[4] In the event of the proceeds from the sale together with payments retained by the Seller being insufficient to pay the Seller, the Purchaser shall be liable for the deficiency and shall pay the same to the Seller upon its demand."
223 Lord Goff of Chieveley (at 617) noted the serious consequences of accepting the purchaser's argument, namely that "the basis for winding up the purchaser by reference to the unpaid instalment could be lost; a guarantor of the instalment might cease to be liable under his guarantee; and an assignment or charge of the debt to a third party could lose its value", then said:
"Considerations such as these lend added weight in this context to the familiar principle of construction that clear words are needed to rebut the presumption that a contracting party does not intend to abandon any remedies for breach of the contract arising by operation of law: see eg Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1973] 3 All ER 195 at 215, [1974] AC 689 at 717 per Lord Diplock. I can find no such expression of intention on the part of the seller that he should, by exercising his right of rescission under cl 5.05[2], abandon his right at common law to recover as a debt unpaid instalments of the price which have already accrued due. I would, however, go further. For I am satisfied that, on a true construction of cl 5.05, the recovery of such instalments is consistent with the provisions of the article applicable in the event of a rescission."
224 In Berry v Mahoney [1933] VLR 314, cl 12 in a contract for sale of land provided that in the event of the purchasers committing any breach, all moneys paid by them under the contract should be forfeited to the vendors who were entitled, on giving the purchasers seven days' notice in writing, to rescind the contract, enter upon the property sold and resell it and recover the deficiency in price from the purchasers as liquidated damages. The Full Court held cl 12 did not exclude or restrict other rights or remedies available to the parties apart from the special conditions. Mann ACJ (with whom Lowe and Gavan Duffy JJ agreed) said (at 321):
"We think that the provision as to resale and as to the recovery of the difference between what is obtained by resale and what was contracted to be paid is a provision in the vendor's favour to enable him to determine, if he so desires, in a simple and convenient way the amount of his damages, instead of having recourse to a Court of law to ascertain them … the presence of clause 12 of the conditions of sale does not exclude other remedies available upon general principles to the vendor or the purchaser apart from and outside of this special condition."
225 Lowe J (at 324), in some additional remarks, described cl 12 as "an enabling clause introduced for the benefit of the vendor" which did not restrict the rights he had apart from that clause.
226 In Taylor v Raglan Developments Pty Ltd [1981] 2 NSWLR 117 (at 135) Powell J followed Berry v Mahoney in rejecting the purchaser's submission that that cl 16 of the standard Contract for Sale of Land restricted or removed the vendor's ordinary rights at common law in the event of default by the purchaser. His Honour described the submission as "bold and startling", observing that:
"I say this since, the contract not having been rescinded but, rather, terminated in futuro for breach, and since the right to retain the deposit and the right to damages for breach are the normal rights of an innocent vendor, it would mean giving to cl 16 of the contract a meaning which, far from enlarging, or even protecting, the rights of an innocent vendor, would, at the very least severely limit, if not totally remove, the rights which, in the absence of cl 16 he would otherwise have."
Taylor was referred to with approval in Concut (at [23], footnote 19) and was recently described as "[t]he locus classicus as to the relationship between the alternative regimes prescribed by clauses such as cl 9.3" in the Standard Contract for the Sale of Land - 2000 ed: see Zografakis v McCarthy [2007] NSWSC 144 (at [11]) per Hamilton J.
227 In Progressive Mailing House v Tabali, the lessee argued that cl 10 of a lease dealing with "Default, Termination etc", exhaustively defined the lessor's rights, so that, having re-entered, the lessor could not rely upon the rights it would have had if it had accepted the repudiation of the contract or rescinded on the ground of breach of an essential term.
228 Mason J (at 30) rejected that submission saying:
"If it be accepted that the principles of contract law apply to leases, it is not easy to see why the mere presence of an express power to terminate should be regarded as excluding the exercise of such common law rights as may otherwise be appropriate. It is, of course, open to the parties by their contract to regulate the exercise of the common law right to determine for repudiation or fundamental breach. But in this case the parties have not attempted to do so."
229 His Honour (at 32) identified the weakness in the appellant's argument as being that cl 10 did not exclude liability for non-performance of obligations accruing after the date of re-entry but, rather, explicitly preserved "any claim the lessor might have had against the lessee in respect of any breach of covenants and provisions."
230 In Gimtak Pty Ltd v Cathie [1998] VSC 6; [2001] V ConvR ¶54-645 (to which the primary judge referred (at [28]ff)) cl 8.2(b) of a lease to the Minister administering the Education Act 1958 in respect of the Preston College of T.A.F.E. gave the lessor option in the event the lessee had not removed fixtures or fittings to cause them to be removed and recover the costs from the Lessee as a liquidated debt payable on demand. The lessor sought damages from the Minister and the State of Victoria (the "lessee") in respect of the lessee's failure to comply with the lease obligations to make good the premises on departure. The lessee argued that cl 8.2(b) constituted a regime to deal with the consequences of its failure to remove fixtures and fittings or to re-alter alterations when requested to do so and that the lessor was obliged to incur the cost of the making good exercise before it was entitled to recover damages. Smith J rejected that submission. He held that cl 8.2(b) gave the lessor an option, which it might or might not exercise, to remove the fixtures, fittings and floor coverings and re-alter the alterations. If it did so then it could recover the costs incurred as a liquidated debt payable on demand, but if it did not it was left with its rights under cl 8.2(b) to seek damages for breach of the obligations set out in that clause.
231 In Leighton Contractors Pty Ltd v East Gippsland Catchment Management [2000] VSC 26, Byrne J considered an argument that a contractual provision permitting limited rights of deduction excluded a right to raise an equitable set off. After noting (at [23]) that the argument depended upon an expressio unius inference, his Honour applied Gilbert-Ash to hold that the removal of the right to defend required "something more explicit than an inference of this kind".
232 Finally I turn to Concut v Worrell. That case concerned the question whether a service agreement Concut entered into with Mr Wells on 1 December 1986 replaced an anterior oral contract of employment. Concut summarily dismissed Mr Wells in 1988. He brought an action in the Supreme Court of Queensland for damages for wrongful termination of his employment. Concut resisted the claim on the basis that Mr Wells had breached his conditions of employment in a manner which gave it the right to dismiss him without notice and without the payment of any penalties. The primary judge dismissed Mr Wells' claim. He concluded that the dismissal was justified on the basis of serious misconduct on Mr Wells' part which most probably occurred prior to 1 December 1986.
233 The Queensland Court of Appeal (by majority) upheld Mr Wells' appeal, holding, relevantly, that the service agreement became the exclusive charter of the contractual rights and duties of the parties, and that subsisting rights and liabilities under the prior contract, including those arising by reason of breach thereof, were compromised or released: see Concut (at [8], [20]).
234 The service agreement contained a provision (cl 6) dealing with dismissal for misconduct: Concut (at [13]). In the High Court the respondent argued, inter alia, that cl 6(a) (which dealt with serious misconduct) had a prospective and exclusive operation so that Concut was precluded from dismissing Mr Wells during the currency of the service agreement for misconduct anterior to the date of the service agreement: see Concut (at [21])
235 The appeal was allowed. Gleeson CJ, Gaudron and Gummow JJ concluded (at [18]) that the Court of Appeal's interpretation of the service agreement as a new and discrete contract of employment which had the effect of terminating and replacing the anterior oral agreement between Concut and Mr Wells did not accord with the manifest intention of the parties. Their Honours noted (at [23]) that contracts between master and servant were a typical class of contract in which terms would be implied by law. They recognised that the parties could exclude the implication of terms typically implied in contracts between master and servant, they held, applying Stocznia Gdanska and Gilbert-Ash, that "clear words are needed to rebut the presumption that a contracting party does not intend to abandon any remedies for breach of the contract arising by operation of law".
236 In their Honours' view (at [23] - [24]), however, cl 6(a) operated prospectively and was a provision of the nature of that referred to by Powell J in Taylor (at 135), designed to augment rather than to restrict or remove the rights at common law which Concut otherwise would have had in respect of a breach of any term implied by law, in particular Mr Wells' contractual and fiduciary obligations to act in a manner compatible with the due and faithful performance of his duty, or consistently with the confidential relation between himself and the appellant. Nor did cl 6(a) release or compromise such rights as Concut may have had at the time of the execution of the service agreement by reason of Mr Wells' past misconduct.
237 McHugh J also held that the Court of Appeal had erred and (at [41], [44]) that there was only one contract of employment between Concut and Mr Wells. Kirby J also concluded that Concut's right to dismiss Mr Wells for pre-1 December 1986 misconduct survived execution of the service agreement. In his Honour's view (at [54] - 55]) "it would be yet another illustration of impermissible expressio unius reasoning to conclude that the express provisions of the service agreement, such as cl 6, were intended to replace whatever legal consequences flowed from the previous oral agreement between the parties, including for any breach of such agreement". Rather, the "better, more practical and commercially realistic view [was] that the service agreement was intended to vary and supplement the oral employment agreement between the parties, not to rescind it". His Honour added (at [56]) that:
"It would take much more explicit provisions in the service agreement to persuade me that it was intended, objectively, to deprive the employer of the remedies normal to the discovery by it of such a breach by a senior employee of one of the most basic terms ordinarily implied in an employment contract. This is particularly so given the essential character of an employment relationship recognised by the common law, which continued from the commencement of the oral contract until the employee's dismissal, regardless of the intervening execution of the service agreement."
238 The description of the principle of concurrence as "the contract law counterpoint to the expressio unius rule" (Courtenay and Curtin, above), and the reference in both Concut and Leighton's to the rule as an analogical reasoning tool in interpreting a contract calls to mind the increasing convergence of principles of statutory and contractual interpretation: see Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2005] FCA 1812; (2005) 56 ACSR 263; approved on appeal in Lion Nathan Australia Pty Ltd (ACN 008 596 370) v Coopers Brewery Ltd (ACN 007 871 409) and Others [2006] FCAFC 144; (2006) 156 FCR 1; The Owners of Strata Plan No 3397 v Tate [2007] NSWCA 207 (at [63] ff) per McColl JA (Mason P agreeing); Gardiner v Agricultural and Rural Finance Pty Ltd [2007] NSWCA 235 (at [13]) per Spigelman CJ. Application of the expressio unius rule in the contractual context should be approached with the same caution adopted in statutory interpretation: see generally the discussion in Pearce & Geddes, Statutory Interpretation in Australia (2006), Australia, LexisNexis, at [4.28] ff.
Construction of cl 7
239 It is convenient at the outset to deal with the appellant's argument that cl 7 imposed a continuing obligation on the respondent which survived the expiry of the lease. In my opinion that submission should be rejected. The respondent's obligation to remove the wharf was expressly limited to it doing so prior to the expiration of its term. That obligation did not survive the expiry of the lease. There is no sensible reason to conclude that the parties intended any other scenario. Cessation of the respondent's obligation on expiration of the term of the lease is consistent with the fact that once the lease expired the respondent had to give up possession of the property comprised in the lease: Woodfall's Law of Landlord and Tenant, Sweet & Maxwell, Vol 1 at [17.002]. Thereafter it had no legal right to enter the premises it had formerly occupied. Clause 7 recognised that the respondent's obligation did not, and could not, survive expiry of the lease, and that the only (former) party to the lease which thereafter had control of the land and the legal right to deal with the wharf was the appellant.
240 Further, in my view cl 7 was intended to deal exhaustively with the parties' obligations and rights in relation to the wharf. The clause established a regime dealing with each party's obligations, the time when each was to be performed and the consequences in terms of payment by either party or their respective entitlements to compensation in the event that a particular step was taken. Thus the respondent was obliged to remove the wharf prior to the expiration of the term of the lease at its cost and without compensation. If it did not remove the wharf or any part of it by the time the lease had expired then the appellant could retain the wharf (or any part thereof) and not pay compensation. Alternatively it could remove and sell or otherwise dispose of the wharf and recover the cost of so doing from the respondent on demand in a claim for liquidated damages, after deducting the net proceeds of any sale of the wharf.
241 Clause 7 modified the situation which would ordinarily exist between landlord and tenant in relation to structures erected on the land. The wharf, being fixed to the land on which it stood by timber piles sunk into the bed of the harbour (primary judgment at [7]) was undoubtedly a landlord's fixture. Once fixed, it became part of the land and was owned by the appellant as long as it remained fixed: Melluish (Inspector of Taxes) v BMI (No 3) Ltd [1996] AC 454 (at 473) per Lord Browne-Wilkinson. Fixtures which form part of the realty pass with the land: North Shore Gas Co Ltd v Commissioner of Stamp Duties (NSW) [1940] HCA 7; (1940) 63 CLR 52 at 68 per Dixon J; Wincant Pty Ltd v South Australia (1997) 69 SASR 126 (at 142) per Olsson J (with whose observations in relation to the law of fixtures Doyle CJ agreed), primary judgment (at [31]). The tenant is not entitled to remove them.
242 However parties to a lease may provide for the tenant to remove fixtures it would not otherwise have been entitled tor remove: Melluish. This, as the primary judge held, was, in part, the purport of cl 7. It was intended to ensure the leased premises were left clear of structures, whether erected at the time of the lease or during its term. It imposed an obligation on the respondent, and granted it permission, to do an act otherwise prohibited.
243 Thus cl 7 was framed specifically with a view to adjusting what otherwise would have been the parties' rights. Without cl 7 the respondent could have walked away from the land at the expiration of the term leaving the wharf in situ. The appellant could not have required it to remove it, nor sought compensation for it remaining: it formed part of its land. Clause 7 conferred a benefit on the appellant, enabling it to have the wharf removed at the respondent's cost, whether because the respondent complied with its obligation to do so prior to the expiration of the lease or because the appellant removed it after the term expired. It also gave the appellant the option to retain the wharf without paying the respondent compensation.
244 The conclusion that cl 7 exhaustively defined the parties' rights and remedies is also supported by cl 8. That provision gave the appellant the option, in the event of early determination of the lease, to require the respondent to remove the wharf at its cost, and, in the event of non-compliance gave the appellant the option to remove the wharf and recover the cost from the respondent. Once again an express regime was formulated for removal of the wharf, spelling out each party's rights and obligations.
245 It might be accepted, as the primary judge did (at [32] - [33]), that "at the time … the lease[s] [was] executed no one could tell whether removal of the improvements immediately prior to the determination of the term would be more advantageous to the lessors or to the lessee": Starline Drive-In Theatre Ltd v Federal Commissioner of Taxation [1964] HCA 68; (1964) 112 CLR 458 (at 460) per Kitto J. Accordingly, while the respondent accepted the obligation to bear the cost of the wharf being removed, whether before or after the term expired (the only difference being who carried out that task), the appellant was entitled to retain the wharf, an option it would no doubt exercise if it determined that course was advantageous to it.
246 Once the respondent left the premises however it could have no control over the fate of the wharf, nor any idea what the appellant's intentions were in relation to it. The mere fact that the wharf remained in situ post expiration did not necessarily mean the appellant had decided to retain it. As the facts of this case indicate, reasonable minds may differ as to the question whether the fact the wharf has not been removed means the appellant has decided to retain it. The primary judge concluded (at [44]) it had not. Beazley JA (at [162]) has reached the opposite conclusion, with which Campbell JA agrees. For my part I would, with respect, prefer the primary judge's finding. As he clearly demonstrated, the position the appellant found itself in at the time the proceedings were commenced in relation to the wharf was reached more by a process of attrition than active desire on its part to retain the wharf - whose demolition it had been seeking even before the lease expired.
247 It can be assumed that the parties were alive to the uncertainty which might flow to decide if the consequences of the respondent's breach of cl 7 at the expiration of the lease were determined from the mere fact that the wharf continued to remain on the land. The respondent would have been in breach of its cl 7 obligation. It is plain, in my opinion, that the parties turned their minds to the possibility of the respondent being exposed to a claim for damages in respect of that breach. They sought to limit the uncertainties which might bedevil such a case by prescribing a regime for the appellant to recover damages for breach from the respondent: they were only recoverable if the appellant had removed the wharf and the (net) cost of so doing had been quantified.
248 In my opinion by expressly dealing with the circumstances in which the appellant could recover damages in respect of the respondent's breach of its cl 7 obligation, the parties manifested their intention that the appellant would not be entitled to recover damages if it had not removed the wharf. The regime they created makes it plain they intended to exclude any right on the appellant's part to recover damages other than in the circumstances cl 7 prescribed.
249 Such an interpretation gave the parties certainty at the commencement of the lease in 1972 as to the consequences of non-removal of the wharf twenty-seven years later on 31 December 1999 when the lease was to expire. It addressed the parties' commercial interests in a practical and commercial manner.
250 The conclusion that cl 7 constitutes a code is consistent with the authorities dealing with the principle of concurrence. I start with the general proposition that the ordinary consequence of the breach by the respondent of its obligation to remove the wharf prior to the expiration of the term of the lease would be that the appellant would have a cause of action for damages against the respondent in the nature of the secondary obligation referred to by Lord Diplock in Moschi v Lep Air Services Ltd [1973] AC 331 at 350; see also Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 at 849-850.
251 However, as I have sought to explain, cl 7 was an exceptional provision to be found in a lease. Clause 7 was not merely a provision in the appellant's favour designed to augment existing rights: cf Concut, Berry, Taylor, Gimtak. Rather it represented an adjustment of the parties' rights in circumstances where an obligation was imposed upon the respondent which it would not ordinarily have been required to undertake. Concluding that cl 7 is an exhaustive statement of the parties' rights and remedies does not, therefore, do violence to the implication of terms which are fundamental to the relationship between landlord and tenant: cf Gilbert-Ash, Stocznia Gdanska SA, Concut.
252 Further the interpretation I favour does not substantially limit the appellant's rights. It ensures that it can recover damages for the respondent's breach if it has itself acted to restore the land to the condition it would have been in had the respondent performed its cl 7 obligation. To that extent, cl 7 reflects the general principle that damages in contract are awarded with the object of placing the plaintiff in the position in which it would have been had the contract been performed: Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR 1 (at 11-12); Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64.
253 In my opinion, with respect, the primary judge erred in concluding that cl 7 did not exhaustively contain the parties' rights in respect of the removal of the wharf at, or after, the expiration of the term of the lease.
254 The conclusion that the appellant could not recover damages unless the wharf had been removed means the Court would not have granted specific performance at the date proceedings were commenced. The primary judge's decision should be affirmed on the basis of Ground 2 in the Amended Notice of Contention.
255 In writing the above I have assumed that the respondent's failure to remove the wharf constituted a breach of cl 7 on its part. I am conscious that the respondent sought to argue that its failure to remove the wharf did not constitute a breach in circumstances where it had attempted unsuccessfully to obtain consent to demolish the wharf prior to the expiration of the term. Having regard to the conclusion I have reached on the interpretation of cl 7, it is unnecessary to decide this question.
256 I agree with the orders Beazley JA proposes.
257 CAMPBELL JA: I agree with Beazley JA.
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