SIMMONS -v- LOVE [2015] WASC 79 (6 March 2015)

Supreme Court of WA|2015-12-08|Before: Beech J

1 In this action the plaintiffs (the Buyers) initially sued for specific performance of a contract for sale of land (Contract), being a proposed lot to be created following subdivision, entered into as buyers with the defendant (the Seller). Initially, the Seller defended the action on the basis, among other things, that the Contract was unenforceable because it contravened the Planning and Development Act 2005 (WA) and that conditions in general condition 13 had not been fulfilled, bringing the contract to an end.

2 However, on 10 November 2014 the parties settled on the sale and purchase transaction the subject of the contract.

(c) the costs of earlier proceedings brought by the Buyers, and opposed by the Seller, for the extension of a caveat lodged by the Buyers to protect their interest as Buyers under the Contract.[1]

4 There is also a counterclaim first made by the Seller very close to the trial. In my view, there is no merit in the counterclaim.

5 For the reasons that follow, the Buyers' claim must be dismissed. In essence, that is because I find that on the date for settlement, 29 October 2013, the Buyers were not ready, willing and able to settle on the Contract in accordance with its terms. They were willing to settle only if a certificate of title for the new lot was produced at settlement, which the Contract did not require.

(3) The Buyers' claim and the issues [69] [75].

(4) The proper construction of the Contract [76] [91].

(6) Were the Buyers ready, willing and able to settle on 29 October 2013? [96] [121].

(7) Oral agreement on 18 October 2013? [122] [147].

(8) Was the nonoccurrence of settlement on 29 October 2013 for a reason attributable to the Seller? [148] [151].

(9) The proper construction of cl 4.7(b) [152] [159].

(10) Is cl 4.7(b) unenforceable as a penalty? [160] [168].

7 Mr Love owned 3 Norbury Crescent City Beach (the Original Land).

8 On 8 June 2011, Mr Love made an application jointly with the proprietors of the adjoining lot 55, Kerin Smart and Joan Catherine Lawrence, (the Neighbours) to the Western Australian Planning Commission (WAPC) for approval to subdivide 3 Norbury Crescent and the adjoining property. In order to have enough land for the subdivision, Mr Love needed to purchase 223 sqm from the Neighbours. The plan attached to the subdivision application shows that the new proposed lot to be created would be the amalgamation of the Original Land and 223 sqm of the adjoining lot 55.[2]

9 On 2 September 2011, the WAPC gave conditional approval for the subdivision of the Original Land so as to create proposed lot 1, being 3a Norbury Crescent City Beach.[3]

10 Sometime after that approval was received Mr Love engaged a real estate agent, Mr Garry Dye from Acton North, to sell the proposed lot. He told Mr Dye that he had an approval but would not proceed with the work required to satisfy the conditions of approval, given the state of the real estate market, and that he needed a contract of sale in order to make the payment of $272,000 to the Neighbours plus about $100,000 in development costs. He said he would await an unconditional sale before going to the expense of the development cost.[4]

11 Mr Love says that he also told Mr Dye that he wanted to settle after the plan of subdivision was endorsed in order for dealing. Mr Dye said that his instructions were that settlement would be within 14 days of the diagram for the subdivision being endorsed by Landgate as in order for dealing. This evidence was not challenged, and I accept it.

12 In March 2013 Mr Simmons contacted Mr Dye.[5]

13 Mr Simmons and Mr Dye met at the site of the proposed lot. Mr Dye showed Mr Simmons a copy of the proposed subdivision plan for the new lot.[6] The subdivision plan showed that the proposed lot the subject of the sale would be produced after the amalgamation of the Seller's land with some land to be acquired from the Neighbours.

The vendor has not yet done the work to satisfy the conditions of subdivision required and he will only do that work when he has a cash unconditional Contract of Sale for the land. The vendor requires that settlement be within 14 days of the diagram for the subdivision being endorsed as In Order for Dealing at Landgate. This will allow the lot to be transferred to you and registered in your name when an application is lodged by the vendor for a new title at settlement and a transfer of the lot to you will be registered at the same time. The title for your lot will be issued by Landgate at about a week or two after settlement but your ownership of the lot will be recorded from the time and date of settlement. In order to do this you must have the capacity to settle without requiring a mortgage to a bank because the vendor cannot have settlement being 14 days after the issuance of the title.[7]

15 Mr Dye says that in response, Mr Simmons said that he had the cash to complete the purchase. I do not accept that Mr Dye recalls this detailed account of a conversation in March 2013. He was first asked to recall it in January 2015.[8]

16 Mr Simmons' evidence is that Mr Dye told him everything had been approved for subdivision.[9]

17 On 7 March 2013, Mr Simmons met with Mr Dye at Mr Dye's office. Mr Simmons says that he said words to the effect 'if I sign this contract how long will it be before titles are ready' to which Mr Dye said 'as far as I am aware everything is in order to apply for the titles and [Mr Love] was just waiting to get a firm offer'.[10]

18 I do not accept that Mr Dye said anything to this effect; that did not reflect the position as Mr Dye knew or understood it to be.

19 Mr Simmons stipulated that the price of the offer would be $1 million.[11] After discussions, special conditions 1 to 4 were inserted in the offer.[12]

20 Mr Love rejected Mr Simmons' offer and made a counteroffer of $1.05 million.[13]

21 Mr Simmons did not accept that counteroffer. He said he would like to make a new offer of $1.03 million.[14] That offer was accepted,[15] giving rise to the contract the subject of this action.

22 On 7 March 2013, Mr Simmons and Mr Love entered into a contract for Mr Simmons to buy and Mr Love to sell a proposed lot, referred to as proposed lot 1, 3a Norbury Crescent City Beach (the Subdivided Lot), for a purchase price of $1.03 million. The settlement date was stipulated as being '30 days from acceptance subject to the title being ready for dealing'.[16]

The buyer is aware that settlement is to be within 30 days of acceptance of this offer. Should settlement not take place within the 30 days of acceptance then settlement will be within 14 days of the title being ready for dealing.

Subject to the purchaser being satisfied with his architect's initial concept drawings being satisfactory to his needs within 21 days of acceptance. Should this clause not be satisfied within the 21 days then this clause will be at an end.

25 The Contract incorporated the 2011 Joint Form of General Conditions for the Sale of Land (General Conditions), so far as they are not varied by or inconsistent with the Contract and Special Conditions.

26 General conditions 3 and 4 provide relevantly as follows:

The Buyer must arrange for the Transfer to be prepared.

(a) sign the Transfer; and

(b) deliver the Transfer to the Seller or the Seller Representative a reasonable time before the Settlement Date.

(a) subject to subclause (e) to (m) the Buyer must arrange for:

before the Transfer is delivered to the Seller.

(a) Where the Contract specifies the time and place for Settlement, Settlement must take place at the time and place specified.

(b) Where the contract does not specify the time for Settlement, the Buyer must specify the time for Settlement which must be during normal business hours on a Business day.

(c) Where the place for Settlement is not specified in the Contract, the Buyer must specify the place for Settlement which must be in the Perth CBD.

(a) the date for Settlement specified in the Contract; or

(b) if not date for Settlement is specified in the Contract, the later of:

(1) the Business Day which is 25 Business Days after the Contract Date; and

(2) if the Contract is subject to a condition which, if not satisfied, will result in:

(B) a Party being entitled to terminate the Contract, the Business Day which is 15 Business Days after the date on which the last of each condition specified in this subclause is satisfied.

4.1 Buyer delay

(a) if for any reason not attributable to the Seller, Settlement is not completed within 3 Business Days after the Settlement Date, the Buyer must pay to the Seller at Settlement interest on:

(1) the balance of the Purchase Price; and

(2) any other money payable at Settlement.

(b) The right of the Seller to interest under this clause is in addition to the entitlement of the Seller to Rent under clause 6.6.

4.2 Seller delay

If for any reason attributable to the Seller, Settlement is not completed within 3 Business Days, after the Settlement Date the Seller must allow to the Buyer at Settlement, as a deduction from the Purchase Price, compensation:

(a) the balance of the Purchase Price; and

(b) any other money payable at Settlement.

Interest payable under clause 4.1 and compensation allowable under clause 4.2 is to be calculated:

(a) at the Prescribed Rate; and

(b) from and including the Settlement Date to but excluding the date on which Settlement occurs,

and will be treated as being in full satisfaction of any claim the Party claiming interest or compensation has against the other Party as a result of the delay in Settlement.

(a) if the Seller is not ready, willing and able to complete Settlement on the Settlement Date, the Seller is not entitled to interest under clause 4.1 until;

(1) the Seller is ready, willing and able to complete Settlement; and

(2) the Seller has given Notice of that fact to the Buyer.

(b) If a Notice is given in accordance with subclause (a) within 3 Business Days after the Settlement Date, interest will be calculated and payable from and including the Settlement Date to but excluding the date on which Settlement occurs.

(c) If a Notice is given in accordance with subclause (a), after the period specified in subclause (b), interest will be calculated and payable from and including the day on which the Notice is given up to but excluding the date on which Settlement occurs.

(a) if the Buyer is not ready, willing and able to complete Settlement on the Settlement Date, the Buyer is not entitled to compensation under clause 4.2 until;

(1) the Buyer is ready, willing and able to complete Settlement; and

(2) the Buyer has given Notice of that fact to the Seller.

(b) If a Notice is given in accordance with subclause (a) within 3 Business Days after the Settlement Date, compensation will be calculated and payable from and including the Settlement Date to but excluding the date on which Settlement occurs.

(c) If a Notice is given in accordance with subclause (a) after the period specified in subclause (b), compensation will be calculated from and including the day on which the Notice is given up to but excluding the date on which Settlement occurs.

(1) the Interest Party claims that the Interest Default Party is liable to pay interest or compensation under clause 4.1 to 4.5; and

(2) the Interest Default Party disputes the entitlement of the Interest Party to the interest or compensation,

(b) Subject to subclause (h), and if the Interest Party requires the Interest Default Party to pay interest or compensation under clause 4.1 to 4.5 at Settlement, the Interest Party must not later than 2 Business Days before Settlement serve an Interest Notice on the Interest Default Party setting out:

(1) the basis on which the claim for interest or compensation is made; and

(2) the amount claimed, which may include an amount to be calculated on a daily basis.

(c) The Interest Default Party must pay the Interest Amount on Settlement to:

(2) if the Interest Party has not appointed a Representative, then to the Representative of the Interest Default Party; or

(3) if subclause (1) and (2) do not apply, then to the Interest Party, to be held by the Representative or the Interest Party subject to and for the purposes specified in this clause.

(d) On the day which is 20 Business Days after Settlement, unless:

(1) the dispute has been resolved between the Parties; or

(2) court proceedings are Instituted by a Party to determine the dispute,

the Representative who holds the Interest Amount must pay the Interest Amount to the Interest Party, or, if applicable, the Interest Party may retain the Interest Amount.

(1) court proceedings are Instituted by a Party as specified in subclause (d); or

(2) an agreement is reached between the Interest Party and the Interest Default Party with regard to the dispute,

the Representative who holds the Interest Amount or, if applicable, the Interest Party must pay the Interest Amount, as applicable:

(A) as determined in accordance with the court proceedings; or

(B) in accordance with the agreement between the Parties.

(f) If the Interest Default Party disputes the entitlement of the Interest Party to interest or compensation under clause 4.1 to 4.5:

(1) that dispute does not affect the obligations of the Parties to proceed to Settlement; and

(2) subject to the obligation of the Interest Default Party to pay the Interest Amount on Settlement in accordance with this clause, the Parties must proceed to Settlement.

(g) Each Party authorises a Representative who holds the Interest Amount under this clause to:

(h) The provisions of this clause do not affect the right of the Interest Party after Settlement to claim and if appropriate, institute proceedings against the Buyer to recover an amount of interest or compensation as specified in clauses 4.1 to 4.5.

4.7 Restriction on right in case of court proceeding

(a) The right of a Party under this clause to interest or compensation will cease as at and with effect from and including the date on which court proceedings are Instituted by a Party for:

(3) any other order or declaration to the same or similar effect to an order or declaration as specified in subclause (1) or (2); or

(4) other relief based on the Contract having been terminated.

(b) It is the intention of the Parties that where there is a delay in respect to Settlement:

(2) interest payable at the Prescribed Rate for the period of the delay represents the best estimate that the Parties can give as to the damages sustained arising from the delay.

(c) Where court proceedings are Instituted by a Party in accordance with subclause (a), nothing in this clause or in the Contract:

(1) restricts, limits or prejudices the entitlement of a Party to claim interest under an Act or by way of damages or compensation; or

(2) limits or otherwise affects the discretion of the court.

The right of a Party under this clause does not affect the right of a Party under clause 24.

27 'Notice' was defined to mean a notice as specified in cl 21.1.

28 'In Order for Dealing' was defined to mean that the Subdivision Plan had been initialled by an inspector:

(b) in particular, as in order to enable the issue of a separate Certificate of Title for the Lot.

29 Subdivision Plan was defined to mean a deposited plan which includes the Lot including, if applicable, a strata plan which includes the Proposed Strata Lot.

30 Lot was defined by stating that Lot has the same meaning as the definition of lot in the Planning and Development Act.

31 Subdivision Lot was defined to mean the Land which is not a Lot as defined in the Planning and Development Act or a Proposed Strata Lot and which is:

32 The references in the definition of In Order for Dealing and Subdivision Plan to Lot should be read as a reference to Subdivision Lot.

33 Settlement Date was defined to mean the date each party must complete settlement:

(b) any other relevant provision of this document or of the Contract.

34 Special condition 4 was extended twice. On 23 March 2013 it was extended to apply through to 50 days of acceptance.[17] On 20 April 2013, the clause was extended to 26 May 2013.[18]

35 On 21 May 2013, the parties signed a further extension/variation agreement.[19] It provided that the Contract was unconditional as at execution of the variation. It also made Ms Gimondo a joint purchaser.

36 Mr Simmons and Mr Love both say that at the time of signing this document they agreed that the purchase price would be reduced by $4,000.[20] They disagree as to what was said and as to why the reduction was made. It is not necessary to resolve these conflicting accounts.

37 On 20 June 2013, KWS Capital Pty Ltd (KWS) lodged a caveat over three properties owned by the Seller, including the Original Land.[21] That caveat was the subject of proceedings in this court. The Seller became aware of the caveat about 15 July 2013.[22]

38 The reasons of decision of Edelman J in KWS Capital Pty Ltd v Love[23] reveal the following:

(a) the KWS caveat was lodged pursuant to a charge alleged by KWS to secure fees of $154,000 said to be owing to it under a structuring fee agreement made between it and Mr Love. By that agreement, KWS alleged that Mr Love was liable to pay the structuring fee upon approval by the lender of a loan to him, and regardless of whether the loan was in fact advanced;

(b) Mr Love lodged an application with Landgate for the issue of a s 138B Notice for the removal of the KWS caveat. The Registrar of Titles inadvertently referred only to one of the other properties the subject of the KWS caveat and did not make reference to the Seller's Original Land relevant to these proceedings;

(c) Edelman J dismissed KWS's application to extend its caveat over the Scarborough Beach property. The primary ground for that decision was that it appeared that KWS had adequate security by virtue of its charges over the Seller's Original Land and the other property owned by the Seller;[24]

(d) Edelman J made orders that the KWS caveat be extended over the Seller's Original Land and the third property.[25]

39 By letter of 11 July 2013 the Buyers' bank, National Australia Bank (NAB), advised that the Buyers' application for finance for $500,000 had been approved, subject to acceptance of the bank's normal terms and conditions.[26]

40 Just before 19 July 2013, Ms Gimondo told Ms Lukey of GPS Property Settlements (GPS), the Seller's settlement agent in relation to the Contract, that the Buyers were borrowing some of the purchase price from a bank.[27]

41 By email at 2.30 pm on 19 July 2013 Ms Lukey sent a proposed variation of contract to Ms Gimondo, acting for the Buyers. The email stated 'if satisfied ... execute the document and forward me a copy'.[28] The proposed variation was in terms ultimately executed on 18 October 2013. Mr Love says that he did not know about and did not authorise GPS to do this. I do not accept that evidence. I accept Ms Lukey's evidence that she prepared the document after a discussion with Mr Love. I think that that is more likely than Mr Love's version.[29]

42 I do not accept Mr Simmons' evidence[30] that when he telephoned Mr Dye after receiving this proposed variation Mr Dye said it was unnecessary to sign.

43 Ms Lukey prepared the variation because she was concerned that the statement in the variation of 21 May 2013 that the Contract was now unconditional might affect the legal efficacy of the Contract, given that it related to a lot yet to be created by subdivision.[31] Contrary to the Seller's submissions, that fact, reflecting the uncommunicated thinking of the Seller and his agent about the purpose of the variation, is not relevant to the proper construction of the variation agreement of 18 October 2013. In any event, there is no issue between the parties as to the proper construction of the variation document of 18 October 2013.

44 By email at 2.32 pm on 19 July 2013 Ms Lukey wrote to Ms Gimondo referring to the settlement date being '14 days after title being ready for dealing' and requesting her to contact the Buyers' bank to ensure they would be ready for settlement with the application for title, and seeking confirmation in that respect.[32] Both Mr Simmons[33] and Ms Gimondo[34] say that Mr Simmons then sent an email to his banker, although the email is not in evidence.

45 On 4 October 2013, the Seller, as registered proprietor of the Seller's Original Land, and the Neighbours lodged with the Planning Commission an application for endorsement of deposited plan 74084.[35] Deposited plan 74084 would enable the issue of two new titles, including the title for the proposed new lot 1 that was the subject of the Contract.[36]

46 On 16 October 2013, GPS advised Ms Gimondo that 'the title is now in order for dealing ... as per the attached notification'.[37] The attached notification from Landgate stated that the current status of Survey DP74084 was in order for dealing.[38]

47 The attached notification from Landgate stated that the survey plan, as distinct from a specific title, was in order for dealing. By contrast, the settlement agent's letter stated that the title was in order for dealing.

48 GPS' letter of 16 October 2013 also stated that pursuant to the Contract they confirmed that the settlement date was 29 October 2013. The letter requested the Buyers to provide the transfer of land document 'in due course', and to contact the agent when they (the Buyers) were in a position to schedule settlement.

Telephone conversation between Ms Gimondo and Ms Lukey on 18 October 2013

49 On 18 October 2013, after receiving the email of 16 October 2013, Ms Gimondo telephoned Ms Lukey to discuss settlement preparations. Ms Lukey told her that the terms of the Contract were clear that the Seller could settle without the issue of titles. Ms Gimondo said in response that that was 'ridiculous' because the bank needed to be able to lodge its mortgage and required a title, and that the Buyers were using their own money for a large part of the purchase price and also required a title.[39]

50 Ms Gimondo's evidence is that Ms Lukey said that the Contract had been drawn up incorrectly from the start which was why on 19 July 2013 she (Ms Lukey) prepared a further variation to contract document.[40] I do not accept that Ms Lukey made statements to that effect. Such statements would have been inconsistent with Ms Lukey's understanding of the Contract, and with the reason that she had prepared the variation of contract document in July 2013. Ms Lukey understood (correctly) that the Contract provided for settlement within 14 days of the plan or diagram being in order for dealing, and without the issue of titles. Ms Lukey had not drawn up the proposed variation of contract in order to require that a title be produced at settlement. She had prepared it to address her concerns about the enforceability, as explained earlier in these reasons at [43].

51 On 18 October 2013, Mr Simmons and Mr Love met. They signed a further variation to the Contract dated 18 October 2013.[41]

52 The variation of contract document stated as follows:

(1) clause (e) of the party's variation of contract dated 21 May 2013 is deleted and is replaced with the following text 'special condition 4 of the contract for sale has been satisfied';

(2) for the avoidance of doubt, the parties agree that the contract for sale remains conditional on a new title being issued in respect of the Land.

53 The conversations leading to the execution of this document are in dispute. I will set out the competing versions and make findings in section 7 of these reasons.

54 On 25 October 2013, Ms Gimondo sent GPS an email.[42] The email referred to a conversation on 18 October 2013 in which GPS had advised that the application for new titles was prepared but still in the file waiting for lodgement. The email requested advice as to when GPS would lodge an application for new titles so that settlement could proceed. The email also said that Ms Lukey had said the file was with GPS' inhouse solicitor, and the licensee was now handling the file and would make contact, saying that they were yet to hear from her. There does not appear to have been a substantive response to this email.

55 Ms Gimondo says that on 25 October 2013 she called Ms Lukey and asked if settlement was proceeding on 29 October 2013 and if she had lodged the application for new titles. In response Ms Lukey said settlement would not take place on 29 October 2013 and that no new date had been booked. She says she and Mr Simmons agreed that she would send an email confirming this discussion and that of 18 October 2013. That evidence was not challenged and I accept it.

56 On 31 October 2013, KWS issued a writ of summons in the District Court of Western Australia against Mr Love, seeking payment of its alleged outstanding commission of $154,000.[43]

57 On 18 January 2014, Mr Simmons sent an email to Mr Metaxas, solicitor for the Seller.[44] I will say more about the content of that email in section 7 of these reasons.

58 Mr Metaxas' email in response, read with Mr Simmons' email, meant that in order for Mr Love to settle on the sale of the Subdivided Lot he required an amount of about $1.75 million. This sum comprised $1.025 million for the first mortgagee of the Original Land, $300,000 for the second mortgagees of the Original Land, $300,000 to be paid to the Neighbours for the land acquired from them and $154,000 to be used as security in order for the KWS caveat to be lifted.

59 On 21 January 2014, the Buyers' solicitors wrote a letter to the Seller enclosing by way of service a notice to complete dated 21 January 2014.[45] The notice to complete:

(a) recited the agreement and some of its extensions and variations;

(b) recited that on 16 October 2013 the title to the property was in order for dealing and that the Seller had notified the Buyers in writing that the settlement date was fixed for 29 October 2013;

(d) asserted that the Seller had refused or neglected to fix a further settlement date or to effect settlement in accordance with the agreement;

(f) stated that the Seller was in default of his obligation under the agreement in failing to specify a further time or date for the settlement date and to settle on the sale of the property;

(g) gave notice that the Buyers were ready, willing and able to complete the purchase of the property in accordance with the agreement, and that settlement was fixed for 11.00 am on 7 February 2014;

(h) gave notice that unless the Seller completed the agreement within the time specified the Buyers may exercise their right to affirm the Contract and sue for damages or specific performance, or terminate the Contract and elect to exercise their rights.[46]

60 In the days between 21 January 2014 and 7 February 2014 there was email correspondence between the settlement agents about possible settlement on 7 February 2014.[47] On 6 February 2014, GPS advised that the Seller was not in a position to settle as the certificate of title for the Original Land was subject to dealing (due to the KWS caveat).[48]

61 On 23 January 2014, the Buyers, by their solicitor, lodged a caveat over the Seller's Original Land claiming an interest pursuant to the contract.[49]

62 On 24 February 2014, Mr Love caused the Registrar of Titles to issue notices under s 138B of the Transfer of Land Act 1893 (WA).[50] As a consequence, the Buyers applied to extend the caveat. On 4 April 2014, I made orders extending the caveat until further order and reserving the costs of the caveat proceedings to the determination of this action.[51]

63 In the meantime, on 28 February 2014 the Buyers commenced this action. It was an action for specific performance. In his defence, the Seller asserted that the Contract was unenforceable, among other reasons, because it contravened the Planning and Development Act and because conditions in general condition 13 had not been fulfilled, bringing the Contract to an end.

64 On 22 May 2014 the first mortgagees of the Original Land commenced proceedings seeking an order for possession of the Original Land.[52] On 18 September 2014, the court made an order for possession.[53]

66 On 3 October 2014, the Seller and the Buyers agreed to settle on the Contract on terms that included that the Seller give written confirmation that the Contract was valid and unconditional and that settlement would take place in accordance with the terms of that contract.[54]

67 The Seller gave written confirmation to that effect.[55]

68 On 10 November 2014, settlement of the Contract took place, and a sum of $95,746.89 was paid by the Seller to be held in an interest bearing trust account to abide the outcome of these proceedings.[56]

69 The statement of claim does not fully reflect the claim ultimately advanced by the Buyers at trial. That is because the statement of claim pleads a claim for specific performance. As I have said, on 10 November 2014 the parties settled on the Contract. The Buyers' claim, advanced at trial, is for the sum of $95,746.89, being interest on the purchase price at the prescribed rate of 9% from 29 October 2013 until 10 November 2014. The Buyers did not amend the statement of claim to reflect this, but from late October 2014 onwards, the action was conducted on the basis that the Buyers' claim was for the sum claimed at trial.

70 Initially, the Buyers' claim for this sum was articulated as a claim for compensation under cl 4.2 of the General Conditions. However, in December 2014 the Seller amended his defence to plead that by operation of cl 4.7(a) of the General Conditions, the Buyers' right to compensation under cl 4.2 ceased. Ultimately, the Buyers' claim is for compensation or damages under cl 4.7(b) for, in effect, liquidated damages in an amount equal to the interest payable at the prescribed rate for the period of the delay in settlement from 29 October 2013 to 10 November 2014.

71 The parties conducted the trial on the basis that any claim under cl 4.7(b) by the Buyers must satisfy the requirements of cl 4.2 and cl 4.5, namely that the delay in settlement was for a reason attributable to the Seller, and that the Buyers were ready, willing and able to settle on the Settlement Date. I agree with that.

72 In order to succeed in their claim, the Buyers must show the following:

(1) That the Settlement Date for the Contract was 29 October 2013.

(2) That they were ready, willing and able to perform the Contract on that date.

(3) The nonoccurrence of settlement on that date was for a reason attributable to the Seller.

(4) On its proper construction, cl 4.7(b) entitles an innocent party to claim liquidated damages in the amount equal to interest at the prescribed rate for the period of the delay, and there is no need for that party to prove any loss from the delay in settlement.

73 The Seller challenges all of these elements of the Buyers' claim. Further, the Seller's defence and counterclaim gives rise to the following additional issues:

(5) On 18 October 2013 was there, as the Seller claims, an oral agreement between Mr Simmons and Mr Love that settlement of the Contract would be delayed until the KWS caveat was removed? If such an agreement was made, what was its legal effect?

(6) Is cl 4.7(b) of the General Conditions unenforceable on the ground that it is a penalty?

(7) Did the Buyers breach the Contract by failing to complete settlement on 29 October 2013 and, if so, is the Seller entitled to damages reflecting the Seller's liability for interest on mortgages registered over the Original Land for the period from 29 October 2013 to 10 November 2014?

74 At trial, counsel agreed that these were the issues for determination in the action.[57] Other issues that might appear to arise on the pleadings, such as whether the Contract was frustrated, and the efficacy of the Buyers' Notice to Complete of 21 January 2014, fell away.

75 Resolution of several of these issues will be influenced by the proper construction of the Contract, including its provisions as to the date for settlement and the terms on which settlement is to occur. For that reason, it is convenient to begin with the question of the proper construction of the Contract.

4. The proper construction of the Contract Construction of contracts: general principles

76 The principles relevant to the proper construction of contracts are well established, and were not in dispute in this case. I apply the principles stated in Red Hill Iron Ltd v API Management Pty Ltd[58] and in Kidd v the State of Western Australia.[59] In the latter case I set out the following outline.[60]

In summary:

(1) the primary duty of the court in construing an instrument is to endeavour to discover the intention of the parties as embodied in the words they have used in the instrument;

(2) it is the objectively ascertained intention of the parties, as it is expressed in the instrument, that matters, not the parties' subjective intentions. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood the terms to mean;

(3) the objectively ascertained purpose and objective of the transaction may be taken into account in construing the instrument. That may invite attention to the genesis of the transaction, its background and context;

(4) the apparent purpose or object can be inferred from the express and implied terms of the contract, and from any admissible evidence of surrounding circumstances; and

(5) an instrument can be construed so as to avoid it making commercial nonsense or giving rise to commercial inconvenience. However it must be borne in mind that business common sense may be a topic on which minds may differ.

...

A contract, like a statute, must be constructed as a whole. A construction that makes the various parts of an instrument harmonious is preferable. If possible, each part of an instrument should be construed so as to have some operation.

On the proper construction of a contract, evidence of surrounding circumstances is not admissible unless the court determines that the contract is ambiguous or susceptible of more than one meaning.

Ambiguity is not confined to lexical, grammatical or syntactical ambiguity. It is enough if the instrument is susceptible of more than one meaning or if the scope or applicability of the contract is doubtful.

...

There are limits on the extent to which surrounding circumstances can influence the proper construction of an instrument. Reliance on the surrounding circumstances must be tempered by loyalty to the text of the instrument.

There are also limits on the kind of evidence which is admissible as background to construction of a contract, and the purposes for which it is admissible. Evidence of prior negotiations is admissible for some purposes but not for others. Insofar as such evidence establishes objective background facts known to the parties or the genesis, purpose or object of the transaction it is admissible. Insofar as it consists of statements and actions of the parties reflective of their actual intentions and expectations it is inadmissible. Such statements reveal the terms of the contracts which the party intended or hoped to make. They are superseded by, or merged into, the contract.

Construction of the provisions as to timing of and conditions for settlement

77 The body of the Contract stipulated the Settlement Date as being 30 days from acceptance, subject to the title being ready for dealing. Special condition 1 stated that 'the Buyer is aware that settlement is to be within 30 days of acceptance. Should settlement not take place within the 30 days of acceptance then settlement will be within 14 days of the title being ready for dealing'.

78 The Buyers point to cl 13.9 of the General Conditions which provides as follows:

Issue of title - Settlement Date

(a) As soon as practicable after the Subdivision Plan is In Order for Dealing, the Seller must:

(1) apply for, and arrange for the issue of a separate Certificate of Title for the Subdivision Lot; and

(2) notify the Buyer in writing, as soon as practicable after a separate Certificate of Title has been issued for the Subdivision Lot.

(b) Unless otherwise provided in the Contract, the Settlement Date will be the date which is

(1) 15 Business Days after the Seller notifies the Buyer that a separate Certificate of Title has issued for the Subdivision Lot; or

(2) where:

(A) the Buyer is aware that a separate Certificate of Title has been issued for the Lot; and

(B) the Buyer has notified the Seller that the Buyer is aware that a separate Certificate of Title has issued for the Lot, 15 Business Days after the Buyer has so notified the Seller.

(1) special condition 1 does not vary, and is not inconsistent with, cl 13.9 of the General Conditions;

(2) the use of the word 'title' in special condition 1, read with general condition 13.9, means that on a proper construction the Contract required a separate certificate of title for the Subdivided Lot for settlement, and settlement would be 14 days after that occurred.[61]

80 For the reasons that follow, I do not accept those submissions.

81 In my view, it is telling that the phrase used in special condition 1 is 'the title being ready for dealing', and not 'the title being issued'. If, as the Buyers' construction invites, the objective intention were that settlement be within 14 days of title being issued, then in my view the Contract would have said so in those terms, and without any reference to being 'ready for dealing'.

82 The phrase 'title being ready for dealing' is ambiguous or susceptible of more than one meaning, so regard to the factual matrix in which the Contract was made is permissible. At the time of entering the Contract both parties knew that the proposed lot the subject of the Contract did not then exist, and would be produced by subdivision following the amalgamation of the Seller's Original Land with some additional property to be acquired from the Neighbours. That was apparent from the subdivision plan which Mr Simmons saw before he entered into the Contract.

83 The phrase 'ready for dealing' is technically inapposite to a certificate of title. If one were to read the phrase literally, every title is in order for dealing. A plan or diagram of subdivision is in order for dealing; a certificate of title is not.

84 The phrase 'in order for dealing' is used in the General Conditions and is defined in cl 26.1 of the General Conditions to mean a subdivision plan having been initialled in order to enable the issue of a separate certificate of title. These provisions of the General Conditions mean that the parties can be taken to know that a subdivision plan is in order for dealing when it is said to be in order for dealing so as to enable the issue of a separate certificate of title. Being ready for dealing is synonymous with being in order for dealing.

85 For these reasons I would think the preferable construction of the phrase 'within 14 days of the title being ready for dealing' is within 14 days of the plan or diagram for the subdivision of the Original Land necessary for the creation of the Subdivided Lot being in order for dealing.

86 The Seller's submissions made some reference to the parties' subsequent conduct and statements in support of this construction. However, such material is not relevant to the proper construction of the Contract.[62]

87 Clause 13.9(b) sets out when the Settlement Date will be, unless otherwise provided in the Contract. In this case, the Contract does otherwise provide in special condition 1. The specific provision in special condition 1 about the timing of settlement is another provision for the purposes of general condition 13.9.

88 Further, in my opinion cl 13.9 generally is inconsistent with the objective intention revealed by special condition 1. In my view, the effect of special condition 1 is that at settlement, the Seller is not required to produce a certificate of title. The effect is that settlement would occur on the following basis:

(1) the plan or diagram of subdivision is in order for dealing;

(2) there is an application for new titles to effect the subdivision, so to produce, subsequent to settlement, the certificate of title for the Subdivided Lot;

(3) an instrument of transfer of the Subdivided Lot would be executed and provided at settlement. The transfer would identify the lot and the diagram or subdivision plan, with the certificate of title, volume and folio details to be filled in by Landgate.

89 At trial, the Buyers accepted that cl 2 of the variation of contract signed by the parties on 18 October 2013 did not effect any alteration of the Contract as regards the timing of settlement or whether a certificate of title was required to be provided at settlement.[63] I proceed on that basis.

90 For these reasons, on a proper construction of the Contract as varied:

(1) the Settlement Date was within 14 days of the subdivision plan or diagram for the Original Land being in order for dealing; and

(2) settlement did not require the production by the Seller of a certificate of title for each lot of the subdivided land. Rather, settlement would proceed on the basis outlined in [88] above.

91 I turn to the issues identified in [72] and [73].

92 On 15 October 2013, Landgate notified that the survey DP 74084 was in order for dealing.[64]

93 On 16 October 2013, GPS confirmed that the Settlement Date was 29 October 2013.[65]

94 In these circumstances, by operation of special condition 1, as I have construed it, the Settlement Date under the Contract was 29 October 2013.

95 If I had accepted the Buyers' construction of special condition 1, there would have been a question as to whether 29 October 2013 was the Settlement Date under the Contract. However, given the conclusion I have reached as to the proper construction of special condition 1, it is not necessary to deal with that question.

6. Were the Buyers ready, willing and able to settle on 29 October 2013?

96 The requirement that a party be ready, willing and able to perform means that the party must be ready, willing and able to perform the contract in accordance with its terms, properly construed. I have found that, on its proper construction, the Contract required the Buyers to settle on the basis of the subdivision plan being in order for dealing, an application for new titles being lodged, and a transfer of the new lot being executed and provided at settlement. Thus, the Buyers were required to settle without a certificate of title for the Subdivided Lot being available at settlement.

97 For the reasons set out below, I find that the Buyers were not ready, willing and able to do so. In short, I find that:

(1) in October 2013 the Buyers' intention was to use a new facility with NAB to pay $500,000 of the purchase price;

(2) NAB required a certificate of title at settlement; and

(3) the Buyers were not willing to settle without the production of a certificate of title at settlement.

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