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

(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;

(c) recited that settlement did not take place on 29 October 2013, through no fault of the Buyers;

(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.

98 In my opinion, consideration of the Buyers' conduct and statements in the period July 2013 to January 2014 sustains the conclusion that their intention was to use a new facility with NAB, to be secured by a mortgage over the Subdivided Lot, to pay $500,000 towards the purchase price. The Buyers try to resist this conclusion by pointing to their ability to settle irrespective of any new NAB facility. However, as I will explain later, an ability to settle is not enough. Further, the Buyers' conduct and statements in October 2013 reveal that they were willing to settle only on the basis that a certificate of title for the Subdivided Lot was produced at settlement.

99 In July 2013, Ms Gimondo told Ms Lukey that the Buyers were borrowing some of the purchase price from a bank.[66]

100 As at January 2014, when the Buyers were demanding settlement by 7 February 2014, the Buyers wished to use $500,000 from NAB towards payment of the purchase price.[67]

101 I find that the position was the same in October 2013.

102 On 16 October 2013 Ms Lukey spoke to Ms Gimondo. When Ms Lukey said the terms of the Contract meant that the Seller could settle without the issue of titles, Ms Gimondo said that was 'ridiculous' because the Buyers' bank needed to be able to lodge its mortgage and it required a title.[68] In my view, what Ms Gimondo said is a firm indication of the Buyers' intention, at that time, to use the new NAB facility, secured by a mortgage, to partly fund the purchase price.

103 Ms Gimondo reported her conversation with Ms Lukey to Mr Simmons.[69] What Ms Gimondo said to Ms Lukey reflected the Buyers' shared intention to use the NAB facility for $500,000. It was that conversation that led to Mr Simmons to ask Mr Love to agree to a variation of contract.

104 The catalyst for Mr Simmons going to see Mr Love in order to have the variation of contract signed on 18 October 2013 was that:

(1) the Buyers understood, and the Seller's settlement agent had asserted, that the terms of the Contract meant that settlement would proceed without a certificate of title having been issued;

(2) the Buyers were intending to use the new facility with NAB to fund $500,000 of the purchase price; and

(3) NAB required a certificate of title in order to settle.

105 On his own evidence in his witness statement,[70] Mr Simmons went to meet Mr Love on 18 October 2013 with the object of changing the terms of the Contract regarding settlement. Mr Simmons believed that the variation document signed on 18 October 2013 would mean that the Seller would be required to produce a title at settlement. Mr Simmons said to Ms Gimondo that he wanted to get Mr Love to sign a document that would mean there would be a title before settlement.[71] Mr Simmons' purpose in seeking to vary the Contract in this respect reflected the Buyers' intention to use NAB funds to partly fund the purchase price.

106 In the course of crossexamination, Mr Simmons sought to cast a different light on the evidence in his statement. Mr Simmons said, in effect that:

(1) he did not understand there to be any real distinction between an application for new title, and the issue of the title;[72]'

(2) he understood that Ms Gimondo had said to him that in the conversation of 16 October 2013 Ms Lukey had said that the Seller wanted to settle without there being any application for new title;[73]

(3) his purpose in having the variation agreement signed on 18 October 2013 was to ensure that the Buyers would not need to settle until there had been an application for new titles lodged.[74]

107 I do not accept that evidence. Mr Simmons' wife and cobuyer was a settlement agent. She understood very well the distinction between an application for new titles having been made, and a certificate of title having been issued. That distinction was the central subject matter of her conversation with Ms Lukey on 16 October 2013. It was that distinction that gave rise to the Buyers' evident problem concerning NAB's requirement for a certificate of title. Ms Lukey did not tell Ms Gimondo that the Seller could settle without an application for new titles; she said the Seller could settle on an application for new titles and without the new certificate of title being issued. Given NAB's requirement for a certificate of title, that was a problem. I do not accept that there was any misunderstanding about this between Ms Gimondo and Mr Simmons.

108 As I find in the next section of these reasons, when Mr Simmons spoke to Mr Love on 18 October 2013, he said the Buyers wanted a title at settlement and wanted the variation signed. That is what Mr Simmons meant. He did not say, and did not mean, that the Buyers wanted an application for title at settlement.

109 At an early stage of his evidence Mr Simmons said that when he entered into the Contract, he understood that settlement would be completed on the basis of an application for new titles, and the titles would not be available at settlement.[75] That evidence, which I accept, reveals that in 2013, Mr Simmons understood the distinction between the issue of title and an application for title.

110 Moreover, Mr Simmons' witness statement says that Ms Gimondo told him that Ms Lukey had said settlement could occur 'without the issue of titles'.[76] Mr Simmons did not expressly say in his oral evidence that, when he said 'without the issue of titles' in his witness statement, he meant without applying for new titles. To the extent he may have implicitly made that suggestion, I reject it. Paragraphs 137 and 138 of his witness statement reinforce my assessment that Mr Simmons appreciated the difference between there being an application for new titles and titles being issued; what Mr Simmons wanted was settlement only when a title was issued. When questioned, Mr Simmons could not explain why in [137] of his witness statement he had used the words 'without the issue of titles'.[77] I think the explanation is simple. He used those words because that is what he meant.

111 Mr Simmons claimed, in his evidence, that even as late as October 2014, indeed up to the trial, he still did not understand the difference between the issuing of title and the making of an application for title.[78] I found Mr Simmons' evidence to the effect that he had never appreciated this distinction to be entirely unconvincing, and to detract from his credit generally.

112 Ms Gimondo's attempts in her evidence, the first of which was gratuitous, to say that Mr Simmons did not appreciate the difference between a title and an application for title were unconvincing and detracted from her credit.[79]

113 In order to demonstrate that they were ready, willing and able to settle, it is not enough for the Buyers to show that they had sufficient available funds to pay the purchase price without needing to draw on the new NAB facility and without needing a certificate of title at settlement. The Buyers must show that they were ready and willing, not just that they had the ability to settle. In Mr Simmons' responsive witness statement he says that he intended to borrow $500,000 from NAB, secured by a mortgage over the Subdivided Lot, but that he did not 'require' those funds in order to carry out settlement.[80] His evidence about what he intended to do supports my conclusion as to the Buyers' intentions. The question is not just whether the Buyers could have settled without using the new NAB facility; it is also whether they were willing to do so.

114 Further, several times in the course of her evidence in crossexamination, Ms Gimondo accepted that the Buyers' intention was to use the new NAB loan to fund $500,000 of the purchase price.[81] I find that that reflected the true position. I do not accept other parts of her evidence in which she said that using the new NAB facility was just one of the Buyers' options, and that they also could have settled without using the NAB facilities as they had other funds available through other accounts that were not fully drawn down.[82] Mr Simmons gave evidence to similar effect.[83] The existence of available accounts from which, potentially, the purchase price could have been paid was the subject of unchallenged evidence from Mr Simmons.[84] I accept that evidence. However, I do not accept that, as at October 2013, the Buyers intended or considered using those other funds. I find that their intention at that time was to use the new NAB funds to the extent of $500,000. That is why Ms Gimondo said what she said to Ms Lukey.

115 In October 2013 no occasion arose for the Buyers to consider whether they would settle without using the new NAB facility.

116 At no time during October 2013 did the Buyers express or manifest any intention to use, or indicate they were considering using, any option that did not include using $500,000 from the new NAB facility towards the purchase price.

117 Further, during October 2013 the Buyers expressed a requirement that the certificate of title be provided at settlement. That is what Ms Gimondo told Ms Lukey on 16 October 2013. It is what Mr Simmons said to Mr Love. It is what Ms Gimondo and Mr Simmons discussed among themselves. At no stage during October 2013 did the Buyers express any willingness to settle on the Contract without the provision of a certificate of title at settlement.

118 Mr Simmons said in evidence that in October 2013 the Buyers would have settled on an application for titles.[85] I reject that evidence. It is inconsistent with the Buyers' conduct and statements in 2013.

119 For these reasons I find that the Buyers were, as at 29 October 2013, not ready and willing to settle on the Contract without the issue of a certificate of title by settlement. Consequently, the Buyers were not ready, willing and able to settle on the Contract in accordance with its terms.

120 That conclusion is fatal to the Buyers' claim. However, for the sake of completeness I will deal with the other issues in relation to the Buyers' claim, before turning to the Seller's counterclaim.

121 It is convenient to deal next with the question of whether on 18 October 2013 Mr Simmons and Mr Love orally agreed that settlement of the Contract would be delayed pending the removal of the KWS caveat from the Original Land.

122 Mr Simmons and Mr Love gave very different versions of their discussions on 18 October 2013.

123 Mr Simmons' account of the conversation he had with Mr Love is as follows:

(2) he told Mr Love that Ms Gimondo had spoken to Natasha and that there was some confusion about whether settlement could proceed without the issue of title for the Subdivided Lot;

(3) he said that the Buyers wanted to avoid any confusion with respect to settling the title so they wanted the further variation to contract signed;

(4) Mr Love said that he had no problems signing it and said 'of course you want a title before you settle';

(5) he asked Mr Love if he knew what Natasha was not telling them (being Mr Simmons and Ms Gimondo) about the settlement being referred to their inhouse solicitor;

(6) Mr Love said that he needed to refinance all of his property, that it was difficult for him to find a lender and that he had made arrangements with KSW Capital. KWS had not secured a lender but were demanding their fee of $140,000;

(7) KWS had lodged a caveat over the Original Land but it was not a problem because his lawyer said the court would remove it; and

(8) he said to Mr Love 'please get on with it as I need my block as I am nearly ready for planning approval' to which Mr Love said 'don't worry you will get your block it will be sorted out in a couple of weeks, 29 October or thereabouts should be fine for settlement'.[86]

124 Mr Love says that he told Mr Simmons about KWS and its caveat sometime in August 2013.[87] Mr Love gives a very different version of the conversation on 18 October 2013.

(1) Mr Simmons arrived at his home without any prior warning;

(a) he had received notice from GPS that the subdivision plan was in order for dealing;

(b) he needed to obtain finance of $500,000 from NAB;

(c) NAB would not provide the money without the issue of the title;

(d) he wanted a variation signed to allow for the issue of new titles prior to settlement;

(3) when he read the proposed variation he considered that nothing in it affected the Buyers' obligation;

(4) he said to Mr Simmons 'of course you will get a title about two weeks after settlement and the title will show you as the owner from the time and date of settlement. The contract requires you to settle within 14 days after my title is in order for dealing ... If you are unable to do so you will be in default, or I can agree to vary the contract as you have asked. KWS has lodged a caveat over my property, as you know. I am confident the caveat will be removed';

(5) he then said 'when the caveat is removed he could apply for the title of the land to be issued before settlement, and that you (Mr Simmons) will have to wait for the caveat to be removed before we can get a title and settle'; and

(6) Mr Simmons said 'if you sign the variation we will agree to that, to which Mr Love said I will sign the variation subject to settlement being after I can get the caveat removed'.

126 What Mr Love says in one respect at least does not entirely make sense. On the one hand he says that he considered the variation agreement did not affect the Buyers' obligation to settle without a certificate of title. On the other hand he says that he agreed to sign the document and to give the Buyers what they wanted, namely a title at settlement in exchange for their agreement not to insist on settlement until the caveat was removed.

127 I have had considerable difficulty in finding the facts as to what occurred on 18 October 2013. To my mind neither version of events entirely makes sense, or sits easily with the objective probabilities and known facts. Further, I have substantial reservations about the reliability of the evidence of both of the two participants in the conversation.

128 Although I am not positively satisfied to the contrary by the evidence of Mr Simmons, in the end I am not satisfied by the evidence of Mr Love that he and Mr Simmons made an agreement to the effect that there would be no settlement of the Contract until the KWS caveat was removed.

129 My earlier findings provide the context in which Mr Simmons went to see Mr Love in order to get Mr Love to sign the variation of Contract document. By 18 October 2013, the Buyers had a problem in that:

(1) they knew the Contract provided for settlement on an application for a new title, and did not require a title to be issued before settlement;

(2) they intended to use $500,000 under a new facility from NAB; and

(3) NAB required title to the new lot to be issued before it would advance the moneys.

130 In those circumstances, the Buyers wanted to alter the terms of the Contract so that title would be provided prior to settlement. That is what Mr Simmons thought was the effect of the variation document ultimately signed. I find that on 18 October 2013 Mr Simmons said to Mr Love that his bank required a certificate of title, and the Buyers wanted the variation signed to get a title before settlement.

131 That context may invite attention to the question of why Mr Love would have agreed to vary the Contract, thereby giving an indulgence to the Buyers, without requesting or requiring something in return. Mr Love's evidence was that he considered that the variation document which he had been asked to sign did not in any way alter the terms of the Contract regarding settlement and any need for title. Consequently, he did not consider that he was giving anything away by signing the variation.

132 The oral agreement alleged by Mr Love was not referred to in any document, or otherwise asserted by Mr Love, until he filed the third version of his defence in June 2014. In my view, that tells strongly against acceptance of his evidence that an oral agreement was made on 18 October 2013.

133 Mr Love had numerous opportunities to assert the oral agreement in the early part of 2014. On 22 January 2014, the Seller received a letter from the Buyers' solicitors enclosing a notice to complete. The notice to complete called upon the Seller to settle on the Contract on 7 February 2014. In January and February 2014, the KWS caveat remained in place. Given the terms of the alleged oral agreement, that agreement would have been a complete answer to the notice to complete sent by the Buyers' solicitors to the Seller.

134 Mr Love did not inform the Buyers' solicitors, or any party, of the alleged oral agreement in response to the notice to complete.

135 The Seller's real estate agent wrote to Mr Simmons on 22 January 2014.[89] Mr Dye's email said that:

Mr Love's advice to me was to inform you that he is unfortunately in a position where he will not be able to settle by the ... date in February 2014 due to the unfortunate situation of a caveat being placed on his property preventing him from settling and that if you decide to take up your option of rescinding the contract then so be it as he has his hands tied in relation to the caveat however he is doing everything possible to rectify the problem and has every intention of proceeding to a successful settlement of 3A Norbury Crescent as soon as the caveat has been lifted.

136 Moreover, in early February 2014 there was email correspondence between Ms Gimondo and Ms Lukey.[90] The Buyers wrote on 2 February 2014 advising that the new settlement date was 7 February 2014 and that they were ready, willing and able to settle on that date. After first saying she would contact her client, Ms Lukey stated that the 'Seller is not able to complete settlement [on 7 February 2014], the certificate of title remains subject to dealing'. Although Ms Lukey could not recall,[91] I infer that someone from GPS spoke to Mr Love before the email was sent.

137 In my view, if Mr Love had made the agreement he alleges, it is likely that he would have said something about it to his settlement agent and real estate agent, and it is unlikely that they would have written on his behalf in the terms that they each did.

138 The Seller filed a defence in this action on 4 April 2014. On 15 May 2014, he filed an amended defence. Neither of these defences made any reference to any alleged oral agreement on 18 October 2013. When those defences were filed, the KWS caveat was still on foot. An allegation of the oral agreement was first inserted by the reamended defence dated 11 June 2014.

139 Nothing in the evidence provides any explanation for Mr Love's failure to refer at all to the alleged oral agreement of 18 October 2013 in his defence or in his amended defence. That oral agreement would seem of central relevance in defending a claim for specific enforcement of the Contract.

140 The Seller's counsel submits that the email sent to him on Saturday, 18 January 2014, by Mr Simmons supports a conclusion that an oral agreement was made on 18 October 2013. For the reasons that follow I do not accept that.

141 The email set out some background. It referred to the condition that settlement would take place 14 days from titles being ready for dealing. The email then stated:

Settlement was arranged for 29 October 2013 as titles were ready for dealing on 16 October, obviously it was put on hold due to the caveat placed on Ross' block.[92]

142 It also referred to issues that arose in meeting the conditions of subdivision. The email stated that while this was happening 'we were being patient. It was not so alarming as we were still in the process of arranging plans to get planning approval which is possible as an applicant even if a third party still owns the property'.

143 The email raised a query about Mr Metaxas having advised in a telephone call that Mr Love needed to come up with about $1.75 million in order to settle on the Subdivided Lot.

144 The Seller submits that the reference to 'settlement being put on hold due to the caveat' is a reference to the agreement made on 18 October 2013 to defer settlement pending removal of the caveat. I think the language of the email is equivocal. Settlement being 'put on hold due to the caveat' is equally consistent with the Seller having been unable to settle due to the caveat.

145 Similarly, the reference to 'being patient' is consistent with the Buyers having been patient in allowing the Seller time to comply with his obligation to settle, perhaps in the interests of good relations with a future neighbour.[93]

146 For these reasons, I am not satisfied that Mr Simmons and Mr Love made an oral agreement to the effect that settlement of the Contract would be deferred until the KWS caveat was removed from the Original Land.

147 In light of that, questions as to the enforceability of the oral agreement to vary a contract for sale in writing need not be considered.[94]

8. Was the nonoccurrence of settlement on 29 October 2013 for a reason attributable to the Seller?

148 At the meeting on 18 October 2013 it is common ground that Mr Love told Mr Simmons about the KWS caveat and the circumstances in which it was lodged.[95] Both Mr Love and Mr Simmons understood that while the KWS caveat remained over the Original Land, settlement of the Contract could not occur.

149 There was a suggestion in parts of Mr Love's evidence[96] that he could have settled in that, if the Buyers had settled without the title, as the Contract required, the Seller could then have used some of the proceeds of sale to create a bond to secure KWS, leading to the removal of the caveat. It is not necessary to determine whether that was, in fact, a viable option at that time. I find that at no stage in October 2013 did the Seller suggest that this approach could, or should, be taken. The position adopted by the Seller in October 2013 was that he was not in a position to settle because of the KWS caveat.

150 The Seller's counsel submits that the Buyers did very little to push for settlement in the second half of October 2013 and did not respond substantively to Ms Lukey's email of 16 October 2013. However, in my view that was because of what Mr Love had told Mr Simmons on 18 October 2013, and what Ms Lukey told Ms Gimondo on 25 October 2013. On 25 October 2013, Ms Gimondo called Ms Lukey and asked if her settlement was still to proceed on 29 October 2013, and whether she had lodged the application for new titles. Ms Lukey said that settlement would not take place on 29 October 2013, and no new date had been booked.[97] This evidence was not challenged. Ms Lukey had no recollection of the content of any discussions.[98]

151 I find that, in substance, the reason that settlement did not occur on 29 October 2013 was that the presence of the KWS caveat lodged over the Original Land meant that the Seller was not in a position to settle. Thus the nonoccurrence of settlement on 29 October 2013 was for a reason attributable to the Seller.

152 The Buyers submit that the proper construction of cl 4.7(b) is as follows.[99] In the event that proceedings regarding the enforceability of the Contract are commenced, the innocent party's right to interest or compensation under cl 4.1 and cl 4.2 ceases.[100] If proceedings are instituted, a claim for liquidated damages represented by interest at the prescribed rate for the period of the delay can be made under cl 4.7(b) by the party not responsible for the delay. However, it is open to that party to claim and prove other damage beyond damages in the liquidated sum.[101]

153 The Seller's construction of cl 4.7 is as follows. If settlement is delayed, but ultimately proceeds without litigation, interest is added to the purchase price, or compensation deducted from the settlement sum (depending on who is responsible for the delay). But if proceedings are commenced, the party seeking compensation for the delay in settlement must prove its loss.[102]

154 In support of his construction, the Seller submits that cl 4.7(b) should not be construed as a liquidated damages clause because:

(1) the words in cl 4.7(b) are 'best estimate' whereas the words 'genuine preestimate of damage' are a commonly used form of words in the context of liquidated damages clause; and

(2) a claimant is not confined to seeking the liquidated sum because of the option provided under cl 4.7(c).

155 Further, the Seller submits that cl 4.7 would have used different words if the intention had been as reflected in the Buyers construction.[103]

156 In my view, none of these submissions sustain the Seller's construction.

157 Clause 4.7 should be construed as a whole. It should be construed so that each provision within cl 4.7 has some operative effect. To my mind, the fundamental flaw in the Seller's construction is that it involves giving no operative effect to par (b) of cl 4.7. Indeed, the Seller's counsel admitted as much, saying of par (b) of cl 4.7 'it achieves nothing. It is just a statement of intention'.[104] By contrast, the Buyers' construction gives some operation and effect to each paragraph of cl 4.7. A construction that gives each part of an instrument some operation is to be preferred to one that does not.[105]

158 Further, in my view, the language of cl 4.7(b), read in the context of cl 4.7 as a whole, favours the Buyers' construction. The language of cl 4.7(b) makes it clear that the parties intend that where there has been a delay in settlement, compensation for the delay should be paid. To my mind, the intention revealed by subparagraph (2) of cl 4.7(b) is that 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 suffered by reason of delay, and so compensation is payable in that amount.

159 For these reasons, in my view, on a proper construction of cl 4.7, where there is a delay in settlement, an innocent party may claim liquidated damages calculated as the interest payable at the prescribed rate for the period of delay, or may claim and prove damages in a different amount, at that party's election.

10. Is clause 4.7(b) unenforceable as a penalty?

160 As was said by the High Court, '[t]he law of penalties, in its standard application, is attracted where a contract stipulates that on breach the contract breaker will pay an agreed sum which exceeds what can be regarded as a genuine preestimate of the damage likely to be caused by the breach'.[106]

161 In Spiers Earthworks Pty Ltd v Landtec Projects Corp Pty Ltd[107] McLure P said (Newnes JA agreeing) as follows:

The question whether a sum stipulated is a penalty or liquidated damages (that is, a genuine preestimate) is to be judged as at the time of the making of the contract. It will be a penalty if the sum stipulated for the breach is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach: Dunlop Pneumatic Tyre (87). It is not enough that it should be lacking in proportion; it must be 'out of all proportion': Ringrow [32]. The stipulation will not be a penalty just because it would result in recovery of a sum exceeding the actual loss suffered. The requirement that the stipulated sum be extravagant and unconscionable in amount (that is, out of all proportion) stems from a policy emphasis on freedom of contract: Ringrow [31] [32].

162 The party resisting enforcement of a provision on grounds that it is a penalty has the onus of proving that it is a penalty.[108]

163 Whether a clause is a penalty invites attention to the proper construction of the clause, and the Contract as a whole, but it is not solely a matter of contractual construction. The court is not limited to considering the terms of the Contract and any background factual matrix evidence that would be admissible for the purposes of contractual construction.[109] However, in this case, no party led any evidence as to the basis upon which interest or compensation was calculated in formulating the provisions of the General Conditions. Given that the General Conditions are standard form conditions not created by these parties, that is unsurprising.

164 The fact that circumstances of breaches may vary so as to make precise preestimation very difficult is not an obstacle to characterisation of the clause as involving a genuine preestimate of damage. To the contrary, it is in such circumstances that the parties may agree to make a genuine preestimate.[110]

165 The Seller did not develop his contention that cl 4.7(b) was a penalty in written or oral submissions.

166 Considered at the time the Contract was entered in March 2013, a delay in settlement could have caused loss to the Buyers in a variety of ways. Such delay may have consequences for the sale by the Buyers of other property owned by them. Delay may have given rise to interest costs in relation to moneys borrowed for the purpose of acquiring the property the subject of the Contract. Delay may have had consequences for the cost of building on the property.

167 The method of calculating the liquidated damages chosen in cl 4 is sensitive to the length of the delay in settlement. It applies equally to both parties, giving rise to rights in favour of whichever party is innocent of causing any delay. The amount calculated in accordance with cl 4.7(b) is not out of all proportion to any loss that could possibly have been contemplated as likely to be suffered by the Buyers as a result of delay in settlement.

168 For these reasons, I reject the Seller's contention that cl 4.7(b) is unenforceable as a penalty.

169 It is difficult to identify the evidentiary foundation of the Seller's counterclaim.

170 On the Seller's evidence, the parties agreed on 18 October 2013 to defer settlement. On that basis, there could be no room for a counterclaim by the Seller, as was acknowledged by his counsel.[111]

171 The foundation for the counterclaim appears to be the suggestion in parts of the Seller's evidence[112] that he could have settled if the Buyers had settled without the title, as the Contract required, because he could then have used some of the proceeds of sale to create a bond to secure KWS, leading to the removal of the caveat. As I said earlier in these reasons, I find that at no stage in October 2013 did the Seller suggest that this approach could or should be taken. The position adopted by the Seller in October 2013 was that he was not in a position to settle because of the KWS caveat.

172 Moreover, prior to the removal of the KWS caveat in June 2014, at no stage did the Seller call upon the Buyers to perform the Contract. To the contrary, the Seller denied the enforceability of the Contract.

173 Further and in any event, I have found that, in substance, the reason settlement did not proceed on 29 October 2013 was the presence of the KWS caveat.

174 In those circumstances, there is no room for any counterclaim by the Seller.

175 For the reasons I have given, the Buyers' claim and the Seller's counterclaim must both be dismissed.

176 I would hear further from the parties as to the orders to be made and as to costs.

CITATION : SIMMONS -v- LOVE [2015] WASC 79 (S)

Costs - Claim for specific performance - Contract settled subject to dispute about entitlement to compensation - Trial of claim relating to compensation - Appropriate costs orders

1 BEECH J: On 6 March 2015, I published reasons for decision dismissing the Buyers' claim for damages, and dismissing the Seller's counterclaim.[113] I ordered that the parties file minutes of orders in relation to costs and submissions in support, with the question of costs to be dealt with on the papers.

2 These reasons relate to the costs of the action. They also relate to the costs of earlier proceedings in CIV 1361 of 2014 (the Caveat Proceedings) brought by the Buyers, and opposed by the Seller, for the extension of a caveat lodged by the Buyers to protect their interest under the Contract.[114]

(1) they should have their costs of the action up to settlement of the sale of the Subdivided Lot on 10 November 2014;

(2) the Buyers should pay 50% of the Seller's costs of the action after 15 December 2014; and

(3) the Seller should pay the Buyers' costs of the caveat proceedings.[115]

(1) the Buyers should pay the Seller's costs of the action up to 23 October 2014, alternatively there should be no order as to costs in that respect;

(2) the Buyers should pay the Seller's costs of the action after 23 October 2014; and

(3) although the Seller's position in this respect is unclear, there should be no order as to the costs in respect of the caveat proceedings.[116]

6 Until the Contract was settled on 10 November 2014, in substance the action involved a claim by the Buyers for specific performance that was defended by the Seller. The Seller defended the action on various grounds, none of which succeeded at trial. The point on which the Seller succeeded at trial, namely that the Contract required settlement on the basis of lodgement of an application for new titles and the Buyers were not ready and willing to do so, was not raised by the Seller at any time prior to 10 November 2014. Prior to settling on the Contract, the Seller gave written confirmation that the Contract was valid and unconditional and that settlement would take place in accordance with the terms of that Contract.[117]

7 In these circumstances, in my opinion, it is appropriate that the Seller pay the Buyers' costs of the action up to and including 10 November 2014.

8 Once the Contract had settled, the issue between the parties was the Buyers' claim for compensation in the sum of $95,746.89. The Buyers failed in their claim for that sum.

9 Consequently, the starting point is that costs should follow the event, and the Seller should have his costs of the action after 10 November 2014.

10 Under O 66 r 1 of the Rules of the Supreme Court 1971 (WA), the court has a discretion to order that the successful party receive less than whole of his costs, or that he pay the costs of some issue or issues.

11 I adopt, without repeating, the principles outlined in Singh v Kaur Bal.[118]

12 The Buyers' submissions point to defences raised by the Seller on which he was unsuccessful.[119] I am not persuaded that those issues were significantly substantial, in the context of the trial as a whole, or, in the case of the issue as to what was said on 18 October 2013, sufficiently discrete and severable from the question of whether the Buyers were ready, willing and able, to justify departing from the ordinary rule that costs follow the event.

13 In my opinion, having regard to the conduct of the case as a whole, an order that the Buyers pay the Seller's costs of the action after 10 November 2014 reflects the justice of the case.

14 Insofar as the Buyers incurred distinct costs relating to the Seller's counterclaim, there should be an order that the Seller pay the Buyers' costs of the counterclaim.

16 The conduct of the Seller necessitated the commencement by the Buyers of their application to extend the caveat. The Seller applied under s 138B of the Transfer of Land Act 1893 (WA), with the result that the Buyers were required to obtain an order extending the caveat within 21 days, or else have it lapse. On 28 February 2014, the Buyers' solicitors wrote to the Seller requesting he withdraw his application under s 138B and allow the caveat to remain on the title. The Seller did not respond to that request.

17 In the Caveat Proceedings, the Seller asserted that the caveat should not be extended because the Contract was illegal or otherwise unenforceable by operation of s 136 and s 140 of the Planning and Development Act 2005 (WA). Further, he contended that the conditions in General Condition 13 had not been met, with the effect that the Contract was no longer on foot.[120]

18 The contentions made by the Seller in the Caveat Proceedings were abandoned in the action. By his letter of 13 October 2014, the Seller acknowledged the Contract was valid and unconditional. Settlement took place. The Seller amended his defence to withdraw these defences.

19 In these circumstances, the Seller should pay the Buyers' costs of the Caveat Proceedings.

20 For the reasons I have given, I make the following orders:

(a) the Seller pay the Buyers' costs of the action up to and including 10 November 2014, such costs to be taxed if not agreed;

(b) the Buyers pay the Seller's costs of the action from 11 November 2014, such costs to be taxed if not agreed; and

(c) the Seller pay the Buyers' costs of the counterclaim, such costs to be taxed if not agreed.

(2) In CIV 1361 of 2014, the Seller pay the Buyers' costs of the proceedings.

CITATION : SIMMONS -v- LOVE [2015] WASC 79 (S2)

Practice and procedure - Slip rule - Costs orders - Whether costs orders should be amended

1 The Seller applies under the slip rule for an order amending an order as to costs. For the reasons that follow, I would dismiss the application.

2 On 20 March 2015, I made costs orders in this action. Relevantly, my orders were that:

(1) the Seller pay the Buyers' costs of the action up to and including 10 November 2014, such costs to be taxed if not agreed;

(2) the Buyers pay the Seller's costs of the action from 11 November 2014, such costs to be taxed if not agreed.

3 Those costs orders were made after a trial of the action. I delivered reasons on the trial on 6 March 2015.[121]

4 At the time that judgment was delivered on the trial, the parties were agreed that directions should be made for the exchange of submissions as to costs. Following the delivery of the judgment on 6 March 2015, there was some exchange between court and counsel as to the appropriate approach to the question of costs. From the court's perspective, the exchange occurred with a view to exploring whether the parties might be able to reach an agreed position as to the costs of the trial.

5 In the course of the exchange, I made an observation to the effect that it would not be expected that the costs in favour of the Buyers up to 10 November 2014 would exceed the costs of the Seller for the period after 11 November 2014.[122]

6 Based upon that observation, the Seller applies under the slip rule for an order that the Buyers' taxed costs up to 10 November 2014 do not exceed his taxed costs of the action from 11 November 2014.

7 Some of the background I have recounted is inconsistent with the affidavit sworn by the Seller in support of this application. He, and presumably his solicitors, have erred in their recollection of the timing and context in which the relevant observation was made. The Seller says in his affidavit that the comment was made in the course of a hearing on 20 March 2015 as regards the costs of the action.[123] That is incorrect; there was no hearing as regards costs. Moreover, there was no hearing of any kind on 20 March 2015. Rather, events occurred as I have already outlined.

8 Order 21 r 10 permits the court to correct errors in judgments or orders arising from any accidental slip or omission. I apply the principles relevant to the slip rule stated by Allanson J in Commissioner of the Australian Federal Police v Goldfinger Bullion Reserve Corporation [No 2]:[124]

The orders have been formally recorded. The general rule is that a superior court of record, in the absence of a statutory provision, and subject to certain narrow exceptions, may not reopen an extracted order. This rule is underpinned by a central and pervading tenet of the judicial system that controversies, once resolved, are not to be reopened except in a few, narrowly defined, circumstances: D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 [34]; Burrell v R [2008] HCA 34; (2008) 238 CLR 218 [15].

The slip rule in O 21 r 10 of the Rules of the Supreme Court is one of the exceptions. The rule reflects the inherent jurisdiction of a court 'at any time to correct an error in a decree or order arising from a slip or accidental omission', regardless of whether the order has been drawn up, passed and entered: see Milson v Carter (1893) AC 638 at 640. It applies where the mistake or error is the result of inadvertence by a party's legal representative: L Shaddock & Associates Pty Ltd v Parramatta City Council (No 2) [1982] HCA 59; (1982) 151 CLR 590, 594. But it is a power to correct a mistake. The correction should be such that had the matter been drawn to the court's attention at the time, the correction would have been made at once: Storey & Keers Pty Ltd v Johnstone (1987) 9 NSWLR 446. Where the proposed correction would alter the substance of an order in a matter on which there might be a real difference of opinion, the rule does not apply.

9 The Seller submits that had his counsel requested that the court make an order to the effect now sought, it is 'probable' that the court would have made such an order.[125] I am not persuaded that it is probable that such an order would have been made. In any event, the question is not whether it is 'probable' that such an order would have been made. If that were the test, orders could all too readily be varied after having been pronounced and perfected.

10 As the principles set out above make clear, the slip rule is not intended to be applied where a proposed correction requires the exercise of an independent discretion or is a matter upon which a real difference of opinion might have existed. Any proposal that the court make an order to the effect of the observation, made in the course of an exchange with counsel, is of that character. It would have required a decision to be made, on a matter of discretion, on which there is, to say the least, room for differences of opinion. Moreover, had such an order been sought, it is likely that evidentiary material would have been advanced by the parties on the question of whether such an order was appropriate. This is not a situation where, had it been drawn to the court's attention, the order would have been made at once.

11 For these reasons, I dismiss the Seller's application.

[1] See Simmons v Love [2014] WASC 116.

[2] Exhibit A, 14. The number in all references to exhibit A or exhibit B is a reference to the page number within the exhibit.

[12] Exhibit C1 [28] [31]; exhibit 2 [9].

[17] Extension/variation agreement dated 23 March 2013, exhibit A, 57.

[18] Extension/variation agreement dated 20 April 2013, exhibit A, 71.

[20] Exhibit C1 [98]; exhibit 1 [26].

[23] KWS Capital Pty Ltd v Love [2013] WASC 294.

[25] KWS Capital Pty Ltd v Love [2013] WASC 294 (S) [14].

[29] ts 170, at the time of trial, Ms Lukey's surname had changed to Triscari. For convenience, I will refer to her as Ms Lukey, her surname at the time of the events.

[51] Simmons v Love [2014] WASC 116.

[58] Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323 [106] [112]; Primewest (Mandurah) Pty Ltd v Ryom Pty Ltd [2014] WASCA 28 [55] (Martin CJ, Murphy JA agreeing); for recent confirmation of these principles see Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35] (French CJ, Hayne, Crennan & Kiefel JJ).

[59] Kidd v The State of Western Australia [2014] WASC 99.

[60] Kidd v The State of Western Australia [117], [122] [124], [126] [127] footnotes omitted; as to the proposition in the third paragraph quoted from Kidd see also Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164 [45].

[61] Plaintiffs' outline of submissions dated 13 February 2015 [10] [14]; ts 234 235.

[62] Agriculture & Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570 [35] (Gummow, Hayne & Kiefel JJ); Birla Nifty Pty Ltd v International Mining Industry Underwriters Ltd [2014] WASCA 180 [50] (McLure P, Buss & Newnes JJA agreeing).

[94] As to which, see, for example Phillips v Ellinson Brothers Pty Ltd [1941] HCA 35; (1941) 65 CLR 221, 243 244 (Williams J); Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93, 112 113 (Dixon CJ & Fullagar J); Agricultural & Rural v Gardiner [74] (Gummow, Hayne & Kiefel JJ).

[95] Exhibit C1 [140] [144]; ts 143 144.

[99] Plaintiffs' outline of submissions dated 13 February 2015 [32] [47]; ts 228 230.

[102] Defendant's outline of submissions dated 12 February 2015 [35] [41]; ts 219 222.

[105] Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109 (Gibbs J); Perpetual Custodians Ltd v IOOF Investment Management Ltd [2013] NSWCA 231; (2013) 278 FLR 49 [80] [81] (Leeming JA, McColl & Gleeson JJA agreeing).

[106] Ringrow Pty Ltd v BP Australia Pty Ltd [2005] HCA 71; (2005) 224 CLR 656 [10] (Gleeson CJ, Gummow, Kirby, Hayne, Callinan & Heydon JJ).

[107] Spiers Earthworks Pty Ltd v Landtec Projects Corporation Pty Ltd [No 2] [2012] WASCA 53 [21].

[108] Spiers Earthworks [23] (McLure P), [86] (Murphy JA).

[109] Spiers Earthworks [25] [26] (McLure P).

[110] Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1914] UKHL 1; [1915] AC 79, 87 88 (Lord Dunedin).

[113] Simmons v Love [2015] WASC 79.

[114] See Simmons v Love [2014] WASC 116.

[115] Plaintiffs' submissions dated 16 March 2015 [13], [19], [12].

[116] Defendant's submissions dated 12 March 2015 [3] [5].

[118] Singh v Kaur Bal [2011] WASC 303 (S) [9] [15].

[119] Plaintiffs' submissions dated 16 March 2015 [20], [21].

[120] Simmons v Love [2014] WASC 116 [27].

[121] Simmons v Love [2015] WASC 79.

[123] Affidavit of Ross Maitland Love sworn 30 October 2015 [3] [6].

[124] Commissioner of the Australian Federal Police v Goldfinger Bullion Reserve Corporation [No 2] [2013] WASC 16 [13] [14].

[125] Seller's submissions dated 2 December 2015 [16].