Plaintiff v Defendant

1 By summons filed on 9 August 2021 the defendant seeks to have the plaintiff's claim summarily dismissed pursuant to s 62 and 63 of the Civil Procedure Act 2010 ('CPA'). In the alternative, the defendant seeks to have the plaintiff's statement of claim struck out in accordance with r 23.02 of the Supreme Court (General Civil Procedure) Rules 2015 ('the Rules').

2 The defendant relies on the affidavit of its solicitor Sai Yuen Jasper Kwok affirmed 6 August 2021 ('Kwok 6 August 21 affidavit').

3 The plaintiff relies on his affidavit sworn 30 August 2021 ('Ledlin 30 August 21 affidavit').

4 The defendant is the registered proprietor of the property known as 89 Lewis Road, Wantirna South and more particularly described in Volume 08675 folio 134 ('the property').[1]

5 In 2020, the property was marketed for sale. The defendant's selling agent was Jones Lang LaSalle ('JLL').

6 On 20 August 2020, the plaintiff sent an offer to purchase the property for $8,550,000 to Simon Wellock of JLL.[2] There followed an exchange of emails between the plaintiff and JLL.[3] This included an email of 29 September 2020 in which the plaintiff offered to purchase the property for $9 million, with a $5,000 refundable deposit.[4]

7 On 6 October 2020, the plaintiff paid an amount of $5,000 to JLL in respect of the property. This payment was made in accordance with his obligations pursuant to the letter of intent.[5]

8 On 12 October 2020, the plaintiff and defendant signed a letter with the heading 'Letter of intent proposed purchase of 89 Lewis Road, Wantirna South'.[6] I shall refer to this as the 'letter of intent'.

9 On 16 November 2020, the defendant's solicitors sent the plaintiff an unsigned contract of sale.[7] I shall refer to this as the 'contract of sale'.

10 On 30 November 2020, the defendant's solicitors sent the plaintiff an unsigned vendor statement pursuant to s 32 of the Sale of Land Act 1962.[8]

11 On 2 December 2020, the plaintiff executed the contract of sale. His solicitors then sent the executed version to the defendant's solicitors.[9] The defendant did not execute the contract of sale.

12 On 4 December 2020, the defendant's solicitors wrote to the plaintiff's solicitors stating that the defendant "rejects your client's offer contained in the contract of sale executed by your client", and "[Y]our client's offer simply does not meet our client's expectation and our client will not enter into the contract of sale."[10]

13 On 7 December 2020, the plaintiff filed a writ and statement of claim.

14 On 2 February 2021, the defendant filed its defence.

15 On 11 May 2021, orders were made listing the trial on 31 May 2022.

16 On 2 June 2021, the plaintiff made an offer to purchase the property for $10.8 million.[11]

17 By summons filed on 9 August 2021, the defendant made this application for summary dismissal or strike out.

18 The plaintiff filed a writ and statement of claim alleging that the defendant had breached the terms of the letter of intent. It defines the letter of intent as an agreement and I read this as an allegation of breach of contract.

19 The plaintiff pleads, too, that the defendant made a false or misleading representation about the sale of the land by representing it would accept the purchase price of $9 million plus GST for the property.[12] The plaintiff pleads that the defendant is estopped from denying it would accept the purchase price in consideration for the purchase of the property.[13]

20 The plaintiff seeks orders for specific performance, including that the defendant execute the contract of sale or otherwise act in good faith to complete the transaction.[14] The plaintiff seeks damages for breach of the letter of intent and/or pursuant to s 236 of the Australian Consumer Law and Fair Trading Act 2012 ('Australian Consumer Law').[15]

21 The defendant pleads, amongst other things, that the clause in the letter of intent with the proposed price of $9 million was not legally binding.[16] The defendant says the parties have not agreed upon any terms with regard to any transaction and that it was the plaintiff who refused to negotiate or discuss the terms of any transaction.[17] It denies that it breached the letter of intent and denies making a false or misleading representation.[18]

22 The parties filed written submissions and made oral submissions.[19] Key submissions are outlined below.

23 As submissions were directed to the letter of intent, I shall set out relevant clauses.

1. Purpose

We refer to our recent discussion in respect of your proposed purchase of 89 Lewis Road, Wantirna South (land) from Harperway Pty Ltd as trustee for The Lu Family Trust (we, us or our).

This letter of intent confirms our principal terms of understanding about the transaction.

2. Status

This letter is a statement of intent only. It is not intended to create binding legal relations or form part of any legally binding contract or representation having legal effect except for this paragraph 2 and paragraphs 4 (Confidentiality and Non-Disclosure), 5 (Due Diligence), 6 (Exclusivity), 7 (Good Faith), 8 (Definitive Agreements), 9 (Costs) and 10 (Governing Law) which are intended to be legally binding.

3. Principal Terms of Understanding

The principal terms of our understanding about the transaction are as follows:

(a) The transaction

(i) You or your nominee (collectively you or your) intend to purchase the land from us (transaction).

(ii) The parties may reconsider the transaction structure after completing due diligence and after receiving professional advice.

(i) The total purchase price of the land under the transaction is $9,000,000.00 plus GST (if any) (purchase price).

(i) You will pay the purchase price to us in the following manner:

(A) 10% of the purchase price will become due and payable on signing of the definitive agreement by way of deposit (initial deposit);

(B) 20% of the purchase price will become due and payable on the expiry of 6 months from the date of the definitive agreement by way of further deposit (further deposit);

(C) The balance of the purchase price, subject to usual adjustments being made to the balance of the purchase price in accordance with customary practice, will become due and payable on settlement. Settlement will take place on the expiry of 12 months from the date of the definitive agreement.

(ii) If we serve you a statement pursuant to section 27 of the Sale of Land Act 1962, you must not refuse to the release and you must promptly do all things necessary to release the initial deposit and the further deposit to us prior to settlement.

4. Confidentiality and Non-Disclosure

In consideration of us making information about the land and our businesses (including but not limited to the lease agreements relating to the land) available to you for the purposes of due diligence and contract negotiation, you undertake that, you and your respective officers, employees, consultants or contractors, must not make any disclosure or announcement of any kind about that information, this letter or the transaction, either directly or indirectly, without our prior written consent. Disclosure may, however, be made where required by law.

5. Due Diligence

(a) You and your advisers will conduct due diligence and we will:

(ii) provide you with information in relation to the land (including any lease agreement);

(iii) provide such other assistance to you,

that is reasonably required for the due diligence.

(b) We may incur costs in providing assistance or information to you for the purpose of your due diligence. Before incurring any such costs, we will provide you with a cost estimation for your consent. You agree to pay us all reasonable costs incurred by us that you have consented in providing such assistance or information.

(c) You must complete the due diligence within 45 days from the date of this letter.

6. Exclusivity

In consideration of you agreeing to pay us a sum of $5,000, we agree that we will not without your consent, for a period of 45 days from the date of this letter or earlier if you give us a written notice that you do not wish to proceed with the transaction (expiration date) permit any other person to carry out any due diligence on the land. This sum is non-refundable, it must be paid to the trust account of JLL (Vic) Pty Ltd.

7. Good Faith

The parties will negotiate in good faith to complete the transaction.

8. Definitive Agreements

If the transaction proceeds, our lawyers will prepare the formal definitive agreement in respect of the transaction which will contain terms usual for a transaction of the same nature.

Neither party will have any liability to the other for deciding not to execute any definitive agreement.

9. Costs

Unless otherwise agree in this letter, each party will bear its own costs and expenses incurred in connection with this letter, the due diligence and the negotiation, preparation, and execution of the definitive agreements, whether or not they execute any definitive agreements.

10. Governing Law

This letter will be governed by and construed in accordance with the laws of Victoria.

11. Agreement

The terms of this letter will expire if it is not accepted by you within 2 business days. Please signify your agreement to the terms of this letter by signing and returning the enclosed copy of this letter to us.[20]

24 It is common ground that no contract of sale has been executed by the parties.

25 Since the proceeding was initiated, the plaintiff has offered to purchase the property. By letter dated 2 June 2021 from the plaintiff to JLL, the plaintiff offered to purchase the property for $10.8 million.[21] The offer was not accepted by the defendant.

26 The property is currently being marketed for sale. This proceeding is impeding that process and wrongfully undermining the value of the property.

27 The defendant seeks summary judgment in its favour, or alternatively, that the statement of claim be struck out.[22] There is no real prospect that the claim can succeed for the following reasons.

28 The plaintiff's claim ultimately turns on the question of whether, by the letter of intent, the defendant agreed to complete, or represented that it would complete, a contract of sale for the property at the price of $9 million. The letter of intent states in clause 2 that it is "not intended to create legal relations or form part of any legally binding contract or representation having legal effect except for ... [clauses 2, 4-10]." Clause 3 contains the principal terms of understanding. Clause 3(b) defines 'the transaction' by reference to purchase of the property for the 'purchase price' of $9 million. The effect of clause 2 is that clause 3 is not binding.

29 Clause 8 provides that "[N]either party will have any liability to the other for deciding not to execute any definitive agreement".

30 Clause 9 provides that the parties will bear their own costs and expenses "whether or not they execute any definitive agreements".

31 The plaintiff alleges breach of contract by an alleged breach of good faith in clause 7 of the letter of intent ('the good faith obligation'). The good faith obligation refers to an obligation to "complete the transaction".[23] This is a fundamental problem because clause 7 does not impose an obligation to "complete the transaction" by executing a contract of sale in the sum of $9 million. It is clear from clauses 2 and 8 that there is no such obligation. If that were the case, there would be no work for those clauses to do and they would be meaningless. The plaintiff has not addressed what clauses 2 and 8 mean.

32 The obligation in clause 7 is to negotiate in good faith. The plaintiff is seeking an order that the defendant complete the transaction for $9 million. It is completely fanciful to seek such an order.

33 The plaintiff alleges breach of contract by an alleged breach of the exclusive due diligence obligation in clause 6 of the letter of intent ('the due diligence obligation'). This is hopeless because the letter of intent only provides an exclusive right to conduct "due diligence", not an exclusive dealing clause.

34 Clause 5 refers to the due diligence that the plaintiff proposes occur. Clause 6 creates a 45 day exclusive right to conduct due diligence. It does not preclude the defendant from continuing to advertise the property or approaching agents looking for buyers or soliciting offers. The plaintiff gained an informational advantage over other buyers for a 45 day period. He did not have an "exclusive dealing" right or any right to stop the defendant from continuing to market the property or soliciting offers.

35 There is no relevant ambiguity in the letter of intent, and so there is no basis to look to the surrounding circumstances under principles of interpretation of contract.[24] Reading the letter of intent as a whole, it is not binding.

36 The letter of intent falls within the third Masters v Cameron[25] category summarised by Riordan J in Bai v Lightspeed Finance Pty Ltd,[26] namely "where the parties do not intend to be bound until they execute a formal contract".[27] The later emailing of the unsigned contract of sale does not alter that position or remove the case from that category.

37 Alternatively, the surrounding circumstances set out in the plaintiff's own affidavit do not assist him. It is mostly irrelevant to his pleaded case. Firstly, he refused to pay $50,000 as initially sought by the defendant and was told that without that deposit the defendant could "go out to the market to seek other deals".[28] Secondly, he instead agreed to pay the substantially lesser sum of $5,000 for the exclusive right of due diligence for a 45 day period and signed the letter of intent in those terms. Thirdly, it is clear that the parties, including the plaintiff himself, did not intend a right of exclusive dealing such as that which might prevent the defendant from approaching estate agents to see potential buyers.

38 There is no suggestion that there was any "due diligence" conducted by any party other than the plaintiff during the 45 day period. The only "non-exclusive" conduct alleged by the plaintiff was an approach to estate agents to look for potential buyers.[29] That is not due diligence by buyers. It cannot be a breach. Moreover, the approach to agents had no material effect; it did not facilitate a sale or otherwise shut the plaintiff out and the 45 day period is now concluded. The property remains on the market. Accordingly, no relief to the plaintiff is available. There is no real prospect of the Court ordering damages or specific performance.

39 The plaintiff's claim that the letter of intent constituted a misleading representation faces the same difficulty as the contract claims. That is, the express statements in the letter of intent that the parties were not bound to proceed with the transaction and would not be liable if they chose not to proceed. In that context, the plaintiff could not have been misled by the letter of intent to believe that the defendant agreed to be bound to complete a contract of sale at a price of $9 million. Alternatively, even if the plaintiff was misled, there is no possible act done in reliance of the alleged misrepresentation other than, possibly, the payment of $5,000. A claim of $5,000 should be made under the simplified "arbitration" procedure in the Magistrates' Court, not in this Court.

40 The plaintiff's claim (in his affidavit) about representations made by Mr Wellock is new. It is not pleaded. Paragraph 13 of the plaintiff's affidavit refers to things Mr Wellock allegedly did on 5 October 2020. Mr Wellock was not retained as an agent by the defendant at that time. Importantly, the letter of intent is dated after this, on 12 October 2020, and is signed by the plaintiff. It specifically provides that the transaction price is not binding. Therefore, any reliance on the alleged representation could only have been between 5 and 12 October 2020.

41 The plaintiff's estoppel claim must fail for the same reasons as the misrepresentation claim, with the added difficulty of the absence of unconscionable conduct.

42 In answer to the Court's question, s 64 of the CPA does not apply. The plaintiff has not contended that it does. It usually applies where the matter is very complex or of public interest. It is discretionary. The Court is not limited to matters it can take into account. The plaintiff has not put forward anything that would enliven s 64.

43 In reply to the plaintiff's submissions on the question of delay in bringing this application: whilst delay is always relevant, its significance depends on the facts of the case. It will be of greater significance where there is prejudice and here there is none.

44 The principal issue in this proceeding, which should only be determined at trial after evidence has been heard, is which category of Masters v Cameron the letter of intent falls within. The plaintiff says it clearly falls within the following Masters v Cameron category summarised by Riordan J in Bai v Lightspeed: "where the parties intend to be immediately bound but propose a proper and more formal contract to a similar effect to the earlier agreement".[30] Whether the parties intended to create a legally binding contract, applying the principles in Masters v Cameron, is an issue of fact to be determined at trial.

45 Clause 2 specifically provides that the good faith and due diligence obligations (clauses 5 and 7) are legally binding. The due diligence clause is a condition precedent. The defendant was paid monetary consideration for the benefit of being able to negotiate in good faith. The obligation is capable of being enforced similar to a stay of legal proceedings if a party commences legal proceedings without complying with a contractual obligation to 'mediate in good faith'. Clause 8 of the letter of intent states that if the transaction proceeds, the defendant's lawyers will prepare the 'formal definitive agreement' which contains the usual terms for a transaction of the same nature.

46 The defendant relies upon the term in clause 8 that "[n]either party will have any liability to the other for deciding not to execute any definitive agreement." However that must be read in context and in particular with clause 2 which specifically contemplates that certain clauses are binding, including the good faith obligation.

47 The letter of intent is an agreement. It is to be construed in accordance with the principles in Broughton v B&B Group Investments Pty Ltd ('Broughton').[31] Read objectively, it sets out the intention of the parties in relation to a process that would be followed in relation to the transaction. The letter of intent includes terms that the plaintiff will "negotiate in good faith" and pay the defendant $5,000. It is pleaded in the statement of claim and admitted by the defendant that the letter of intent included clauses to that effect.[32]

48 The defendant relies on clause 2 to say that "the transaction" in clause 3 is not binding. That does not mean clause 3 is irrelevant for the purpose of interpreting other provisions. It is relevant in understanding the particular property in question and the purchase price. Clause 3 sets out the "principal terms" of the parties' understanding about the transaction. Clause 3(b) refers to the purchase price "under the transaction". The transaction contemplated is the sale of the property for $9 million (plus GST). The obligation to negotiate in good faith must be read in this context. The good faith obligation is the nub of this case.

49 An issue at trial will be the meaning to be attributed to the term "the transaction" for the purposes of interpreting the good faith obligation in clause 7. The circumstances in which the letter of intent was signed and the representations made by Mr Wellock to the plaintiff will assist the Court in identifying the purpose or objective of the transaction, to the extent that it is not already apparent from clause 3.

50 The principal terms of the transaction were reflected in the contract of sale that the defendant sent to the plaintiff. It provided for the purchase price of $9 million plus GST. The plaintiff signed the contract of sale without any changes and promptly returned it to the defendant. The defendant appears to have changed its mind and refused to sell the property to the plaintiff for $9 million (plus GST). Instead, the defendant demanded a substantially higher price.

51 The plaintiff claims, amongst other things, that:

(a) he paid good consideration, being $5,000, to the defendant to receive the benefit of the letter of intent;

(b) the benefit to the plaintiff included a specific obligation in clause 7 for the parties to negotiate in "good faith" to complete their "transaction"; and

(c) in breach of the contractual requirement to act in good faith to complete the transaction, the defendant acted in the manner described in paragraph 12 of the statement of claim.

52 The plaintiff also claims that the defendant's agent, Mr Wellock, represented to him that he would be able to purchase the property for $9 million if he signed the letter of intent and paid $5,000, subject to satisfactory completion of due diligence. It is conceded that there is no reference to Mr Wellock in the statement of claim, and particulars need to be provided for paragraph 16 of the same. There may be an argument at trial as to whether Mr Wellock could make representations on behalf of the defendant and whether the plaintiff could rely upon those representations. The misrepresentation allegations involve questions of fact to be determined at trial. At paragraph 16 of the defence, there is a denial.

53 The defendant originally wanted $50,000 in consideration for the rights given to the plaintiff under the agreement, and the plaintiff negotiated this amount down to $5,000. After execution of the agreement, the plaintiff paid $5,000 and completed the due diligence process. It must have been expected that he would receive some benefit for payment of the $5,000. Clause 2 of the letter of intent specifically excludes the good faith clause and, in doing so, acknowledges that it was to be legally binding on the parties. Further, the plaintiff acted to his detriment in reliance on the misrepresentation by paying the $5,000 and completing the due diligence. The defendant did not follow the procedure in the letter of intent. It denied the plaintiff the benefit of the bargain for which he had paid consideration and upon which he acted to his detriment.[33]

54 The resolution of this claim will depend on numerous questions of fact. These are matters more appropriately determined at trial. They include whether the representation was made that the defendant would accept the purchase price of $9 million (plus GST) for the property and, if the plaintiff acted to his detriment in reliance on that representation by, for example, payment of $5,000 or conducting due diligence. The evidence at trial is expected to show that the defendant did not act in good faith when it sent and immediately rejected the contract of sale giving effect to the transaction. The evidence is expected to establish the contract of sale was generally consistent with the letter of intent. It is expected to be established that the contract of sale was sent by the defendant so that it could be seen as complying with its contractual obligations, although it had no intention of completing the sale.

55 The status of the letter of intent is an issue for trial. There is some ambiguity. The statement in clause 2 that the letter "is a statement of intent only" seems to be at odds with clause 11. Clause 11 provides that the "terms of this letter will expire if it is not accepted by you within 2 business days. Please signify your agreement to the terms of this letter by signing and returning the enclosed copy of this letter to us.".

56 The defendant's strike out application is misconceived. The assertion that the statement of claim does not disclose a cause of action is wrong. It discloses causes of action in relation to breach of contract and breach of s 30 of the Australian Consumer Law.

57 The defendant has never provided information to the plaintiff to support its allegations that the entire statement of claim may prejudice, embarrass, or delay the fair trial of the proceeding or that the claim is an abuse of process. Accordingly, the plaintiff cannot respond.

58 There is a proper basis for bringing this claim. The plaintiff wants the benefit of an agreement for which he paid $5,000 and upon which he acted to his detriment. He remains ready, willing, and able to perform his obligations under the agreement.

59 In answer to the Court's question, the plaintiff is not seeking orders requiring the defendant to sell the plaintiff the property for $9 million. He is seeking to enforce the obligation to act in good faith. In all likelihood, the plaintiff would have purchased the property if the defendant acted in good faith.

60 The plaintiff seeks loss of opportunity damages for breach of contract. Paragraph 23(c) of the statement of claim pleads the loss of opportunity to purchase and redevelop the property. But for the breach of the good faith obligation in clause 7, the plaintiff would have redeveloped the property. Submissions regarding loss of opportunity will be developed at trial. The plaintiff relies on Amann.[34]

61 The plaintiff seeks recovery of the money he spent performing a due diligence on the property.

62 The defendant has delayed in making its application to strike out. Such applications should be made promptly.[35] There is no explanation for the delay in making this application six months after filing of defence, and after discovery and mediation have occurred, and two months after the matter was fixed for trial.

63 In answer to the Court's question, s 64 of the CPA is applicable. This is a dispute of the kind in which only a determination on its full merits is appropriate.

62 Defendant may apply for summary judgment in proceeding

A defendant in a civil proceeding may apply to the court for summary judgment in the proceeding on the ground that a plaintiff's claim or part of that claim has no real prospect of success.

63 Summary judgment if no real prospect of success

(1) Subject to section 64, a court may give summary judgment in any civil proceeding if satisfied that a claim, a defence or a counterclaim or part of the claim, defence or counterclaim, as the case requires, has no real prospect of success.

(2) A court may give summary judgment in any civil proceeding under subsection (1) -

(a) on the application of a plaintiff in a civil proceeding;

(b) on the application of a defendant in a civil proceeding;

(c) on the court's own motion, if satisfied that it is desirable to summarily dispose of the civil proceeding.

65 Order 22 of the Rules provides that each party may file affidavit material in respect of a summary application. Here, both parties have filed affidavits consistently with that rule. In particular, r 22.19 provides that the plaintiff may show cause against the application by affidavit and the affidavit may contain a statement of fact based on information and belief if the grounds are set out. I reiterate the following principles.[36]

The Court of Appeal principles in Hausman v Abigroup Contractors Ltd remain good law since the CPA.

Relevant passages from Hausman concerning this matter include the following:

The annotation to this Rule in Williams, Civil Procedure Victoria, suggests that a defendant, who attends on the hearing of an application for summary judgment, may defeat that application by showing that the plaintiff's proceedings are irregular. Normally, however, if the defect can be corrected, for example by amending the statement of claim or by making another affidavit, the plaintiff will be given the opportunity to cure the defect. Assuming the plaintiff's application is properly made, there will be judgment for the plaintiff unless the defendant shows cause against the application to the satisfaction of the court. The Rule provides that the defendant can show such cause "by affidavit or otherwise".

The defendant must satisfy the court that, in respect of the claim to which the application for judgment relates, a question ought to be tried, or there ought for some other reason to be a trial of that claim. The court, if so satisfied, will give the defendant leave to defend and the proceeding will continue to trial in the ordinary way. The court will normally require an affidavit by, or on behalf of, the defendant before it will be satisfied that the defendant is entitled to leave to defend. The standard of diligence required of the defendant in preparing a case in opposition to the application, especially if under pressure of time, is perhaps not as high as that required in preparing for trial.

None the less, the defendant is required to use reasonable diligence to put before the court, albeit in a summary form, all the evidence relied on in the defence. In that regard, it would generally be regarded as an injustice to the plaintiff to allow the defendant to introduce for the first time, on appeal, evidence which was readily available for the hearing of the application, but was not produced. An affidavit filed by the defendant may contain a statement of fact based on information and belief.

The authorities suggest that an affidavit in opposition to an application for summary judgment must provide sufficient particulars to enable the defence case to be properly understood. A bald denial that the defendant is indebted to the plaintiff will not suffice. The affidavit should, so far as practicable, deal specifically with the plaintiff's claim and the facts set out in the supporting affidavit to establish that claim. It should state clearly and concisely what the defence is, and identify the facts relied upon in support of that defence.[37]

66 The Court of Appeal outlined the following tests for summary judgment in Lysaght:

1. the test for summary judgment under s 63 of the Civil Procedure Act 2010 is whether the respondent to the application for summary judgment has a 'real' as opposed to a 'fanciful' chance of success;
2. the test is to be applied by reference to its own language and without paraphrase or comparison with the 'hopeless' or 'bound to fail test' essayed in General Steel;
3. it should be understood, however, that the test is to some degree a more liberal test than the 'hopeless' or 'bound to fail' test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent's case is not hopeless or bound to fail, it does not have a real prospect of success;
4. at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.[38]

67 This proceeding has no real prospect of success for the following reasons.

68 Firstly, the letter of intent is not a binding contract in respect of the sale of the land for $9 million. Its purpose, provided in clause 1, is to confirm the parties' "principal terms of understanding about the transaction". Clause 2 provides that the letter "is a statement of intent only" and is "not intended to create binding legal relations or form part of any legally binding contract or representation having legal effect except for" specified clauses. Those specified clauses do not include clause 3. The parties' principal terms of understanding regarding the sale of the land for $9 million are contained in clause 3. Evidently in clause 8, the parties did not intend to be bound until they executed a "formal definitive agreement in respect of the transaction which will contain terms usual for a transaction of the same nature". Clause 9 also contemplates a definitive agreement.

69 In Bai v Lightspeed, Riordan J stated as follows:

An issue commonly arises in proceedings as to whether parties intended to enter into a binding contract in circumstances where a subsequent formal contract is contemplated.

In Masters v Cameron, the High Court identified three categories of such cases being, in summary:

(a) where the parties intend to be immediately bound but propose a proper and more complete formal contract to a similar effect to the earlier agreement;

(b) where the parties intend to be immediately bound but require the execution of a formal document and intend no departure from the terms of the earlier agreement; or

(c) where the parties do not intend to be bound until they execute a formal contract.[39]

70 Here, the circumstances touch on both categories (a) and (c). The effect of clause 2, reinforced by clauses 8 and 9, is that the parties did not intend to be bound by clause 3, for the sale of the land for $9 million, until they executed a formal contract. However, they did intend to be immediately bound by the good faith and due diligence obligations. I reject the plaintiff's contention that such issues must wait until trial to be determined. There is no ambiguity in the letter of intent. It is unnecessary to interpret it by reference to matters external to it. The principles in Mount Bruce Mining are applicable:

The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.

In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.

Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.

However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. It may be necessary in determining the proper construction where there is a constructional choice. ...

Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations.

Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption 'that the parties ... intended to produce a commercial result'. Put another way, a commercial contract should be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'.[40]

71 These principles were applied by the Court of Appeal in Broughton. The trial judge had considered that the meaning of a special condition clause referring to due diligence was ambiguous and considered circumstances external to the contract. The Court of Appeal held that the clause could be determined by the text of the contract, the context of the contract as a whole, and the purpose of clause and other provisions of the contract.[41] I should add, for completeness, as the plaintiff relies upon Broughton, and the authority considered a dispute regarding due diligence and good faith obligations, that the circumstances are distinguishable to those here. In Broughton, the Court of Appeal considered a claim for breach of contract in circumstances where a contract of sale had been executed (and a deposit of 10% of the purchase price paid).

72 I reject the plaintiff's contention that clause 8, read in context, means something other than its plain words. The reference to neither party having any liability for deciding not to execute any definitive agreement plainly means there should be no liability if the contract of sale is not executed.

73 I reject the plaintiff's contention that there is ambiguity in clause 11 that provides the terms will expire if not accepted within two business days. It means what it says. As discussed above, the letter of intent included clauses that bound the parties. If the plaintiff did not signify his agreement by signing and returning the letter, those terms would have expired.

74 Secondly, pursuant to clause 2, the binding clauses include the good faith obligation in clause 7 and the due diligence obligation in clause 6. The plaintiff says breach of the good faith obligation is the nub of his case. However there is no real prospect of the plaintiff succeeding in his breach of contract claim on the basis of the good faith and due diligence clauses for the following reasons.

75 The plaintiff pleads that the defendant's conduct in sending the contract of sale and later failing to execute it, and abandoning the negotiations unless the plaintiff increased the purchase price, was a breach of the good faith obligation. [42]

76 In paragraph 12 of the statement of claim, the plaintiff pleads that the defendant breached the good faith obligation by sending the contract of sale with no intention to sign it. Relatedly, he pleads that the defendant breached the good faith obligation by refusing to execute the contract of sale after it had been executed by him. The crux of this plea is that the defendant breached the good faith negotiation by insisting no further negotiation would occur unless the purchase price was increased. Given that the good faith obligation was to negotiate to complete "the transaction", there is no real prospect of the plaintiff establishing this clause was breached by the defendant seeking to renegotiate the purchase price. He says there is ambiguity about what "the transaction" means. I reject that submission. "Transaction" is defined in clause 3(a) as the purchase of the land. Whilst the purchase price is referred to in clauses 3(b) and (c), these clauses are not binding. Moreover, as the defendant contends, the good faith obligation was to negotiate to complete the transaction. Given that the parties agreed clause 3 was not binding, a reasonable person would not construe this clause as precluding further negotiation on the purchase price.

77 There is also an allegation that the defendant delayed in providing the plaintiff with the contract of sale and the s 32 statement, and actively pursued potential purchasers in the period between the letter of intent and providing the s 32 statement on 30 November 2020. It is alleged the defendant has failed to execute the contract of sale in a timely manner. However, the good faith obligation did not oblige the defendant to execute the contract of sale. Clause 8 provided that neither party would have any liability to the other for deciding not to execute any definitive agreement. This means there is no liability for failing to execute the contract of sale. Moreover, the good faith negotiation did not preclude the defendant from pursuing other potential purchasers.

78 The plaintiff relies too on an alleged implied term. Clause 5 of the statement of claim pleads that it is an implied term of the letter of intent that "the defendant will do all that is reasonably required of it to enable the plaintiff to have the benefit" of it and "to refrain from conduct which would prevent that outcome". The particulars given to support this allegation are that this term is implied by law to give business efficacy. This does not support the alleged term. The plaintiff has not established any basis for the implication of the alleged term.

79 Turning now to the due diligence obligation. Paragraph 15 of the statement of claim pleads that in breach of the due diligence obligation (referred to in the pleading as 'the exclusivity clause'), the defendant has permitted and/or facilitated other persons to carry out the due diligence on the property. Further particulars are to be provided following discovery. The plaintiff has no real prospect of establishing the due diligence obligation in clause 6 was breached.

80 Clause 6 of the letter of intent is confined to precluding other potential purchasers from carrying out due diligence on the land for a period of 45 days from the date of the letter. It goes no further than that. It is not a condition precedent. The plaintiff paid the defendant $5,000 for the benefit of that exclusive due diligence period. It is clear from the words of clause 6 that the payment of the $5,000 was only for the benefit of the due diligence obligation, not, as contended by the plaintiff, for the letter of intent as a whole.

81 In addition, there needs to be a proper basis for pleadings. The plaintiff has not established there is such a basis for the alleged breach of the due diligence obligation. The only evidence to support the allegation in his affidavit is reference to the defendant approaching third parties (Oakfield Hoskin and BBRE) to look for potential purchasers. Such conduct is not in breach of the due diligence obligation.[43]

82 Thirdly, there is no real prospect of the plaintiff's claims based on the alleged misrepresentations succeeding. These claims are pleaded in paragraphs 16-21 of the statement of claim. The alleged misrepresentation is that the defendant would accept a purchase price of $9 million (plus GST) for the property, and it is alleged the misrepresentations were made at the time of entering into the letter of intent and at the time of sending the contract of sale. As discussed above, the letter of intent does not create a binding obligation in respect of the purchase of the property for $9 million.

83 Nor could the contract of sale constitute a misrepresentation given the terms of the letter of intent. As the defendant says, Riordan J's observations in Bai v Lightspeed are apposite here. Riordan J considered:

... whether it is common practice for the parties to intend to be finally bound to agreements or deeds of the type in question, prior to the execution and exchange of the formal contract ...

... an objective observer would not, in normal circumstances, consider that, by a party's solicitor emailing a form of loan deed to the counterparty, such party was making an offer capable of acceptance by the other party unilaterally signing and returning the form of loan deed. On the contrary, as is usual, the ... Loan Deed Form provided for signatures by both parties; and the common practice is for legal obligations to be concluded on the exchange of a deed signed by both parties."[44]

84 In the plaintiff's affidavit, further allegations are made regarding the alleged misrepresentations. They relate to negotiations between the plaintiff and Mr Wellock in the period immediately prior to the letter of intent being signed, namely 18 September-5 October 2020. These are not pleaded. The plaintiff deposes that Mr Wellock said, amongst other things, that he would give the plaintiff an exclusive due diligence period and if that due diligence was satisfactory then he could purchase the property for $9 million. However, these alleged statements are not capable of being misrepresentations that the plaintiff relied upon to establish the remedies he seeks (specific performance, damages for loss of opportunity and payment of $5,000). This is because the outcome of the negotiations was recorded in the letter of intent. Moreover, on the plaintiff's own evidence, in the negotiations prior to the letter of intent, he was given the opportunity to provide the defendant with a $50,000 non‑refundable deposit. Under cover of an email dated 21 September 2020, the plaintiff had provided heads of agreement to Mr Wellock.[45] It included a purchase price lower than $9 million and a payment of a 10% deposit at the end of the due diligence period of 45 days. Evidently the defendant did not accept the terms in that agreement. By email dated 29 September 2020 to Mr Wellock, the plaintiff declined to pay a $50,000 non‑refundable deposit because:

[t]here are too many unknowns to risk $50k without a clear understanding of demolition costs, contamination, lease details include demo clause and so on. We cannot risk a non-refundable deposit without having access to information and access to the site."[46]

In the same communication, the plaintiff proposed a 45 day due diligence period and a $5,000 refundable deposit. By email dated 5 October 2020, Mr Wellock wrote to the plaintiff and sought "a 10% deposit upfront and a further 20% at 6 mths" and a "$10,000 non-refundable deposit for 45 days exclusive DD".[47] The email proposed "[a]lternatively we are prepared to waive deposit without an exclusive period, during which time we can go out to the market to seek other deals." The plaintiff deposes that after receiving the email he telephoned Mr Wellock and said he was prepared to pay a $5,000 non-refundable deposit, not a $10,000 or $50,000 non-refundable deposit. He deposes that Mr Wellock specifically said that this would give him an exclusive due diligence period and if it was satisfactory, then he could purchase the property for $9 million. On 12 October 2020, the letter of intent was signed by the plaintiff. He says he had received it that day. The letter does not provide for payment of any deposit up front. Clause 3 contemplates the payment of deposit will be on signing "the definitive agreement" and then a further six months following that. Evidently, the plaintiff and the defendant negotiated a $5,000 non-refundable payment in respect of the due diligence obligation contained in clause 6. It is perhaps unsurprising, that without payment of a deposit, the sale transaction with the purchase price was agreed not to be legally binding in the letter of intent.

85 The plaintiff deposes to communications with Mr Wellock after the letter of intent. This refers to his own email to Mr Wellock on 21 October 2020 which refers to having "everything in order prior to the expiry of our Letter of Intent so we have ample time to finalise the details and move to an unconditional contract."[48]

86 I will presume for the purpose of this ruling that Mr Wellock did have authority to act on behalf of the defendant. Even with that presumption though, the alleged communications from Mr Wellock to the plaintiff are not capable of constituting misrepresentations relied upon by the plaintiff to establish loss. They evidence that there was an ongoing negotiation and both parties accepted a definitive agreement would need to be signed. Neither the contract of sale nor the sale price was 'locked in' by the letter of intent or the representations of Mr Wellock. This leads to the next point.

87 Fourthly, the plaintiff has no real prospect of obtaining the relief he seeks, namely, specific performance of the letter of intent or damages. As discussed above, the letter of intent does not require the defendant to sell the property to the plaintiff for $9 million. When pressed during hearing, the plaintiff said the order he seeks is that the defendant negotiate in good faith. This is circular reasoning. The real issue in dispute here is the plaintiff's contention that the good faith obligation was breached by the defendant by not selling the property to him for $9 million. As for damages, there can be none given that there is no real prospect of establishing breach.

88 Section 64 of the CPA is not applicable. This is not a case where it is in the interests of justice to proceed to trial. Indeed, to the contrary, summary disposal is entirely appropriate. Nor is it a case where the dispute is of such a nature that only a full hearing on merits is appropriate. That is, there are no particular reasons, for instance, on the basis of costs or complexity in favour of a trial.[49]

89 There has been delay by the defendant in making this application. However, the trial is more than six months away. There is no serious prejudice to the plaintiff in making the application that could not be addressed by a costs order. The delay does not outweigh the fact there is no real prospect of the plaintiff's claim succeeding. It would be inconsistent with the CPA to permit a futile claim to proceed to trial.

90 Given the above, the proceeding will be summarily dismissed.

91 It follows that it is unnecessary to address the defendant's strike out application.

92 Orders will be made for summary dismissal of the proceeding.

[1] Title search produced on 8 September 2021 (provided to Chambers by email on 8 September 2021).

[2] Exhibit 'OL-1' to the Ledlin 30 August 21 affidavit.

[3] Exhibits 'OL-2'-'OL-8' to the Ledlin 30 August 21 affidavit.

[4] Exhibit 'OL-7' to the Ledlin 30 August 21 affidavit.

[5] This is agreed between the parties: see paragraph 6 of the statement of claim and paragraph 6 of the defence.

[6] Exhibit 'OL-9' to the Ledlin 30 August 21 affidavit.

[7] Exhibit 'OL-13' to the Ledlin 30 August 21 affidavit.

[8] Ledlin 30 August 21 affidavit, [15].

[9] Exhibit 'OL-14' to the Ledlin 30 August 21 affidavit.

[10] Exhibit 'OL-15' to the Ledlin 30 August 21 affidavit.

[11] Exhibit 'SYJK-2'to the Kwok 6 August 21 affidavit.

[16] Defence filed 2 February 2021, [3].

[19] Written submissions filed by the defendant on 6 September 2021 and 28 October 2021; written submissions filed by the plaintiff on 6 September 2021 and 4 November 2021.

[20] Exhibit 'OL-9' to the Ledlin 30 August 21 affidavit (emphasis in original).

[21] Exhibit 'SYJK-2' to the Kwok 6 August 21 affidavit.

[22] The defendant relies on Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158; (2013) 42 VR 27 ('Lysaght').

[23] Statement of claim, [12] (e), (f), (h) and (i).

[24] Mount Bruce Mining v Wright Prospecting Pty Limited [2015] HCA 37; (2015) 256 CLR 104 ('Mount Bruce Mining'), [46]‑[48].

[25] [1954] HCA 72; (1954) 91 CLR 353.

[26] [2021] VSC 543 ('Bai v Lightspeed').

[28] Ledlin 30 August 21 affidavit, [13].

[31] [2017] VSCA 227, [59].

[32] Statement of claim [3(a)], [3(b)] and Defence [3(c)(i)].

[34] Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 ('Amann').

[35] John Holland Construction & Engineering Pty Ltd v Kvaerner R J Brown Pty Ltd & Anor (1996) 8 VR 681, [7]; Re TPS Group Limited v Charthill Group Pty Limited; John Carlton Young; Charles Frederick Marfleet; Asd Asset Management Pty Limited and Australian Stock Developments Limited [1988] FCA 402, [9].

[36] Innovateq Australia Pty Ltd and Anor v Barnes and Ors [2016] VSC 618.

[37] Ibid, [11]-[12] (citations omitted).

[39] Bai v Lightspeed, [75]-[76] (omitting citation).

[40] Mount Bruce Mining, [46]-[51].

[43] Ledlin 30 August 21 affidavit, [25].

[44] Bai v Lightspeed, [80], [81].

[45] Exhibit 'OL-6' to the Ledlin 30 August 21 affidavit.

[46] Exhibit 'OL-7' to the Ledlin 30 August 21 affidavit , being an email from the plaintiff to Mr Wellock sent on 29 September 2020.

[47] Exhibit 'OL-8' to the Ledlin 30 August 21 affidavit.

[48] Email contained in Exhibit 'OL-11' to the Ledlin 30 August 21 affidavit.

[49] See Manderson M & F Consulting (a firm) v Incitec Pivot Limited [2011] VSCA 444; (2011) 35 VR 98, [33]-[34].