349 Special condition 21 provides that the Purchaser shall "simultaneously" with the execution of the contract also execute and exchange a marketing and management agreement, a profit share agreement, and a V Mortgage. Those documents were executed and exchanged. The first two mentioned agreements are dated 28 June 2000. The V Mortgage is undated. Special condition 21 of the contract of sale does not list the MOU amongst the documents to be simultaneously executed.
Memorandum of understanding
350 The MOU is also dated 28 June 2000. No party has sought to rely on the provisions of the MOU, other than as an aid to construction of the provisions of the contract of sale. In substance, and making allowance for some inevitable inaccuracy as a result of an attempt to summarise, the MOU provides for the following regime.
351 As to stage 1, if a planning permit substantially as provided for in the contract of sale is not obtained by 30 June 2002, or any agreed extension date, then either party is entitled to terminate the contact of sale and the deposit is to be repaid. If a planning permit is obtained but it permits less than 69 apartments then the parties are to negotiate in good faith as to the viability of proceeding and, if they decide they shall proceed, the MOU provides for a price reduction by a sum "not exceeding" an amount of $120,000 per apartment below 69.
352 As to stage 2, if the planning permit for stage 2 provides for less than 34 apartments then the parties are to again negotiate as to the viability of proceeding. If they do decide to proceed, then the price is to be reduced by a sum of $120,000 per apartment below 34. If no planning permit at all is issued for stage 2 prior to 1 October 2003, or any agreed extended date, then the stage 2 balance provided for under the contract of sale, $9,980,000, is cancelled and the purchaser is to pay to the vendor the value of the stage 2 land as determined by an independent valuer, and the vendor is to pay to the purchaser the sum of $4,080,000.
Other agreements
353 As indicated, special condition 21 of the contract of sale referred to other agreements to be executed simultaneously with the contract of sale.
354 I have already referred to the V Mortgage which was to secure all or part of the stage 2 payment in certain circumstances.
355 The parties also executed a management and marketing agreement pursuant to which Primelife Management Services Pty Ltd agreed to manage the retirement village upon completion of the works for a period of 25 years in consideration of management fees payable by the plaintiffs, who would at that point be the owners of the retirement village.
356 The plaintiffs in turn entered into a profit share agreement with MGD pursuant to which they promised to share their profit on operation of the business, as managed by Primelife Management Services Pty Ltd.
357 These arrangements gave effect to the proposals set out in the property information report under which Primelife Management Services Pty Ltd would manage the business on behalf of the purchaser under a 25 year marketing and management agreement and the "sustainable annual EBIT at full occupation", projected to be in excess of $2,661,700, was to be shared equally with MGD.
Contract claims
Construction issues
358 The plaintiffs allege that special condition 7.2 imposed upon MGD an obligation to commence the stage 1 works by 1 June 2001 and an obligation to commence the stage 2 works by 1 October 2003.
359 In argument, the plaintiffs particularly relied upon the proviso to special condition 7.2. They submitted that the proviso made it clear that clause 7.2 did impose an obligation to commence works by the specified dates because otherwise there would be no point in providing for agreement in writing in order to vary the dates, or for providing that any such agreement was to be referable to the occurrence of an Intervening Event.
360 Whilst there is force in the plaintiffs' submission concerning the proviso, I cannot accept their construction of special condition 7.2.
361 First and foremost, the plaintiffs' construction requires one to ignore the three express references to intention in the provision. Each reference to commencement of the works is qualified by a statement that what is provided for is what is intended.
362 Secondly, sub-paragraph (a) creates an overarching obligation which is to commence the works "as soon as practicable in all the circumstances". In my view this supports a construction under which the provisions dealing with specified dates record an intention then existing and not a contractual obligation to commence by the specified dates.
363 Finally, the MOU, executed at the same time as the contract of sale, makes express provision for circumstances which are inconsistent with a contractual obligation to commence the respective stages by the specified dates. The MOU provides for circumstances where a planning permit for stage 1 is not obtained by 30 June 2002 and where a planning permit for stage 2 is not obtained by 1 October 2003. These provisions are inconsistent with an obligation imposed upon MGD to commence construction of the stage 1 works by no later than 1 June 2001 and of the stage 2 works by 1 October 2003. Works cannot commence before a planning permit is obtained.
364 Accordingly, whilst this construction necessarily creates a circumstance where the substantive obligation does not sit comfortably with the proviso, my conclusion is that special condition 7.2 imposed upon MGD an obligation to commence works as soon as practicable in all the circumstances and records an intention to commence the stage 1 works by 1 June 2001 and the stage 2 works by 1 October 2003 but otherwise does not impose a contractual obligation to do so.
365 The plaintiffs also contend that MGD was under an obligation to lodge an Application (as defined) pursuant to special condition 6.1 of the contract of sale, alternatively pursuant to an implied condition.
366 Special condition 6.1 creates uncertainty in this respect as it is expressed to be an acknowledgement by the purchaser that the vendor will make the application. As a matter of construction it seems to me that special conditions 6.1, 6.2, 7.1 and 7.3 do impose upon MGD the obligation to apply for a planning permit in accordance with the Application (as defined).
367 The defendants did not make submissions which were contrary to this conclusion, but counsel for the first and second defendants did submit that the terms of the MOU make it clear that the Application (as defined) might be progressed in stages, as the MOU has different trigger dates for the stage 1 planning permit (or its absence) and the stage 2 planning permit (or its absence). It is correct, I think, that the contractual obligation in the contract of sale might be performed by two or more separate applications which together constitute the Application (as defined), and the MOU reflects that possibility. But those matters do not otherwise detract from, or qualify, the obligation which is imposed on MGD in that regard.
368 The plaintiffs also contend for a term implied by law to the effect that each party must do all such things as are necessary on its part to enable the other party to have the benefit of the contract of sale. The defendants did not admit the existence of this implied term. The term is said to be implied by law and I assume that nothing more is contended for in this respect than the implied terms referred to in authorities such as McKay v Dick[7] and Butt v McDonald.[8] In this proceeding all of the matters in contention are the subject of express terms.
Alleged breaches of the contract of sale, absent variation, amendment, estoppel, election or waiver
369 The defendants contend that if there were any breaches of the written terms of the contract of sale, those breached terms were the subject of oral variation or amendment which obviated the breach, or the breaches were the subject of estoppel, election or waiver. It is first necessary to determine whether the plaintiffs have established breaches of any of the written terms of the contract of sale.
370 The plaintiffs' allegations of breach are set out in paragraph 14 of the fifth further amended statement of claim.
371 In para 14(a) to (c), it is alleged that MGD breached the contract of sale by failing to construct the Building, failing to commence stage 1 of the works by the specified date, and failing to commence stage 2 of the works by the specified date. The allegations are founded upon a construction of special condition 7.2 which I have rejected. The plaintiffs have not established breach on these grounds.
372 In para 14(d), the plaintiffs allege MGD breached the contract of sale by failing to lodge the Application (as defined) with the City of Boroondara.
373 Absent the matters relied upon by the defendants as referred to above, the plaintiffs have established this breach. No Application (as defined) has ever been lodged. In final submissions counsel for MGD conceded that the initial application for a permit was not the Application (as defined) provided for in the contract of sale, as the differences between the plans forming part of the application as lodged and the Plans (as defined) were not a result of any amendment falling within special condition 7.5. MGD conceded that it could not be said that those changes were necessary to accommodate an Intervening Event, and there was no written agreement to the amendments.
374 What counsel for MGD submitted was that whilst there was initial non-compliance with the contract of sale in this respect, this breach was "remedied" prior to service of the rescission notice and was not by that time "a current breach". The argument in this respect was that the contractual arrangements contemplated that the stage 1 application would precede stage 2. During 2002 applications for stage 1 (as set out in the March 2002 plans and the November 2002 plans) were made which provided for a greater number of units, respectively 78 and 84, than those shown on the Plans incorporated in the contract of sale. It was contended that, in so far as stage 1 was concerned, the differences between the Plans incorporated in the contract of sale on the one hand, and the March 2002 and November 2002 plans on the other, were necessary to accommodate an Intervening Event, being the requirements of the Boroondara Council or its requests, and did not substantially and detrimentally affect the property. In November 2002 the parties agreed, so it was contended, that stage 2 would be deferred. Thus, by 2004 there was no current breach.
375 I reject this analysis of the position.
376 The initial application covered stage 1 and stage 2, and it is conceded that that application was not in accordance with MGD's obligations under the contract of sale. Accordingly, MGD was then in breach. What subsequently occurred was not a return to compliance with the provisions of the contract of sale, but a progressive movement further away from them. Stage 2 was, over the period up until late 2003, abandoned by MGD. This abandonment was not clear and unqualified until late 2003, but movement in that direction began much earlier. A decision was made by Primelife and MGD to defer steps towards obtaining planning approval for stage 2 in mid-2001. Compromises involving a development without stage 2 were presented to the resident objectors in July and August 2001. Even if Primelife's officers preserved in their own minds the possibility of reviving stage 2, it was, on Mr Barber's own evidence, only that, a possibility. By late 2003 Primelife and MGD's abandonment of stage 2 was clear. When Primelife's officers reassessed the project in late 2003, stage 2 was not referred to and the land on which it had originally been intended to be constructed was regarded as "surplus".
377 Primelife's officers, acting on behalf of MGD, took the final step in the complete departure from the Plans provided for in the contract of sale when MGD applied to amend the planning permit in March 2004 so as to pursue the revised version of stage 1. They did not have the plaintiffs' agreement to this course in any relevant sense.
378 All of this may have been done for sound commercial reasons. The contract, however, permitted MGD to only amend in the circumstances provided for in special condition 7.5. MGD ignored that provision. The defendants contend that the plaintiffs orally agreed to what was done, or are estopped from now complaining about it. That is a separate issue which I will address. In the present context, the point is that MGD was obliged to lodge an Application (as defined) and to pursue it to VCAT if necessary. It never did so. Under the contract MGD was entitled to amend, and to pursue an amended proposal, only in specified circumstances. MGD amended as and when it saw fit regardless of those specified circumstances. On at least three occasions, the amendments prior to the initial application, the amendments in November 2002, and the amendments in March 2004, those specified circumstances clearly did not exist. So much was conceded in relation to the initial amendment. There was no relevant Intervening Event (as defined) which occasioned either of the other two amendments. There was no agreement in writing by the plaintiffs to any of the amendments.
379 In para 14(e), it is alleged that MGD breached the contract of sale by failing to exercise its best endeavours to procure a grant of the Planning Permit (as defined).
380 There are three aspects to this allegation.
381 First, it is said that MGD did not make any endeavours to procure the grant of the planning permit because what was done was done by Primelife. I reject this analysis of the position. I accept that MGD delegated the task to Primelife.
382 The second manner in which this allegation is put is that MGD was at all relevant times exercising its best endeavours to procure an outcome which was not the outcome provided for in the contract. This is the argument concerning the Application (as defined) put a different way. For the reasons already given, I accept that MGD was in breach in this respect.
383 Finally, it was contended that MGD and Primelife pursued the applications which were made in a manner below the standard required by the exercise of best endeavours. This latter aspect of the claim occupied a considerable amount of time at the trial. Evidence was given relevant to this aspect of the matter by the architect, Mr Meldrum; the town planner, Mr Barber; by an expert engaged on behalf of the plaintiffs, Mr Black; by an expert engaged on the part of the defendants, Mr McGurn; and, to a limited extent, by one Council officer.
384 In my view the plaintiffs failed to establish this aspect of their complaint.
385 MGD and Primelife were endeavouring to procure an outcome which was not the outcome provided for by the written terms of the contract of sale. They were, however, exercising their best endeavours in that attempt.
386 Mr Meldrum gave detailed evidence as to the steps taken throughout the course of the application processes. I found Mr Meldrum to be a witness upon whom I could rely in this respect. I accept his evidence as to the steps that were taken and the reasons why he took them.
387 The plaintiffs and Primelife and MGD each called expert evidence on the planning issues raised by the allegation that MGD had failed to use its best endeavours in the planning process.
388 The plaintiffs called Mr Jason Robert Black. Mr Black graduated with a Bachelor of Applied Science (Planning) from RMIT in 1999. He held positions with two councils between 1999 and 2005. Since 2005 he has been a senior planning consultant with a company named Macroplan Australia Pty Ltd.
389 Primelife and MGD called expert evidence from Mr Stuart Andrew McGurn from a company named Fulcrim Town Planners Pty Ltd. Mr McGurn obtained a Bachelor of Arts degree in 1984 and a Graduate Diploma of Urban Planning in 1986. Between 1986 and 1998 he was a town planner in various councils. For a period he was Principal Planner at the City of Melbourne. Since 1999 he has been a town planning consultant and director of Fulcrim Town Planners Pty Ltd.
390 Counsel for MGD and Primelife were critical of Mr Black's evidence. It was submitted that he was inexperienced and that he made some "egregious" errors. Mr Black did make an error in relation to a letter from the solicitors' firm Russell Kennedy dated 25 September 2003. The error made did appear to have occurred because Mr Black had not read the letter, or had not read it sufficiently carefully. The criticism that he was relevantly inexperienced was also not without substance. He has been a town planner for only seven years and has spent the majority of that time working for councils. He did not appear to have had much experience in dealing with planning applications for retirement village developments.
391 In final submissions the grounds upon which the plaintiffs submitted that there had been a failure to employ best endeavours were as follows: