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[2024] VSC 622
General information, not legal advice.
Supreme Court of Victoria
2024-10-10
Ierodiaconou AsJ
Original judgment source is linked above.
CONTRACT - Summary judgment application by vendor - Interpretation - Implied term - Condition precedent - Whether rezoning of property an implied term or condition precedent.
1 This proceeding concerns a dispute about the purchase of land for $9.5 million. The plaintiff purchasers say that settlement should be delayed until after the land has been rezoned and, until that occurs, the land is only worth $5 million. They say they are in the process of having the land rezoned from Farming Zone to Comprehensive Development Zone or Urban Growth Zone. In the meantime, an initial settlement date, and then an extended settlement date, have passed without the purchasers completing payment of the purchase price. The defendant vendor relies on the contract of sale, as amended by the terms of settlement ('TOS'), and says there should be summary judgment in his favour. This ruling determines the defendant vendor's summary judgment application.
2 For convenience, I shall refer to the plaintiffs as 'the purchasers' and the defendant as the 'vendor'.
3 By summons filed on 6 June 2024, the vendor seeks summary judgment pursuant to s 63 of the Civil Procedure Act 2010 (Vic) ('CPA'). In the alternative, he seeks that the Statement of Claim filed on 1 May 2024 ('Statement of Claim') be struck out pursuant to r 23.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) ('Rules'). By his counterclaim, the vendor seeks orders that the second plaintiff remove a caveat over the subject property.
4 The central questions for determination and their answers follow.
5 Do the purchasers have any real prospect of success in establishing:
(a) the rezoning of the property was a condition precedent to settlement? No.
(b) the contract of sale contains an implied term that settlement is not required until after rezoning? No.
6 Orders will be made for summary judgment in favour of the vendor in respect of the claim. Consequentially, orders should be made for removal of the caveat per the vendor's counterclaim.
7 The background to this proceeding begins on 22 April 2022.[1] On that date, the defendant (as vendor) entered into a contract (the 'contract of sale') with the first plaintiff (as purchaser) for the sale of 240 O'Herns Road, Epping, in the State of Victoria, being the property more particularly described in Certificate of Title Volume 08635 Folio 231 (the 'Property').[2]
8 The contract of sale included the following:[3]
(a) A sale price of $9,500,000.
(b) Two deposits of $475,000 each. The first was to be paid upon signature, the second was to be paid three months later.
(c) A settlement date of 16 August 2023 (16 months after the date of the contract of sale), whereupon the outstanding balance, being $8,550,000, would be paid.
(d) A special condition (Special Condition 4), stipulating that the vendor provide access to the Property for the purposes of rezoning and subdivision approval prior to settlement.[4]
(e) A special condition (Special Condition 5) that the contract is conditional on the purchaser paying the deposit of $475,000 no later than 27 April 2022, and that failure to pay by that date entitled the vendor to terminate the sale.
9 The first plaintiff paid the two deposits.[5]
10 On 15 September 2022, the first plaintiff registered a caveat on the Property's title, being dealing number AW066581S (the 'Caveat').[6] The Caveat refers to the first plaintiff's interest as purchaser under the contract of sale.
11 On 11 October 2022, to progress the rezoning and per Special Condition 4, the second plaintiff's town planner, Human Habitats Pty Ltd, requested that the vendor provide access to the Property for soil testing by another company.[7]
12 On 13 October 2022, the second plaintiff's conveyancer sent a follow-up email requesting an inspection time.[8]
13 In or about late October 2022, the vendor advised that the second plaintiff could be granted access on 5 November 2022. This date was not practicable for the second plaintiff.[9]
14 On 18 November 2022, the second plaintiff's hired soil tester, DRC Environmental, attended the Property to undertake soil testing. However, the vendor refused access, citing wet weather conditions which may affect features of the Property.[10]
15 Between November 2022 and March 2023, there were several exchanges between the purchasers and the vendor, either through their representatives or by proxy, regarding access to the Property for the purposes of rezoning, testing, and other like activities.[11]
16 On 18 March 2023, the vendor's daughter advised that the vendor would not want any soil testing, engineering, or other like work done to the Property before settlement.[12]
17 On 4 May 2023, the purchasers' representative, Banga Legal, sent a letter to the vendor's representative, Conlan Cummings Lawyers, stating that the second plaintiff (in this proceeding) had been attempting to seek reasonable access to the Property for the purposes of rezoning and subdivision approval by surveyors and town planners since August 2022.[13]
18 On 25 May 2023, after several exchanges, the purchasers' solicitor sent a letter that acted as a 'final notice' before initiating formal litigation, stating that it seemed the vendor was not able to act in good faith.[14]
19 On 18 July 2023, the first plaintiff nominated the second plaintiff to be the substitute purchaser, thereby taking the transfer of the Property in its place.[15] The Nomination of Real Estate form stated:
The Buyer nominates the Nominee as substitute Buyer to take a transfer of the Property instead of the Buyer.
The Buyer and the Nominee acknowledge that they are jointly and severally liable for performing the obligations of the Buyer under the Contract and for paying any expenses resulting from this nomination (including, but not limited to any stamp duty) and the Nominee is bound by the Contract as if the Contract had been entered by the Nominee and the Seller.
The Guarantor acknowledges that the nomination of the Nominee as substitute Buyer does not affect the Guarantor's obligations under the Guarantee.[16]
20 Tajinder Singh, the second plaintiff's sole director, signed as guarantor.[17]
21 On 16 August 2023, the original date of settlement, the purchasers failed to complete the purchase of the Property by paying the outstanding amount under the contract of sale.
22 On 30 July 2023, the second plaintiff (in this proceeding) issued a proceeding against the vendor in the Supreme Court of Victoria, proceeding number S ECI 2023 03377 (the 'first proceeding').
23 Notably, in the first proceeding, the second plaintiff sought orders extending the settlement date to 23 April 2024. It also sought an injunction restraining the vendor from enforcing specific performance and completion of the contract until 24 April 2024.[18]
24 The substantive allegation in the first proceeding was that the vendor had breached Special Condition 4 by not allowing the purchasers and their agents sufficient access to the Property for the purpose of the rezoning and subdivision applications.[19]
25 On 25 August 2023, the vendor's solicitors served the purchasers' solicitors with a notice of default and recission.[20]
26 On 6 September 2023, Stynes J ordered that the parties attend mediation. At the mediation, held the same day, terms of settlement (the 'TOS') were agreed upon between the parties.[21]
Operative Part
- The contract is to be amended as follows:
(a) Special Conditions 1,2,3 and 5 are to be deleted: and
(b) The settlement date is extended to 5 April 2024,
in consideration of OHR paying Chiarelli $100,000 by 30 November 2023, $20,000 by 15 March 2024 and $30,000 at settlement.
- Time is of the essence in respect of all obligations in paragraph 1 above and for the avoidance of doubt in the event that the payments are not made in accordance with that paragraph Chiarelli will be at liberty to rescind the contract in accordance with its terms.
- Paragraph 2 is without prejudice to any rights Chiarelli may have to pursue OHR for any amounts outstanding under these terms or the contract.
- A breach of these terms will otherwise constitute a breach of the contract.
- OHR acknowledges that it is liable for and to the extent that it is necessary will indemnify Chiarelli against any land tax accruing in respect of the property from 1 January 2024.
- OHR warrants that it will not complete the rezoning process referred to in special condition 4 of the contract until at or after settlement.
- The parties will seek orders dismissing the proceeding with no order as to costs.[22]
28 On 13 September 2023, Stynes J dismissed the first proceeding by consent.[23]
29 The purchasers subsequently paid further amounts due to the vendor pursuant to the TOS.[24] However, the purchasers did not pay the remaining monies due at settlement.
30 On 20 March 2024, the vendor's solicitor received a letter from the purchasers' solicitor (the '20 March 2024 letter'), relevantly stating:
WITHOUT PREJUDICE
RE: 240 O'Herns Road Epping Pty Ltd (ACN 669 288 475) vs Chiarelli, Marino
Dear Colleague,
Our client has advised us he requires a 12-month extension on the 240 O'Herns Road Epping.
Our client seeks to continue with the purchase and in the manner most amicable to both parties, hence, at this juncture requests a 12-month extension.
Our client understands the Vendor will want assurance and has provided instructions he is willing to provide further funds upon settlement, which is open to negotiation.
At this stage, our client wanted to put their intention forward in writing, to notify the Vendor as soon as practicable of the request.
We do not wish for this matter to go to court and are hopeful we can come to an agreement.
We look forward to hearing from you within 7 days.[25]
(Emphasis original.)
31 The vendor's solicitor sent a reply the same day (the '20 March 2024 letter in reply'):
Chiarelli sale to 240 O'Herns Road Epping Pty Ltd ATF 240 O'Herns Road Epping Family Trust
Thank you for your letter of 20 March 2024, which requests that my client agree a 12-month extension to the settlement date.
I am somewhat concerned by the implied threat of legal proceedings which is contained in the penultimate paragraph of your letter. My client's position is as follows:
There appears to be no dispute that the agreed settlement date is 5 April 2024.
The Court is not empowered to simply extend the settlement date because it is convenient to your clients for it to do so.
The proceeding which your clients issued with case number S ECI 2023 03377 was dismissed by consent. Consequently, they cannot re-agitate any claim against Mr Chiarelli that they made in that proceeding.
Insofar as they seek to rely on any other allegation against Mr Chiarelli that could have been made in that proceeding, but wasn't, they are likely to find themselves to be estopped from pursuing it (see Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45).
No allegation has been made by your clients to the effect that Mr Chiarelli has breached the contract since the date of the settlement of their proceeding, and I am not aware of any circumstances which could possibly give rise to any such claim.
For the avoidance of doubt, it is Mr Chiarelli's understanding that your clients have no claim against him which would justify further intervention of the Court. However, if your clients are now alleging that they do, they should explain clearly what that claim is. They cannot realistically expect him to negotiate under a threat of proceedings if they won't tell him what those proceedings will be alleging. Given the deadline contained in your letter I would be grateful if you would provide a full response by return.
I also note that your letter was headed "without prejudice." The protection from production in Court that is given to "without prejudice" communications only extends to correspondence which is written in an attempt to resolve an existing dispute. Your letter provides no evidence of any existing dispute; it is simply a request that the time be extended. In the circumstances, it is not accepted that that letter is entitled to the protections extended to "without prejudice" communications, notwithstanding its heading.[26]
(Emphasis original.)
32 Further correspondence was exchanged between the parties' legal representatives on 20 March 2024. The purchasers' representatives stated they were not threatening Court proceedings.[27]
33 On 27 March 2024, the vendor's solicitor received a letter from the purchasers' solicitor (the '27 March 2024 letter'). The letter made an offer to pay the vendor $300,000 in two instalments if he would agree to extend the settlement date by 12 months.[28]
34 On 5 April 2024, the purchasers failed to settle.[29]
35 On 24 April 2024, the vendor's solicitor served a notice of default and recission. It notified the purchasers that unless they complied with the notice within 14 days, the contract of sale would be rescinded.[30]
36 The purchasers commenced this proceeding on 1 May 2024.
37 On 5 June 2024, the vendor filed a counterclaim seeking removal of the Caveat.
38 On 6 June 2024, the vendor filed a summons seeking summary judgment against the purchasers.
39 By letter dated 6 June 2024, the second defendant by counterclaim, the Registrar of Titles, indicated that she did not intend to appear in this proceeding.
40 On 5 September 2024, I heard the vendor's application for summary judgment.
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.
64 Court may allow a matter to proceed to trial
Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because―
(a) it is not in the interests of justice to do so; or
(b) the dispute is of such a nature that only a full hearing on the merits is appropriate.
43 I adopt the principles given by the Court of Appeal in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd ('Lysaght')[31] and the test that is now well-established law:
Upon the present state of authority:
a) 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;
b) 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;
c) 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;
d) 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.[32]
44 The law on the construction of commercial contracts is well settled and not in dispute.
45 Relevantly, in Electricity Generation Corporation v Woodside Energy Ltd,[33] the High Court held:
The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating".[34]
(Citations omitted.)
46 In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd,[35] the High Court held:
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".[36]
(Citations omitted.)
Is there any real prospect of the purchasers establishing that the rezoning of the property was a condition precedent to settlement?
48 The purchasers allege that because of the TOS (clause 6) and the contract of sale (Special Condition 4), it was a condition precedent to settlement that the Property had been rezoned (the 'condition precedent').[42] Further, that settlement was to occur within a reasonable time after the Property was rezoned, and the settlement date of 5 April 2024 in the TOS was subject to the condition precedent.
49 Clause 6 of the TOS is a warranty by the second plaintiff 'that it will not complete the rezoning process referred to in special condition 4 of the contract until at or after settlement.'
provide reasonable access to the property as mutually agreed to surveyors and town planners for the purpose of rezoning and subdivision approval prior to settlement and will provide assistance in signing all paperwork required for the council and planning authority.
51 Before turning to the parties' submissions, I should record that it is common ground that the TOS operates as an amendment to the contract of sale.
52 By paragraph 10 of the Statement of Claim, the rezoning of the Property was a condition precedent to settlement. It is the underlying premise of the whole agreement. Ms Nair, the plaintiffs' solicitor, deposes that it was the parties' clear intention to enter the contract of sale and that the rezoning would be completed before settlement. It does not make commercial sense to settle until the rezoning is complete.
53 The purpose can be discerned from the following contract of sale terms.
54 First, the purchase price. A purchaser does not pay $9.5 million for land valued at $5 million. It makes no commercial sense. The parties signed the contract of sale in April 2022. The valuation in April 2023 shows the land to be worth $5 million and in a farming zone.[43] The land will be valued at about $9.2 million once the rezoning is complete.[44]
55 Secondly, the extended settlement period, being '16 months from contract sign date', does not contemplate an immediate sale. This time frame for rezoning should have been sufficient, but it was not.[45]
56 Thirdly, Special Condition 4 gives access 'prior to settlement'. It contemplates that a rezoned parcel of land will be transferred on settlement. The purpose of providing access is so that the purchaser can commence the rezoning process.
57 Surrounding circumstances are consistent with the commercial purpose.
58 First, the Property is positioned within the Aurora Comprehensive Development Plan (the 'Aurora Plan') [46] and is considered suitable for residential development.
59 Secondly, other properties within the Aurora Plan have already been rezoned.
61 Fourthly, the Property valuation before rezoning was significantly less than the purchase price, so the purchasers could not obtain sufficient finance. It is conceded that the purchasers do not have the finance. Ms Nair deposes that the rezoning is essential for the purchasers to secure the appropriate funds for settlement.[49]
62 Given the above, the rezoning was a foregone conclusion. The only question was when it would be completed.
63 The rezoning involves the registered proprietor entering into a section 173 agreement. It provides for the registered proprietor to contribute to the cost of infrastructure required for the development of the land. The vendor executed a s 173 agreement and provided it to the purchasers on 30 September 2022.[50] After the local government authority raised concerns, the vendor executed a new s 173 agreement on 8 September 2023.[51] The contract of sale does not refer to the s 173 agreement.
64 After the s 173 agreement is executed, the next procedural steps are outside the parties' control. Ms Nair gives evidence of these.[52] They include consideration of the amendment by the local government authority, its decision to propose it to the relevant Victorian government minister, time for submissions by affected parties on the proposed amendment, and finally, gazetting of the amendment.
65 In light of the potential for delays in the rezoning process outside the parties' control, the natural intention of the parties emerging from the contract of sale terms was that the rezoning of the Property was a condition precedent to settlement. Special Condition 3 anticipates the operation of the condition precedent as it allows the purchaser to compensate the vendor for various expenses to which the vendor would be exposed if the settlement did not occur on the projected date.
66 This is not a case of a purchaser buying an opportunity. That is, purchasing with the hope of rezoning. There is usually a sunset clause in such cases, and there is none here. The purchaser was not speculating on the land but effectively buying it off the shelf as it believed the rezoning would go ahead.
67 The TOS preserved the condition precedent. Mr Singh's evidence is that shortly before the TOS were executed, he was advised the rezoning process would take another six to eight months, concluding in January to March 2024.[53] The date for settlement in the TOS was 5 April 2024, after the projected date for rezoning referred to his affidavit of Tajinder Singh affirmed 22 August 2023.[54] The parties have not caused delays after April 2024. They are due to unforeseen administrative delays by the local government authority. The evidence of Ms Nair is that he believes the rezoning will go ahead.
68 Special Condition 4 remained on foot in the TOS. It refers to rezoning and subdivision approval occurring 'prior to settlement'. It is referenced in cl 6 of the TOS, which appears to require the rezoning and subdivision process not to be completed 'until at or after settlement'. Special Condition 4 and cl 6 are irreconcilably contradictory. The construction of cl 6 and Special Condition 4 is an issue for trial.
69 At trial, it will be necessary for the Court to identify the point at which the rezoning process would be considered 'complete' for the purpose of cl 6. In doing so, the Court must consider that cl 6 contemplates completed 'at or after' settlement, suggesting it is not something that can be precisely timed. Further, cl 6 refers to settlement in the active voice, so it is contemplated to be an act performed by the purchasers. However, the planning process is outside the purchasers' control and incapable of precise timing. The vendor knew the rezoning process was in train at the time of the TOS. However, cl 6 does not contemplate the purchasers stopping the process. It shows that the vendor knew there would be a change in value upon rezoning. It supports the contention that both parties knew there would need to be a rezoning before settlement. The time period of the rezoning has not been identified, so it must be a reasonable time.
70 The Curry affidavit refers to additional facts relevant to interpretation. At paragraph 19(c), Mr Curry deposes that cl 6 was included to ensure the vendor would not be liable for any windfall gains tax that might be payable if the land was rezoned before settlement. This is not in the contract. If the contract is to be construed with this evidence, there should be more detail on the windfall tax scheme.
71 The Court should not rule on factual disputes at the time of a summary judgment application.
72 The express terms in the TOS contradict the purchasers' submissions regarding the condition precedent. It provides rezoning is to be completed after settlement. Moreover, the Statement of Claim alleges settlement will occur a reasonable time after rezoning. It does not allege that the rezoning would be obtained within a reasonable time.
73 Whilst the purchasers anticipate the rezoning will occur, there is no guarantee that it will. What happens if there are objections to the rezoning?
74 If the contract of sale is regarded as conditional but has a fixed date for completion of the sale, then that is the operative date to determine whether or not the condition has been fulfilled.[55] The TOS were intended to operate according to their terms with settlement to occur on 5 April 2024.
75 Having entered the TOS, the purchasers can hardly say there was an issue with access per Special Condition 4.
76 The alleged condition precedent cannot, at law, be regarded as such. If anything, it would be regarded as a condition subsequent as that term is used in Zieme v Gregory.[56]
77 If the alleged condition precedent was operative, and rezoning did not occur or was further delayed, then the contract would be over at the option of the purchasers who would not need to show the vendor they have used their best endeavours to fulfil of the condition.
78 If there truly was a condition precedent then the purchasers would have liberty to withdraw from the contract if rezoning did not occur.
79 Clause 4 of the TOS provides that a breach of the TOS constitutes a breach of the contract.
80 The alleged condition was not precedent to the formation of the contract. The parties treated the contract as binding upon execution. The purchasers paid deposits. The vendor provided access to the Property and assisted in signing paperwork to apply for rezoning and subdivision (eg by executing the s 173 agreements), as required by Special Condition 4.
81 The real question is whether the alleged condition is precedent to performance of the contract. The purchasers say it is, and in particular, they say the condition is precedent to settlement.
82 In Perri v Coolangatta Investments Pty Ltd ('Coolangatta Investments'),[57] Gibbs CJ stated:
it probably does not matter in the present case whether the condition is described as "precedent" or "subsequent", provided that it is understood that its non-fulfilment did not prevent a binding contract from coming into existence but did have the effect that the respondent was under no obligation to complete the sale unless the condition was fulfilled or waived.[58]
83 Applying this principle to the dispute here, the question is whether there was a rezoning condition such that the purchasers were not obliged to complete the sale until it was fulfilled. That is, until the rezoning had occurred.
84 For the following reasons, there is no real prospect of the purchasers establishing the alleged condition precedent.
85 First, the contract of sale, as amended by the TOS, expresses no such condition. In contrast to the alleged condition precedent, which is not expressly contained in the contract of sale, there is a condition expressed in the contract of sale (Special Condition 5), which states that the contract is conditional upon a deposit being paid by a stipulated date.
86 The absence of an express clause may be contrasted with authorities in which courts have held that there are condition precedents. For instance, in Coolangatta Investments, a special condition provided that the contract was 'entered into subject to Purchasers completing a sale of their property'.[59] In Australian Mutual Provident Society v Landsa[60] the contract contained an express provision titled 'Conditions Precedent to Performance'.[61]
87 Secondly, the terms of the contract of sale and TOS are clear. The contract of sale is in the standard form with some unambiguous handwritten amendments. Settlement was to occur 16 months from the contract sign date. The price was agreed, as were the dates of the two deposits.
88 Special Condition 4 is titled 'Access'. It provides for access before settlement, and assistance with paperwork for subdivision and rezoning. On reflection, I accept that there is a good argument that the words 'prior to settlement' relate to the words immediately before them. That is, the phrase 'for the purpose of rezoning and subdivision approval prior to settlement'. It would be superfluous if the words related to access to the Property generally (ie be read as 'the vendor will provide reasonable access to the property ... prior to settlement'). This is because the only time the vendor could give access is prior to settlement. After settlement, the vendor has no rights over the Property. Accordingly, I accept that Special Condition 4 contemplates rezoning before settlement. However, it does not form a condition precedent. It places an obligation on the vendor (defendant) to provide access to the Property and cooperate with the necessary paperwork for the purpose of rezoning and subdivision approval before settlement. It does not make settlement of the contract contingent upon rezoning. Moreover, the TOS resolved the dispute regarding access. The purchasers concede that delays in rezoning after this resulted from administrative delays, not the vendor.
89 The TOS amended the contract of sale. Clause 6 of the TOS may be read harmoniously with Special Condition 4. It explicitly refers to that condition. The purchaser warrants that the rezoning process referred to in Special Condition 4 will not be completed 'until at or after settlement'. There is nothing in cl 6 contrary to the access and cooperation for the purpose of rezoning and subdivision. However, it does expressly change the contemplated time frame from prior to settlement to after settlement. Clause 6 is unsurprising in circumstances where the purpose of the TOS was to resolve the first proceeding. To recall, a central allegation in that proceeding was that access had not been provided and that this caused a delay in the approval for rezoning. I reject the purchasers' submission that cl 6 is unworkable because the parties have no control over when rezoning will occur. On the purchasers' own evidence, it appears they are closely monitoring the progress of the rezoning process. On their evidence, there is no precision as to when that process will be completed, and there are still several steps to occur.[62]
90 Clause 1 of the TOS deletes Special Conditions 1, 2 and 3, and extends the settlement date in consideration of the purchaser paying the vendor $150,000 (in three payments).
91 Clause 2 provides that time is of the essence regarding the obligations in cl 1. It further clarifies that the vendor will be at liberty to rescind the contract in accordance with its terms if the cl 1 payments are not made.
92 Clause 2 does not speak to the general 'time is of the essence' clause in the contract of sale because that remains on foot. Clause 3 of the TOS provides that cl 2 of the TOS is without prejudice to any rights that the vendor may have to pursue the purchaser for any amounts outstanding under the contract of sale or TOS. Consistently with this, cl 4 of the TOS provides that a breach of the terms will otherwise constitute a breach of the contract.
93 Both the contract of sale and TOS are silent on the consequence of the local government authority refusing to rezone the Property.
94 Clause 5 of the TOS provides that the purchaser is liable for and, to the extent that it is necessary, will indemnify the vendor against any land tax accruing in respect of the property from 1 January 2024. Given that Special Condition 3 had been deleted, and the TOS extended the settlement date, this clause provides clarity.
95 Thirdly, cl 6 of the TOS is contrary to the alleged condition precedent. The purchaser warrants that it will not complete the rezoning process until at or after settlement. Accordingly, even if there was a real prospect of the purchasers establishing that the contract of sale contained the alleged condition precedent, it was superseded by this clause. Both parties agree, correctly, that the effect of the TOS is to amend the contract of sale. Recital B of the TOS records the same.
96 Fourthly, the purpose of the contract of sale and TOS do not support the purchasers' alleged condition precedent. The purpose of the contract of sale is evidently for the vendor (defendant) to sell the Property and the purchaser (Angad or nominee) to purchase the Property for the price and on the terms set out in the contract.
97 The purpose of the TOS is evident from Recital B: 'to resolve the proceeding and amend the contract'.
98 The alleged condition precedent contradicts the contract's purpose and that of the TOS. Both contain settlement dates and the dates for payments. This was necessary for completion of the sale. On the other hand, the alleged condition precedent contains no fixed date.
99 I should add that although the TOS deleted the handwritten Special Condition 5, it was moot. The vendor's solicitor deposes that the purchasers paid the two deposits in the contract of sale.[63] There was no change to the contractual term that time is of the essence (cl 26.1). Moreover, cl 2 of the TOS provides that time is of the essence, 'and for the avoidance of doubt in the event that payments are not made in accordance with that paragraph [the vendor] will be at liberty to rescind the contract in accordance with its terms.'
100 Finally, I reject the purchasers' contention that the contract does not make commercial sense without the alleged condition precedent. In particular, that the purchasers would not have paid nearly double the current value of the Property unless the contract of sale was subject to rezoning approval. It is evident from the contract of sale and the TOS that the purchasers speculate that the Property will be rezoned. Their evidence is that at the time of the purchase, significant portions of the surrounding land had been rezoned, and in fact, there was already a template s 173 agreement for privately owned properties within the Aurora Plan.[64]
101 Reading Ms Nair's affidavit, it is evident that the commercial issue for the purchasers is that they cannot obtain finance. The valuation they rely upon was done at the request of a bank as at 18 April 2023, about a year after the purchase, and provides a valuation of $5,000,000.[65] It states that the Property was sold off the market. The report states:
All things considered, the site represents a lifestyle property with future development potential subject to a successful rezoning, positioned in an emerging but attractive Epping precinct.
We would expect sound demand from a variety of local developer participants if offered to the market in the current environment, with a marketing, sale and settlement period of three to six months. However, if conditions deteriorate, more flexible terms may be required.[66]
102 It shows that the valuer's assessment was that the Property had a medium-high risk profile.
103 Commercial sense must be considered for both parties. It would not make commercial sense for the vendor to wait indefinitely for rezoning approval. It is evident that the purchasers' venture bears risk, as demonstrated by the valuer's assessment. However, to purchase a property off-market at more than its present market value, based upon the speculation that its value will increase upon rezoning in circumstances where the Property is within an area of land covered by the Aurora Comprehensive Development Plan, is a readily understandable commercial objective.
Is there any real prospect of the purchasers establishing the contract of sale contains an implied term that settlement is not required until after rezoning?
(a) it must be reasonable and equitable;
(b) it must be necessary to give business efficacy to the contract;
(c) it must be so obvious that it goes without saying;
(d) it must be capable of clear expression;
(e) it must not contradict any express term of the contract.
105 In Realestate.com.au Pty Ltd v Hardingham,[69] Edelman and Steward JJ observed:
Each of the BP Refinery criteria is flexible and is assessed as at the time the contract was made. As will be seen below, it can be especially important that the criteria are not applied in an "over-rigid" way in informal contracts. "Reasonableness" and "equity" are elastic notions. Their content is assessed from the perspective of a reasonable person in the position of the contracting parties and will vary accordingly. That which is necessary for "efficacy" involves a range from highly ineffective to highly effective and "business efficacy" will depend upon the extent to which the contract concerns business. It is simply impossible to say that there is a single requirement of "necessity for business efficacy" that applies in the same way to every contract in every circumstance. So too, "obviousness" and "clarity" are concepts that describe a spectrum of possibilities which will be more demanding where the express terms of the contract are thorough and clear. Finally, although contradiction of an express term of the contract is a criterion of greater specificity, the more tension that exists between a proposed implied term and an express term, the less likely the court will recognise such an implied term.
The reason that the five criteria are flexible is important. The criteria serve only to answer the ultimate question: what would have been intended by a reasonable person in the position of the contracting parties? Hence, in Commonwealth Bank of Australia v Barker [(2014) [2014] HCA 32; 253 CLR 169 at 186, [22]], French CJ, Bell and Keane JJ rightly described the implication of terms as "an exercise in construction". And, since the ultimate question for identifying express and implied terms is the same, as Mason J (Stephen and Wilson JJ agreeing) said in Codelfa Construction Pty Ltd v State Rail Authority (NSW) [(1982) 149 CLR 337 at 353], in identifying implied terms "the court is no more confined than it is when it construes the contract".[70]
(Some citations omitted.)
106 In addition to the matters already referred to above, the purchasers say the following.
107 There is a real prospect of establishing that the contract of sale contains an implied term that the purchasers are not required to settle until a reasonable time after rezoning, and that this term persists following entry into the TOS. A reasonable person in the position of the contracting parties would not have intended that the purchasers be required to settle where the rezoning had not occurred.
108 The BP Refinery factors are in favour of implication. The implied term is clear.
109 The implied term is reasonable and equitable. It protects the purchaser against unforeseen delays in the rezoning process, and Special Condition 3 protects the interests of the vendor by providing the purchasers pay various expenses that may arise in the delay to settlement.
110 The implied term is necessary to give business efficacy to the contract of sale. Without it, there is nothing to ensure that the Property is worth the purchase price at settlement and, therefore, nothing to ensure the purchasers can arrange sufficient finance to settle. Without the implied term, the purchasers are exposed to loss of deposit if there is a delay in rezoning.
111 The zoning of the Property is a foregone conclusion. The implied term is obvious. Had the parties turned their mind to the possibility of delay when drafting the contract of sale, they would have inserted the implied term to address the possibility.
112 The implied term is consistent with the express terms of the contract of sale. If the proper interpretation of cl 6 of the TOS is inconsistent, then cl 6 is inconsistent with Special Condition 4 and therefore absurd and liable to be corrected or omitted. A reasonable person in the position of the parties would not have intended the purchasers be required to proceed to settlement where the rezoning had not occurred.
113 The implied term would deprive the contract of business efficacy. It is inefficacious as the rezoning could take months or years. The contract can operate effectively without it. The term is not so obvious that it 'goes without saying'. It is incapable of clear expression because there is no certainty of when the rezoning will occur and the consequences if it does not. It contradicts an express term of the TOS that rezoning is to occur at or after settlement and contradicts the contract of sale terms (discussed above).
114 The contract is operable without the implied term. It is not complicated. It does not operate in a manner contrary to the interests of one party.
115 I reiterate the findings above in respect of the alleged condition precedent.
116 I find that the rezoning term should not be implied. As I have already explained, it contradicts the express terms of the contract of sale (as amended by the TOS), and the contract terms are clear and unambiguous.
117 The rezoning term is unnecessary to give business efficacy to the contract (as amended by the TOS). Nor would it be reasonable and equitable to imply the term, which would require the vendor to wait indefinitely until a decision is made regarding rezoning. Whilst I accept that a reasonable period may be implied in some circumstances, this is not such a case. As explained above, the contract contains a time is of the essence clause and a settlement date, which was later extended and stipulated in the TOS. Further, the purchasers said that in the event of delay, the vendor was protected Special Condition 3 (payment by purchaser to vendor if the purchaser fails to complete on the specified date). However, Special Condition 3 was deleted by cl 1(a) of the TOS.
118 What would have been intended by a reasonable business person in the position of the contracting parties? That the sale would proceed on the terms of the contract of sale, as amended by the TOS.
119 The purchasers have no real prospect of success in demonstrating the implied term.
Should the matter proceed to trial per s 64 of the CPA?
120 There is no basis for proceeding to trial per s 64 of the CPA. Indeed, it would be counter to the interests of justice to so order. This is a straightforward case appropriate for summary determination.
122 As I have awarded summary judgment in favour of the vendor, I do not consider I need to deal with the alternate ground on which the vendor's summons was brought; namely, that the purchasers' Statement of Claim be struck out pursuant to r 23.02 of the Rules.
123 Unless there is a good reason that the ordinary rule should not apply, costs should follow the event. I will allow the parties to make submissions as to costs.
ANGAD TRANS PTY LTD (ACN 633 888 221) ATF ANGAD FAMILY TRUST
ANGAD TRANS PTY LTD (ACN 633 888 221) ATF ANGAD FAMILY TRUST
[1] Plaintiffs' Statement of Claim ('SOC'), filed 1 May 2024; Affidavit of Simon Paul Curry, sworn on 6 June 2024, [7] ('Curry affidavit').
[2] Curry affidavit, [4]; Exhibit "SPC-2" to the Curry affidavit, 1-12; Affidavit of Hirani Nair, affirmed on 3 September 2024, [5] ('Nair affidavit'); for Contract of Sale, see Exhibit "HN-1" to the Nair affidavit, 1-38.
[3] Curry affidavit, [7]; see also Exhibit "HN-1" to the Nair affidavit, 41-2.
[6] Exhibit "SPC-2" to the Curry affidavit, 57.
[7] Exhibit "HN-1" to the Nair affidavit, 42.
[12] Exhibit "HN-1" to the Nair affidavit, 44.
[13] Exhibit "HN-1" to the Nair affidavit, 44.
[16] Exhibit "SPC-2" to the Curry affidavit, 59.
[18] Exhibit "SPC-2" to the Curry affidavit, 76.
[20] Exhibit "SPC-2" to the Curry affidavit, 82-4.
[21] Curry affidavit, [18]; Nair affidavit, [6]-[7].
[22] Exhibit "SPC-2" to the Curry affidavit, 89-90; Exhibit "HN-1" to the Nair affidavit, 39-40.
[25] Exhibit "SPC-2" to the Curry affidavit, 94.
[26] Exhibit "SPC-2" to the Curry affidavit, 97-8.
[30] Exhibit "SPC-2" to the Curry affidavit, 106-8.
[32] Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158 ('Lysaght'), [35] (Warren CJ and Nettle JA).
[34] Ibid, 656-57 [35] (French CJ, Hayne, Crennan and Kiefel JJ).
[36] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104, 116-17 [47]-[49] (French CJ, Nettle and Gordon JJ).
[38] Ibid, [70] (Whelan JA and Riordan AJA), citing Lopes v Taranto [2018] VSCA 288, [66]-[72] (Kyrou, McLeish and Hargrave JJA).
[40] Ibid, 551 [17] (Kiefel, Bell and Gordon JJ).
[41] Ibid, 562 [51]-[52] (Gageler J).
[43] Exhibit "HN-1" to the Nair affidavit, 283.
[47] A reference to s 173 of the Planning and Environment Act 1987.
[49] Nair affidavit, [11]-[12], [25].
[53] Nair affidavit, [27]; see also Singh affidavit contained in Exhibit "HN-1" to the Nair affidavit, 46 [44].
[54] Singh affidavit contained in Exhibit "HN-1" to the Nair affidavit, 46 [44]; see generally: Exhibit "HN-1" to the Nair affidavit, 41-47.
[55] Australian Mutual Provident Society v Landsa [1997] 1 VR 564, 564, 573-74 (Ormiston J; McDonald and Hansen JJ agreeing).
[59] Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537, 540 (Gibbs CJ).
[62] Nair affidavit, [18]-[20], [28].
[65] "Exhibit HN-1" to the Nair affidavit, 132-35.
[66] "Exhibit HN-1" to the Nair affidavit, 134.
[68] Ibid, 283 (Viscount Dilhorne, Lord Simon and Lord Keith).
[70] Realestate.com.au Pty Ltd v Hardingham [2022] HCA 39; (2022) 277 CLR 115, 155-56 [114]-[115] (Edelman and Steward JJ).
Angad Trans Pty Ltd
Marino Chiarelli [2024] VSC 622
(2014) 251 CLR 640
(2015) 256 CLR 104
(2017) 261 CLR 544
(1982) 149 CLR 537
(1977) 180 CLR 266
(2022) 277 CLR 115