Townson Property Corporation v Blueprint Developments

CATCHWORDS : Merger and waiver - liquidated damages treated as part of balance purchase monies - part not paid on completion - recoverable thereafter.

CASES CITED : Pascon Pty Ltd v San Marco In Lamis Cooperative Social Club [1991] 2 VR 227; Da Yun Xu v Fang Lin [2005] NSWSC 569;

PARTIES : Townson Property Corporation Pty Limited (Plaintiff) Blueprint Developments No 2 (Australia) Pty Limited (Defendant)

COUNSEL : Mr A. M. Gruzman (Plaintiff) Mr A. Cheshire (Defendant)

SOLICITORS : McBride Harle & Martin Solrs (Plaintiff) Gray & Perkins Solrs (Defendant)

LOWER COURT DATE OF DECISION : 23 December 2005

LOWER COURT MEDIUM NEUTRAL CITATION : Blueprint Developments No2 Aust P/L v Townson Property Corporation P/L

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ADMINISTRATIVE LAW LIST

10311 of 2006 TOWNSON PROPERTY CORPORATION Pty Limited v BLUEPRINT DEVELOPMENTS NO 2 (Australia) Pty Limited

JUDGMENT 1 The plaintiff was the purchaser of land from the defendant. The contract was made on 1 July 2003 (the due date). Completion was to take place on 9 October 2003. Completion did not take place until 28 November 2003. 2 Prior to completion, the plaintiff sought an extension of the due date. An agreement was reached between the parties. There was oral discussion and subsequent writing. The writing dealt with a number of matters (including the waiver of interest on the balance of the purchase price for the period from 11 November 2003 until 24 November 2003, an increase of deposit in the sum of $142,500 and the immediate payment of a penalty fee of $50,000). 3 The contract contained the following provision:- "30. Liquidated Damages (a) If for any reason not solely attributable to the Vendor completion of this Contract has not taken place by the date herein fixed for completion ("the Due Date") the Purchaser shall on completion pay by way of liquidated damages a sum equal to the rate of 10% per annum on the balance of purchase monies from the Due Date or if the Vendor is unable to complete on the Due Date from the date the Vendor notifies the Purchaser of its ability to complete until actual completion without prejudice to the Vendor's rights under Condition 9 hereof to exercise the Vendor's rights and remedies therein mentioner (sic) or its right to damages by virtue of the default of the Purchaser hereunder. Such sum shall form part of the balance of the purchase monies and be paid on completion as an essential term of this Agreement. "

For completeness, I should mention that monies payable pursuant to this provision have been referred to by the parties in terms such as "interest" or "penalty interest". 4 Prior to completion, settlement sheets passed between the parties. Initially, no provision was made therein for what has been referred to as penalty interest. Ultimately, provision was made for a sum being for a period of 4 days (from 25 November 2003 until 28 November 2003). The monies calculated as payable on completion did not include any amount for liquidated damages or penalty interest for the period from 10 October 2003 to 10 November 2003 (the period). 5 On completion, the balance of the purchase money in the amount calculated was paid in exchange for a transfer in the usual form (which was subsequently registered). 6 Subsequent to completion, the defendant sought a recovery of liquidated damages for the period. The sum claimed was in the order of $45,000. The claim was disputed and it went to hearing in the Local Court. 7 In those proceedings, the claim was founded on breach of contract. The claim was defended on, inter alia, two bases. The defence relied on the doctrines of merger and waiver. 8 The hearing extended over 2 days (30 August 2005 and 25 November 2005). On 23 December 2005, Mr Bradd LCM gave his reasons for decision. Both defences were rejected. The judgment was entered for the sum claimed, plus interest and costs. 9 The plaintiff now appeals against the judgment and orders. The plaintiff alleges error in point of law in respect of the two unsuccessful defences. 10 The appeal was heard on 13 September 2006. Counsel have relied on written submissions supplemented by oral argument. There has been reference to a number of decided cases. 11 Whilst the plaintiff said little concerning it, much argument has come to be devoted to the question of waiver. It is a matter that can be disposed of shortly. 12 The plaintiff looks to what happened prior to completion as giving rise to the alleged waiver. The judgment of the Magistrate contains the following:- " 16. The letter of 23/11/2003 related only to the period of the extension sought from 24/11/2003 until the completion date. It is silent about periods before 24/11/2003. The written agreement signed by Mr Metaxas on 11/11/2003 binds the parties in relation to interest payable from 10/10/2003 until 24/11/2003 (see Equuscorp Pty Ltd and ANOR v Glengallan Investment Pty Ltd 211 ALR 101). The agreement waived interest only from 11/11/2003 until 24/11/2003. Although the settlement sheet did not include interest from 10/10/2003 until 10/11/2003 (see Sportsvision Australia Pty Ltd v Tallglen Pty Ltd and ANOR 44 NSWLR 103). 17. The defendant's obligation to pay interest for the period 10/10/2003 until 10/11/2003 did not merge in the transfer, as there was no agreement to waive the interest. " 13 The plaintiff bears the onus of satisfying the court that there has been error of law that justifies the disturbing of the decision of the Local Court. In my view, that onus has not been discharged. Indeed, it can be said that there was a failure to demonstrate any error. 14 The Magistrate made a number of findings of fact in respect of the defence of waiver. The only matter that could give rise to a question of error in point of law was his construction of the agreement reached between the parties concerning waiver of liquidated damages. In my view he did not err in the construction of that agreement. He correctly held that there had been no waiver of liquidated damages payable for the period. 15 The question of merger was the principal matter argued. At the end of submissions, there was little dispute as to the approach to be taken in the determination of this question. It was common ground that the question turned on the proper construction of the contract itself. It was the document from which the intention of the parties was to be gleaned. 16 In propounding the argument that the contract expressed the intention of merging payment of liquidated damages upon registration of the transfer, the plaintiff looked to the provisions of clause 30 (a). It was said that the particular language of that provision manifested such an intention. I do not accept that submission. 17 Both parties placed significance on the final sentence of the provision. It reads: "Such sum shall form part of the balance of the purchase monies and be paid on completion as an essential term of this Agreement. " 18 In my view, the provision manifests an intention that liquidated damages are to be characterised as balance purchase monies and to be treated as part thereof on completion. In other words, as part of what was to be paid in exchange for a transfer. Otherwise, I do not see it as bearing in any way on the question of merger. 19 The question of merger of the obligation to pay purchase price was the subject of detailed examination in Pascon Pty Ltd v San Marco In Lamis Cooperative Social Club (1991) 2VR 227. This is a decision that was cited with apparent approval in Da Yun Xu v Fang Lin [2005] NSWSC 569. As was said in Pascon a review of the authorities did not give support for the proposition that the doctrine of merger operated in relation to payment of the price of land. It was further said that performance of the duty to pay the price is discharged by performance of that duty. Support for the view taken in that case was also found in decisions dealing with the unpaid vendor's lien. The existence of that lien has been regarded as being inconsistent with the extinguishment of the obligation to pay the price. 20 Leaving that authority aside, it seems to me that an analysis of the contract in this case does not support an intention that, if the plaintiff pays less than the full balance purchase money on completion, that which is unpaid is not to remain due to the defendant (or to put it another way, the provisions manifest an intention that the obligation to pay the full balance purchase price enured beyond completion). In particular, I do not see clause 30 (a) as providing the support claimed by the plaintiff. 21 The appeal fails. The Summons is dismissed. The plaintiff to pay the cost of the Summons.

I certify that this and the …..preceding pages are a true copy of the reasons for judgment herein of Associate Justice Malpass. Date………… Associate……………..

21/09/2006 - spelling errors - Paragraph(s) various

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