Plaintiffs v Defendant

Supreme Court of Victoria|2008-04-24|Before: OSBORN J

Long standing family dispute relating to extensive real property restituted to the defendant in Czech Republic, East Germany and Slovakia - Original proceeding settled in 2001 pursuant to agreed terms of settlement - Proceeding reinstated following alleged breach of terms - Separate trial of preliminary questions relating to issues of liability only - Alleged breaches of terms of settlement by defendant - Alleged repudiation or disentitlement by plaintiffs - Construction of the terms of settlement - Alleged uncertainty of terms - Nature and extent of rights and obligations under the terms - Terms breached by defendant - No repudiation or disentitlement by plaintiffs - Terms not void for uncertainty - Matters to be considered upon further trial of the proceeding.

2 The terms of settlement ("the terms") were effected in respect of a claim in this Court made by the plaintiffs, concerning properties formerly comprising the assets of Alois and Anna Talacko who were the parents of Helena (the first plaintiff), Peter (deceased) and Jan (the defendant).

3 The first plaintiff, Helena Marie Talacko, claims in her own right but by her litigation guardian ("Jan Emil" Talacko). The second to fifth plaintiffs are the children and wife of the late Peter Talacko and claim pursuant to his will. They are Alexandra Bennett ("Alexandra"), Martin Talacko ("Martin"), Rowena Talacko ("Rowena"), and Margaret Helen Beatrice Talacko ("Margaret").

4 The matter has been fixed for hearing in the first instance with respect to issues of liability only.[1]

(b) whether the plaintiffs have repudiated or otherwise disentitled themselves from relying upon the terms; and

6 It is necessary first to set out some background matters.

7 In 1948, Alois and Anna Talacko left Czechoslovakia and settled in Australia, together with their three children Helena, Peter and Jan.

8 At the time of their departure from Europe, Alois and Anna owned extensive real property, including:

(a) five substantial buildings in the historic city centre of Prague known as the Prague 1 District;

(b) horticultural land on the outskirts of Prague at Repy;

(d) a private forest at Sucha in the north east of Slovakia;

(e) an apartment building and adjacent vacant land in Dresden, Germany.

9 In the following years the relevant property of both Anna and Alois was vested in the State, both within Czechoslovakia and within East Germany.

10 Alois died in Melbourne in 1964 and Anna in Melbourne in 1984.

11 Following the cessation of communist rule in Czechoslovakia at the end of 1989, discussions took place between Helena, Peter and the defendant concerning the restitution of their parents' property.

12 The plaintiffs allege that an agreement was reached between the three siblings to pursue such restitution together, and share the proceeds equally as between the three.

13 In 1991 following the passage of a series of restitution laws in Czechoslovakia, Helena, Peter and the defendant exchanged powers of attorney, declarations and testamentary documentation in order to give effect (as the plaintiffs allege) to such an arrangement.

14 In August 1991, the defendant also prepared documents setting out details of his parents' assets with varying degrees of particularity and gave these to Peter and Helena.

15 In September 1991, the defendant made application for the restitution of the central Prague properties. At the time, he alone of the three siblings was residentially qualified to make such a claim, being both a Czech citizen and resident in the Czech Republic.

16 His brother Peter was granted residency rights shortly after the expiration of the deadline for making the relevant claims.

17 In March 1992, a series of properties within central Prague were restituted to the defendant either solely or in part. Thereafter, other properties forming part of his parents' estate were either restituted to him or purchased by him.

19 In 1996, dispute arose over the payment of charges with respect to property jointly claimed by the plaintiffs and the defendant in Dresden.

20 In 1997, the defendant refused to co-operate in the sale of the Dresden property to a third party.

21 Dispute then continued between the plaintiffs and the defendant with respect to the parties' entitlements and obligations concerning both the Dresden and the Prague properties.

22 In October 1998, this proceeding was instituted by way of writ, claiming equitable interests in the properties held by the defendant, which comprised assets formerly owned by Alois and Anna Talacko, and seeking relief for alleged breach of agreement, breach of trust and breach of fiduciary duty.

23 Those proceedings were settled on 23 February 2001 on the following terms:

In full settlement of the matters the subject matter of the proceeding the plaintiffs and the defendant agree as follows:

The defendant to transfer all the right, title and interest that he has or shall have, to such person or entity as shall be nominated by the plaintiffs, in respect of the following:

(a) Kiefernstrasse 19 and Kiefernstrasse 19b, Dresden, Germany;

(b) 17.4473 hectares of land in Repy, as defined in the particulars under paragraph 6 in the amended statement of claim herein;

(c) approximately 0.8 hectares of land in Kbely, as defined in the particulars under paragraph 6 in the amended statement of claim herein;

(d) approximately 364 hectares of land in Sucha, as defined in the particulars to paragraph 6 of the amended statement of claim hereto.

This clause does not apply to any interest in land purchased by the defendant as from this date.

To give effect to paragraph 1, the defendant will sign all necessary documents and give all necessary documents and attend at any place as required by law in respect of the signing of such documents.
If by reason of applicable law, or some other cause, paragraph 1, or any part thereof, cannot be given effect to within 12 months of the date of these terms in respect of a particular property or properties. The defendant shall at the direction of the plaintiffs and at their cost, take all reasonable steps to sell back property or properties at best market value and shall pay the net proceeds of such sale, after the deduction of all expenses, to the plaintiffs or at their direction.
The plaintiffs to be responsible for and pay in the first instance all transfer costs, expenses, taxes, duties, levies and charges in any way payable in respect of the transfer or sale of the properties.
The defendant to pay to the solicitor for the plaintiffs the sum of $150,000 in part payment of the plaintiffs' costs on or before 23 June 2001.
In the event that the defendant breaches any term, condition or warranty in this agreement, then the plaintiffs shall be entitled to enter judgment for an order that the defendant pay equitable compensation for breach of fiduciary duty in respect of each of the Properties and interests in the Properties (as defined in the amended statement of claim) recovered or obtained by him, together with the costs of entering such judgment, and the production of these terms of settlement shall be conclusive evidence of the defendant's irrevocable consent to the entry of such judgment.
The parties shall forthwith consent to orders of the Court that the proceeding be struck out with no order as to costs, together with a right of reinstatement for the purpose of enforcing these terms.
The parties agree to release each other from all actions, suits, demands, liabilities and costs arising out of or in any way related to the subject matter of the proceeding.
The defendant warrants that:

(i) he has not reduced his right, title and interest in the properties the subject of these terms since the commencement of the proceeding;

(ii) the properties the subject of these terms, or any of them, are not encumbered;

(iii) that he shall not deal with the properties the subject of these terms otherwise than in accordance with these terms; and

(iv) that until transfer or sale he will pay costs, taxes and expenses associated with each property the subject of these terms.

24 The plaintiffs submit that the construction of the terms of settlement falls to be determined in accordance with well recognised principles of construction:

(1) The language of a term is generally assigned its natural and ordinary meaning, read in the light of the contract as a whole but where it is ambiguous surrounding circumstances may be taken into account in assigning the presumed meaning. The surrounding circumstances include the matrix of mutually known facts, and the background, object, context and commercial purpose of the transaction, in the objective sense of what reasonable persons in the position of the parties would have had in mind: Codelfa Construction Pty Ltd v State Rail Authority (NSW)[2]; Schenker & Co (Aust) Pty Ltd v Maplas Equipment & Services Pty Ltd[3]; Manufacturers' Mutual Insurance Ltd v Withers[4].[5]

(2) It is well established that the task of construction of a written instrument requires the whole of the instrument to be considered: Re Media, Entertainment and Arts Alliance; Ex parte Hoyts Corporation Pty Ltd[6].[7]

25 The defendant likewise submits that the terms are to be construed according to ordinary contractual principles, most notably, that the meaning of the document signed by the parties is to be determined objectively.

26 In my view, the fundamental principles governing the construction of the terms were stated by the High Court in Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd:[8]

This Court, in Pacific Carriers Ltd v BNP Paribas,[9] has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.[10]

27 Insofar as contextual matters are concerned, it may be observed that the opening words of the terms are as follows:

In full settlement of the matters the subject matter of the proceeding the plaintiffs and the defendant agree as follows ...

28 The original terms were constituted by a handwritten document (written in several hands) and produced at the conclusion of a mediation. The opening words of the terms and the circumstances support the view:

(a) that the drafting may not be as precise as would be the case if the terms were the product of extended reflection;

(b) that the terms reflected a compromise entered into between persons having a prior history of dealing with each other with respect to the subject matter of the terms which may inform the meaning of factual references; and

(c) that the terms were intended to achieve finality as between the parties in respect of the subject matter of the proceeding.

The defendant to transfer all the right, title and interest that he has or shall have, to such person or entity as shall be nominated by the plaintiffs, in respect of the following:

(a) Kiefernstrasse 19 and Kiefernstrasse 19b, Dresden, Germany;

(b) 17.4473 hectares of land in Repy, as defined in the particulars under paragraph 6 in the amended statement of claim herein;

(c) approximately 0.8 hectares of land in Kbely, as defined in the particulars under paragraph 6 in the amended statement of claim herein;

(d) approximately 364 hectares of land in Sucha, as defined in the particulars to paragraph 6 of the amended statement of claim hereto.

This clause does not apply to any interest in land purchased by the defendant as from this date.

30 The terms of clause 1 are relatively straightforward. They provide that the starting point of the settlement is an agreement by the defendant to transfer specified property for the benefit of the plaintiffs entirely.

31 Nevertheless, six matters deserve further preliminary consideration. First, the defendant's interest in the properties is described as "all the right, title and interest (the defendant) has or shall have ... in respect of" the specific properties (my emphasis). I accept such description was apt to encompass interests in land in respect of which the defendant had made restitution claims which were not finalised at the date of settlement.

32 A potentially more difficult question is whether the obligation to "transfer" extends to rights to alternative land or compensation which might be granted with respect to claims for restitution of the specified land.

33 I accept the submission of Mr Williams that the words "right, title and interest" in land are ordinarily to be understood as embracing rights in rem only. The words "right, title and interest" are apt to describe a legal or equitable estate or interest in the land or in the present case, the civil code equivalent pursuant to the relevant law.

34 It is strongly arguable the words "in respect of" are sufficiently wide, however, to describe other interests relating to the land including specifically potential rights to alternative land or compensation granted upon the determination of restitution claims with respect to any of the nominated properties.

35 It is unnecessary to attempt to finally determine the hypothetical potential ambit of the phrase "right, title and interest... in respect of" in the present case, having regard to the sequence of events which has occurred and which I shall describe below.

36 Secondly Czech law permits different ownership of land and fixtures upon it. The interests potentially transferable were not necessarily directly comparable to interests in land under Victorian law.

37 Thirdly it is to be noted that there is no sunset provision contained in clause 1 as to when the rights which it is contemplated may accrue, must accrue. More particularly it is not provided that such rights are limited to those as shall accrue within a period enabling their transfer within 12 months (this brings a time limit adopted in clause 3). It is not contemplated the terms will necessarily be capable of complete performance without some material delay.

38 Fourthly the clause contemplates transfer to a nominee of the plaintiffs. The evidence is that such a nomination was necessary for an effective transfer pursuant to Czech law. At the date of settlement, land could only be transferred to a citizen of the Czech Republic, or to a corporate entity incorporated pursuant to Czech law.

39 It follows that the parties must have contemplated some time would be taken up by the nomination process.

40 Fifthly it is to be observed that the obligation to transfer under clause 1 is not expressly time limited.

41 Sixthly the description of the relevant properties varies in the manner in which they are particularised:

(a) the Dresden property is described by street number;

(b) the Repy property is defined by area, general location and reference back to the amended statement of claim;

(d) the Sucha land is similarly defined but the area is again said to be approximate.

42 In each case a further description of the land would be necessary for the purposes of effecting transfer. The evidence is that the origin of the descriptions in the terms is to be found in two lists of properties prepared by the defendant prior to the commencement of the proceedings between the parties[11] and describing the property interests held by his father and mother at the date his parents fled from Czechoslovakia. The relevant properties were further described in evidence before me and in particular by way of the evidence of the defendant. As at the date of settlement, the properties and more particularly the defendant's interest in them required further particularisation before transfer documentation could be prepared.

To give effect to paragraph 1, the defendant will sign all necessary documents and give all necessary documents and attend at any place as required by law in respect of the signing of such documents.

44 The evidence is that the transfer pursuant to Czech law of a right of ownership to real property required first a written agreement between the owner as seller and the purchaser of the land, building or both, and secondly, the registration of the transfer in the Real Estate Register initiated by a formal application for registration of transfer submitted by the purchaser or the seller or both. The Cadastral Office registers the transfer with retroactive effect as of the date of delivery of the application to the Real Estate Register. If the transfer is not registered in the Real Estate Register, the ownership right to such real estate does not pass to the purchaser.

45 There is some dispute as to the ambit of clause 2 of the terms. In my view, first, the words "to give effect to" are not intended to introduce obligations exclusive of other steps necessary to perform the defendant's obligation to transfer. Secondly, the obligation to sign and give all necessary documents is, however, self-evidently not an obligation to "prepare" all necessary documents. Thirdly, both the general obligation to transfer and the specific obligation to sign and give, must be understood to be underpinned by the implied obligation to co-operate to give effect to the contract:

It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.[12]

46 The amended statement of claim pleads two implied terms:

(i) do all things reasonable, and necessary to be done by them and each of them to carry the agreement into effect;

(ii) co-operate fully with each other party and act in good faith in seeking to carry the agreement into effect.

47 The defendant did not take issue with the first term pleaded, but contests the second.

48 It is not in my view necessary to finally decide whether the second term is to be implied as pleaded, but I doubt that it is. The reasonable onlooker would not have readily inferred that the defendant accepted such a general and ill-defined obligation having regard to the history of the matter. This said, however, it seems to me that in one particular respect the parties must be taken to have contemplated the defendant would act in good faith. It was reasonably necessary if the plaintiffs were to have the benefit of property the subject of claims as yet undetermined and falling within the scope of clause 1, that the defendant would prosecute such claims in good faith. An obligation to act in good faith in this respect should be implied in order to protect vulnerable parties from conduct which would subvert the original purpose for which the contract was made. It should be regarded as an ad hoc implication meeting the tests laid down in BP Refinery (Westernport) Pty Ltd v Shire of Hastings[13]; see Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL & Ors.[14] The defendant's implied obligation to do all things reasonable and necessary to be done to give effect to the agreement embraced an obligation to act in good faith in this respect.

If by reason of applicable law, or some other cause, paragraph 1, or any part thereof, cannot be given effect to within 12 months of the date of these terms in respect of a particular property or properties, the defendant shall at the direction of the plaintiffs and at their cost, take all reasonable steps to sell such property or properties at best market value and shall pay the net proceeds of such sale, after the deductions of all expenses, to the plaintiffs or at their direction.

50 The opening phrases of clause 3 specify a precondition to its operation. The ordinary meaning of the words "cannot be given effect to" is in contrast to words such as "are not given effect to".

51 The clause is concerned with frustration of clause 1 by reason of factors external to the parties. The words "by reason of applicable law, or some other cause" refer to such a cause.

52 Such a construction gives clause 3 a complementary role to clause 1, which imposes the primary obligation to transfer the defendant's interest in the specified properties. The land in issue is not necessarily to be regarded simply as a commercial asset. It formed part of the plaintiffs' claimed family inheritance. The effect of the settlement was thus not merely to give them financial compensation but part of this inheritance. It should thus not be readily assumed that the parties intended to provide for sale of the property as an outcome, save in circumstances where the transfer of the land to the plaintiffs could not occur.

53 In turn, restriction of the circumstances in which the secondary obligation to sell crystallises, protects the defendant against the potentially onerous obligations involved in selling diverse properties of complex characteristics in three jurisdictions.

54 I therefore do not accept that as the defendant contends, the opening words of clause 3 should be read in effect as "if any part of paragraph 1 is not given effect within 12 months of the date of these terms ..." Such a construction does not give full and proper effect to the language adopted by the parties and is not supported by the weight of contextual consideration.

55 The defendant's further submissions focussed particularly upon the interpretation of the words "at the direction of the plaintiffs" which condition the obligation of the defendant to sell.

56 The defendant submits that the effect of the condition is that if the circumstance initially specified in clause 3 arises, the defendant is under an obligation to sell the property in issue. He submits that the words "at the direction of the plaintiffs" govern the mode of sale, but not the obligation to sell, which it is submitted automatically supersedes the obligation to transfer under paragraph 1 once the terms of the initial words of clause 3 are met.[15]

57 The contrary view is that the use of the word "shall" connotes a mandatory obligation (as the defendant submits) but one which the plaintiffs contend arises only upon the giving of a direction to sell. The word "shall" qualifies the word "sell" not "direct". The clause provides the defendant shall "at the direction of the plaintiffs ... sell" not that the defendant "shall sell in accordance with the direction of the plaintiffs".

58 In my view, this construction accords better with the ordinary meaning of the language than that submitted on behalf of the defendant.

59 The defendant further submits that the clause should be construed as giving effect to an agreement intended to finalise the dispute with expedition.

The terms contemplated that clause 1 ought to be the primary mechanism. However, if that mechanism could not be given effect to within 12 months, the terms contemplated moving to the secondary mechanism in clause 3. This would conclude the arrangements with the greatest possible expedition in the event the primary mechanism proved ineffective within the nominated period.

60 This submission begs the question whether in fact the taking of reasonable steps to sell a property at best market value, and the payment of the net proceeds of such sale to the plaintiffs, would in fact be more expeditious than a transfer of the property to the plaintiffs, if such transfer became practically feasible after the expiration of 12 months. There is no sensible basis upon which to conclude that it necessarily would. It certainly would not do so in the case of a transfer process commenced but not completed during the 12 month period due to some practical difficulty causing short delay.

61 Conversely, the construction for which the plaintiffs contend allows the ongoing benefit of the prospect of transfer to be assessed against the probable costs and difficulty of sale. Mr Williams (for the defendant) submitted that if it were intended that the clause convey this benefit to the plaintiffs, there would be no need for the sunset provision of 12 months. It seems to me, however, that it was plainly the parties' intention in the first instance that the properties would be transferred to the plaintiffs. It is not surprising that the fall back alternative of sale should be agreed to arise only after 12 months and in specified circumstances. As I have said, the alternative of sale did not give the plaintiffs part of their inheritance and also had the potential to impose extensive and potentially difficult practical obligations upon the defendant. It was certainly not one which was necessarily for the defendant's benefit.

62 It is to be noted that clause 3 applies if paragraph 1 "or any part thereof, cannot be given effect to within 12 months". It would follow that if any claim with respect to the specified property remained outstanding after 12 months, then on the defendant's construction, whatever the then status of that claim or its ultimate success, no transfer of such property to the plaintiffs could be required thereafter. This is so draconian a consequence that it does not favour the defendant's construction.

63 The plaintiffs also submit that the use of a variant of the phrase "at the direction of the plaintiffs" in the ultimate phrase of the clause is significant:

... and shall pay the net proceeds of such sale, after the deduction of all expenses, to the plaintiffs or at their direction.

The plaintiffs submit that this use of a variant of the phrase "at the direction of" connotes an option because payment is to be made to the plaintiffs unless they choose to direct otherwise.

64 Contrary to this submission, it seems to me that in this context the phrase is concerned with mode of payment and that, if anything, the second use of the phrase tends to support the defendant's construction of the first use of the phrase as one concerned with mode of sale.

65 Nevertheless, I do not regard this consideration as determinative. Both the natural meaning of the words used and the other contextual matters I have referred to favour the plaintiff's construction of the phrase "at the direction of".

66 Moreover, whether the words "at the direction of" themselves be regarded as simply empowering the plaintiffs to direct the defendant to sell in a particular manner (as the defendant contends) or not, I am not persuaded that the clause read as a whole requires the plaintiffs to direct a sale if the initial requirements of the clause are met.

67 The clause does not so expressly provide, and it is not necessary to imply such a requirement to give it efficacy. Further, there are substantial reasons to doubt that this was the parties' intention (which I have referred to above) and the implication cannot be said to "go without saying".[16]

The plaintiffs to be responsible for and pay in the first instance all transfer costs, expenses, taxes, duties, levies and charges in any way payable in respect of the transfer or sale of the properties.

69 The operation of this clause appears relatively straightforward. Insofar as some charges the subject of it may require ascertainment in the course of a sale, the costs in issue may be regarded as giving rise to an obligation which crystallises when the relevant charge is ascertained and levied.

70 The operation of the obligation to pay "in the first instance" was also the subject of contention. Once again, the better view is that the obligation to pay in the first instance is dependant on ascertainment of the appropriate charge. Insofar as such ascertainment might occur at the time the defendant held proceeds of sale, he would be entitled to deduct such ascertained costs as were unpaid pursuant to clause 3.

The defendant to pay to the solicitor for the plaintiffs the sum of $150,000 in part payment of the plaintiffs' costs on or before 23 June 2001.

72 The defendant paid the sum payable pursuant to this clause.

In the event that the defendant breaches any term, condition or warranty in this agreement, then the plaintiffs shall be entitled to enter judgment for an order that the defendant pay equitable compensation for breach of fiduciary duty in respect of each of the Properties and interests in the Properties (as defined in the amended statement of claim) recovered or obtained by him, together with the costs of entering such judgment, and the production of these terms of settlement shall be conclusive evidence of the defendant's irrevocable consent to the entry of such judgment.

74 It is this clause pursuant to which the plaintiffs now seek primary relief.

The parties shall forthwith consent to orders of the Court that the proceeding be struck out with no order as to costs, together with a right of reinstatement for the purpose of enforcing these terms.

76 Pursuant to this agreement the Court ordered by consent on 28 February 2001 that the proceeding be dismissed with no order as to costs. The proceeding was reinstated by order of Gillard J made on 8 July 2005.

The parties agree to release each other from all actions, suits, demands, liabilities and costs arising out of or in any way related to the subject matter of the proceeding.

(i) he has not reduced his right, title and interest in the properties the subject of these terms since the commencement of the proceeding;

(ii) the properties the subject of these terms, or any of them, are not encumbered;

(iii) that he shall not deal with the properties the subject of these terms otherwise than in accordance with these terms; and

(iv) that until transfer or sale he will pay costs, taxes and expenses associated with each property the subject of these terms.

There is dispute concerning the performance of warranties II, III and IV raising individual issues of construction arising on the facts to which I shall further refer.

79 I shall set out a skeleton account of relevant dates involving dealings as between the parties and their representatives. That history is somewhat complicated by the continuing history of the determination of restitution claims by Czech authorities and the parties' response to those determinations. Although this latter history complicates the narrative it is necessary to make some reference to it in order to understand the terms of the communications between the parties.

80 Following the making of consent orders in this Court at the end of February 2001, Alexandra instructed a Czech attorney named Svoboda to advise and assist the plaintiffs with respect to the transfers of land contemplated under the terms. These instructions were given on 1 March 2001. In the event the process of advice proved relatively lengthy.

81 Svoboda's evidence is that there were complications and delays, first in searching relevant title details, secondly in establishing an appropriate corporate nominee to receive property on behalf of parties who were not Czech citizens, and thirdly in resolving the most advantageous manner in which to proceed from a taxation point of view.

82 Again in the immediate aftermath of settlement, the solicitors for the defendant Messrs Findlay Arthur Phillips wrote on 6 March 2001 to the plaintiffs' solicitor advising that the defendant would sign transfers relating to the Dresden properties at the German Embassy in Prague.

83 During 2001 Svoboda carried out initial title searches.

84 On 9 October 2001, the solicitor for the plaintiffs wrote to Findlay Arthur Phillips attaching a schedule of monies payable relating to the Dresden properties and requesting payment.

85 On 29 October 2001, Findlay Arthur Phillips advised that they no longer had instructions to act for the defendant.

86 In March 2002, the Czech Land Office made successive determinations relating to land at Kbely and at Repy. On 20 March 2002, land at Kbely was restituted to Helena (who by that date was able to claim as a Czech citizen although not resident in the Czech Republic) and the defendant in one eighth shares each.

87 On 21 March 2002, some land at Repy was restituted to Helena and the defendant and some to the defendant alone. Other applications were refused on the grounds that the land had been built upon.

88 On 26 April 2002, the defendant appealed the decision of the Land Office of 21 March 2002 and alleged that Helena was not entitled to restitution.

89 In May 2002, a corporate entity was established in the Czech republic on behalf of the second, third and fourth plaintiffs.

90 On 5 June 2002, Svoboda wrote to the defendant requesting details of his property holdings in the Czech Republic and Slovakia and seeking his co-operation in achieving a transfer of the properties. The letter also asked why the defendant had appealed the 21 March 2002 decision of the Land Office.

91 On 19 September 2002, the defendant responded to Svoboda asserting that he had complied with the terms of settlement and questioning the nature of Svoboda's retainer.

92 On 16 April 2003, the defendant's appeal concerning the decision of 21 March 2002 was dismissed.

93 On 15 June 2003, some further plots at Repy were restituted to the defendant and Helena in half shares and restitution was refused with respect to others because they had been built upon. The decision with respect to this latter land known as the "car park land" was appealed by the occupant of the land.

94 On 26 September 2003, Svoboda delivered a framework agreement to the defendant providing for future dealings with land in the Czech Republic and Slovakia, together with letters explaining their contents and asking that they be signed in order to give effect to the terms of settlement.

95 On 3 October 2003, Dammholz, a Sydney solicitor qualified to act in Germany and acting on behalf of the plaintiffs, delivered to the defendant a transfer agreement providing for the transfer of the Dresden land pursuant to the terms of settlement.

96 On 10 October 2003, Svoboda wrote to the defendant seeking an answer to the letter of 26 September and requiring a response by 7 November 2003.

97 On 20 October 2003, Svoboda wrote a letter dated 17 October 2003 in English to the defendant and his attorney Buresova demanding a response and attaching draft agreements and a Czech translation of the letter.

98 On 10 November 2003, the defendant wrote to Svoboda alleging harassment and saying he needed more time to consider the agreements and would reply in due course.

99 On 25 November 2003, the defendant wrote to Svoboda refusing to sign the documents saying they had nothing to do with the settlement and alleging repudiation by the plaintiffs of the terms.

100 On 29 November 2003, the defendant wrote to Dammholz refusing to co-operate in the execution of the Dresden transfer documentation.

101 On 3 February 2004, Svoboda wrote to the defendant enclosing a copy of the Dresden transfer documentation.

102 On 10 February 2004, Svoboda arranged for Dr Blahoutova to translate the agreements into Czech and deliver them to the defendant. Blahoutova did so.

103 On 20 February 2004, Svoboda delivered Czech translations by hand to the defendant's home in Prague at Hastalska 12.

104 After servicing authorities and an insurer in Dresden (at the request of the plaintiffs) billed the defendant in respect of his share of the Dresden property, his attorney Buresova wrote to German authorities on 19 January 2005 saying he was not liable for service charges.

105 On 7 July 2005, the defendant entered into a written lease of land at Repy with one Tusjak and received rent from that time.

106 On 30 August 2006, by decision of the Land Office, further plots at Repy were restituted to Helena and the defendant.

107 On 26 September 2006, by decision of the Land Office, certain land at Kbely was not restituted to the defendant and Helena.

108 On 28 December 2006, by decision of the Land Office, some former military land plots at Repy were restituted to the defendant and Helena and some were not.

109 In summary, the plaintiffs allege that the defendant has breached the terms of settlement:

(a) by lodging the appeal of April 2002 against the Land Office decision of 21 March 2002, allegedly in breach of clause 9(iii) of the terms requiring the defendant not to deal with the properties the subject of the terms otherwise than in accordance with them, and further in alleged breach of the defendant's duty to co-operate[17] (ASC [22] and [23]);

(b) by letter of 19 September 2002 failing and refusing to provide confirmation of title details and an explanation of the above appeal in response to Svoboda's letter of 5 June 2002 in alleged breach of the defendant's duty to cooperate (ASC [25]);

(c) by refusing in November 2003 to sign the proposed agreement relating to various Czech properties in alleged breach of clause 2 of the terms (ASC [29]);

(d) by failing and refusing to transfer the Czech properties in circumstances where it is alleged the law of the Czech Republic obliged him to effect such transfer (ASC [29B]);

(e) by failing and refusing in November 2003 to sign the proposed transfer documentation relating to the Dresden properties and by failing to articulate any objection to such documentation in alleged breach of clause 2 (ASC [33] and [34]);

(f) by failing and refusing to attend at the offices of the plaintiffs' solicitors in Prague in February 2004 in order to sign the proposed transfer documentation relating to the Czech Republic and Dresden properties in alleged breach of clause 2 (ASC [37]);

(g) by failing and refusing to sign Czech language versions of the proposed transfer documentation in alleged breach of clause 2 (ASC ]39]);

(h) by failing to disclose in alleged breach of the warranty contained in 9(ii) of the terms:

(i) the encumbering of the property at Repy by way of competing claims, asserted third party rights of possession and occupation and by the presence of improvements including public buildings, roads and infrastructure;

(ii) that the property at Sucha was the subject of court proceedings in which 18 hectares was being claimed from a third party who had obtained an unlawful transfer of such land (ASC [42]);

(i) by failing to pay taxes and costs due with respect to the properties in Dresden, allegedly in breach of 9(iv) of the terms requiring that until transfer of the land the defendant would pay "costs, taxes and expenses associated with each property and the subject of these terms";

(j) by offering the property in Slovakia for sale, allegedly in breach of the warranty that the defendant would not deal with such property;

(k) by entering into a lease agreement with one Tusjak in respect of a portion of the land at Repy, allegedly in breach of the obligations under 9(iii) of the terms requiring the defendant not to deal with the property otherwise than in accordance with the terms.

(a) denies that the lodging of the appeal on 21 March 2002 breached the terms;

(b) admits correspondence with Svoboda in June and September 2002 but denies his letter breached the terms;

(i) it was not open to the plaintiffs to call for transfers more than one year after the terms were entered into; and

(ii) the documentation forwarded went beyond transfer documentation of the type contemplated by the terms;

(d) denies his refusal to sign the proposed framework documentation was wrongful;

(e) denies that the proper law of sub-clauses 1(b) and (c) of the terms was the law of the Czech Republic and says the proper law of the terms was the law of Victoria and further denies breaching the obligations alleged under Czech law;

(f) says that the plaintiffs were not entitled to call for a transfer of the Dresden property more than one year after the terms were entered into and that the documentation was complex and in the German language unaccompanied by translation into either the Czech or English language so he could comprehend them;

(g) denies that the Dresden transfer documentation constituted a proper and effective transfer agreement and that he failed to articulate proper objection to it;

(h) takes issue with the status of Svoboda and does not admit failing to attend to execute transfer documents at Svoboda's office;

(i) says that by calling on the defendant to execute transfer documents in the form requested, and by instituting a claim for relief based on this refusal to execute such documentation, the plaintiffs have insisted on performance of the terms in a manner fundamentally inconsistent with such terms and have thereby repudiated the terms, which repudiation is accepted;

(j) denies that he knew certain of the properties were encumbered at the date of entering into the terms;

(k) denies that he is liable under the terms for the whole of the costs and taxes payable with respect to the Dresden property pending transfer pursuant to the terms, alternatively says he was liable for a part of such charges only after the plaintiffs took into account income received from the Dresden property and advised him of any balance owing and the plaintiffs have not informed him of any such balance owing. Alternatively, the plaintiffs have waived any breach with respect to non-payment of costs and taxes in respect of the Dresden property;

(l) denies he has offered the property in Slovakia for sale and that he has breached the terms by so doing;

(m) denies he has purported to lease property at Repy to Tusjak and that he has breached the terms by so doing;

(n) denies that the plaintiffs are entitlement to judgment in accordance with clause 6 of the agreement;

(o) says further that clause 6 is so uncertain as to its meaning or effect as to be void for uncertainty;

(p) says the relief sought would impose a penalty not reflective of any loss suffered by the plaintiffs as a consequence of breach of the terms, and that he is entitled to avoid such terms as imposing a penalty;

(q) further says the defendant has acquiesced in the plaintiffs' construction of clause 3 of the terms and waived any entitlement they may otherwise have had to a different construction of clause 3. Further it would be unconscionable if the plaintiffs were to resile from the common assumption upon which the parties proceeded in respect to the meaning of clause 3.

111 The issues raised by the pleadings with respect to breach of the terms and consequent liability which I have summarised above fall to be determined as preliminary issues save for the question of penalty in respect of which I have previously ruled the allegations raised should not be decided on a preliminary basis.

112 Although the pleadings raise a series of complex issues, I have come to the view that it is sufficient in the first instance to consider the plaintiffs' case with respect to the Dresden transfers. I do so in part because it is apparent that the settlement was founded upon an agreement to transfer specified properties. Accordingly, it is difficult to conceive of a more fundamental breach of the terms than a failure to transfer property in accordance with it.

113 I do so secondly because the issues raised with respect to the Dresden transfers crystallise relatively simply the core contentions of the parties.

114 On 6 March 2001, the Melbourne solicitors for the defendant wrote to the solicitor for the plaintiffs under the heading "Re: Talacko ats Talacko, Transfer of German Properties" and stated in part:

We are instructed that our client wishes to sign the transfer papers personally rather than by an attorney. However, our client is about to return to Prague for an indefinite period. As such, our client suggests that the papers be forwarded to him in Prague and he will attend at the German Embassy in Prague and sign them there.

115 The evidence is that in October 2003, Dammholz prepared on behalf of the plaintiffs transfer documentation with respect to the defendant's interests in the Dresden properties.

116 The evidence further establishes that Dammholz was qualified to prepare the necessary documentation at that time and is qualified to give evidence before this Court as to its adequacy.

117 The uncontested evidence of Dammholz is that the relevant transfer documentation complied with German law.[18]

118 Further, it is admitted that the transfer documentation was received by the defendant when it was forwarded to him for signature.

119 I am satisfied that the plaintiffs proffered to the defendant transfer documentation which he was required to sign and give to the plaintiffs' legal representatives in order to effect a transfer of the Dresden properties in accordance with clauses 1 and 2 of the terms.

120 The defendant seeks to justify his refusal to execute the Dresden transfer documentation on two primary bases:

(a) the effluxion of one year since the making of the terms; and

121 The first proposition turns on the question I have addressed above at [49] to [67]. I do not accept that it is implicit in clause 3 of the terms that the right to require a transfer pursuant to clause 1 terminated after the effluxion of one year.

122 There is no evidence of a frustrating circumstance satisfying the clause 3 requirement that the transfer could not be effected in this time. Further for the reasons I have given even if such a circumstance existed the obligation to transfer did not cease unless the plaintiffs' elected to obtain a sale under clause 3.

123 It is also apparent that the documentation was required to be in German to be effective, and that the terms did not require a translation to be provided to the defendant, although they did entitle the defendant to the payment of costs with respect to the transfer transaction. There is no evidence that the defendant requested that an independent translation of the documentation be undertaken or sought to obtain advice about it.

124 When Dammholz first forwarded the transfer documentation to the defendant on 3 October 2003 the covering letter stated:

The contents of our draft is very brief and straightforward and simply says that you transfer all of your interest in subject properties to Margaret and Helena Talacko. You may of course obtain a translation in the English or Czech language, however, for practical reasons the original and signed document must be in the German language.

At a glance

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Before

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Judgment (390 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (13)