving the construction of a contract and one involving a dispute as to the application of its terms to the facts, as perceived by one or other party. 52 D.T.R. Nominees itself illustrates the point. Clause 4 of the contract referred to a plan of subdivision, a copy of which was annexed, which provided for subdivision of the land into 35 lots. The sale involved only lots 1-9 and, instead of registering the approved plan in relation to all 35 lots, the vendor sought to register in two stages, the first stage being limited to a plan of subdivision referring only to lots 1-9. That conduct, it was argued, constituted a repudiation. The question was whether the vendor's conduct was in conformity with the obligation in clause 4 to register what was described as "the relevant plan of subdivision". The complaint was about the vendor's conduct; the vendor's response was that its conduct fell within the obligation in clause 4. By analogy, in the present case, the vendor's conduct to which objection was taken, was the inclusion of certain variations in the plan of subdivision and the accompanying instrument. The vendor's response was that the variations fell within the permissible limit set by the contract. As will be seen from the arguments set out above, including those rejected by the trial judge, the dispute was one which could properly be characterised as a dispute concerning the construction of the contract. In any event, the authorities do not, in my view, require that the dispute be identified as one of pure law, rather than one of mixed fact and law or possibly even a dispute as to the facts: see generally Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 at 305-306 (Barwick CJ and Jacobs J). Repudiation occurs when one party says 'I agree that this is what our bargain requires me to do, but I do not intend to do it'. That was not, on any view, what occurred in the present case. 53 Accordingly, I prefer the view that this case involved a genuine dispute as to what was permissible under the contract and that the vendor, whilst maintaining its position that what it sought to do by way of variations was permissible, moved expeditiously to have the dispute between the parties resolved and maintained its willingness to perform the contract in accordance with the Court's ruling on the dispute. In addition, the dispute was one with respect to the construction of the contract. Apart from seeking a resolution of the dispute, there was no evidence to suggest that the vendor was not able and willing to complete, nor that its frequent assertions that it was able and willing were in any sense untrue, other than by way of its reservation as to the validity of the purchaser's objection to the variations. 54 Despite that conclusion, the preferable approach is nevertheless that the meaning of the phrase "able and willing" in clauses 38 and 39 should not be construed in accordance with the equitable principles revealed in the cases involving rescission or specific performance. Thus, in Green v Sommerville (1979) 141 CLR 594, an action by a purchaser for specific performance for a contract for sale of land, Mason J noted at 611: "It was not a case in which the plaintiff persisted in an untenable view of the contract. Nor was it a case in which it could be said that the respondent came with unclean hands. This is important because the concept of readiness and willingness is an exemplification of the maxim 'He who comes to equity must come with clean hands'." 55 In the present case, it is true that the constraints on variation, and thus the implicit extent of permissible variations, contained in clauses 41.7 and 48, extend to prohibitions on rescinding or terminating the contract on such grounds. Accordingly, it might be understandable that concepts of willingness, if used in that context, would be treated as importing broader equitable principles. However the purpose of clauses 38 and 39 where the phraseology occurs, may be viewed differently. They operate in cases where completion is delayed, but occurs. They are not concerned with rescission or repudiation as such, nor with orders for specific performance. Rather they are concerned to impose a financial burden on a party responsible for delay. Whether a particular party is able and willing to perform may appropriately be understood, in that context, as depending upon the proper construction of the contract and not on what might be considered repudiatory conduct under the general law. For that reason, the preferable conclusion is that the purchaser was unwilling to perform through the period during which it maintained an objection which the Court has found was not a permissible objection. On that approach, it is not necessary to determine whether the purchaser had otherwise demonstrated unwillingness to perform the contract. 56 One matter which confirms the preferred approach is that ability and willingness to perform under clauses 38 and 39 define the days with respect to which payments are to be made and other days, known as "non-interest" days. This exercise is significantly different from that involved in determining questions of repudiation, a fact which tends to support the view that the general law equitable principles do not supply the correct test.

Orders 57 In accordance with the conclusions reached at [47] above, the appeal should be allowed and the orders of Bergin J made on 29 June 2005, dismissing the amended summons, should be set aside. Similarly, her Honour's order as to costs should be set aside. 58 The Appellant is entitled to an order that it be repaid the amount allowed by it on settlement, or paid by it to the purchaser on settlement, subject to deduction of the permissible payment identified at [47], together with interest on the amount to be repaid from the date of settlement at Court rates. The parties should have leave to file short minutes of order to include the necessary calculations. 59 Because the letter from the vendor's solicitors of 1 February 2005 appears to concede a willingness to pay an amount calculated from 27 January 2005 until completion, which is the effect of the proposed order, the Appellant has been successful in these proceedings. Accordingly, it should receive its costs, both in this Court and in the Court below. 60 In its notice of appeal, the Appellant also sought a declaration with respect to its rights under clauses 38 and 39 of the contract. Because the Appellant is entitled to a judgment for a liquidated amount, there is no utility in making the declaration sought. **********

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