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Devpro (a firm) v Seamark

 

[2007] QCA 241

 

SUPREME COURT OF QUEENSLAND

PARTIES:

FILE NO/S:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

DELIVERED ON:

27 July 2007

DELIVERED AT:

Brisbane

HEARING DATE:

15 June 2007

JUDGES:

Jerrard JA, White and Atkinson JJ Separate reasons for judgment of each member of the Court, each concurring as to the orders made

ORDER:

1. Dismiss the appeal
2. Appellant pay the first respondent’s costs

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – OTHER MATTERS – where a contract to purchase a site for development was entered into – where the contract was executed – where the appellant later purported to terminate the agreement – whether the termination was valid in accordance with clause 16.6 of the contract

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – OTHER MATTERS – where the learned trial judge was required to calculate a “development fee” in accordance with clause 13 in the contract – where the calculation of the development fee was contingent on the interpretation of the terms “Building” and “fully leased” – whether in the circumstances the buildings were fully leased

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – OTHER MATTERS – where the contract provided a dispute resolution mechanism in clause 22 – where the contract also contained a requirement of “full faith” in clause 28 – whether clauses 22 and 28 can be used to determine what the percentage profit would be for the purposes of clause 13.2 – whether a term relating to the payment of a fair and reasonable percentage should be implied in the contract

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – OTHER MATTERS – where the learned trial judge calculated a reasonable construction cost – whether the calculation was correct

Trade and commerce – Trade Practices Act 1974 (Cth) and related legislation – Consumer protection – Unconscionable conduct – What constitutes – whether the conduct was unconscionable

Trade Practices Act 1974 (Cth), s 52AC

Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600, applied

Foley v Classique Coaches Ltd (1934) 2 KB 1, distinguished

Sargent v ASL Developments Ltd (1974-75) 131 CLR 634, distinguished

Sudbrook Trading Estates Ltd v Eggleton [1983] 1 AC 444, distinguished

COUNSEL:

M Stewart SC, with D O’Sullivan, for the appellant  S Couper QC for the first respondent

SOLICITORS:

Schweikert Lawyers for the appellant Forbes Dowling Lawyers for the first respondent McCullough Robertson for the second respondent (the second respondent withdrew from the appeal)

[1]  JERRARD JA:  This appeal concerns the construction of an agreement executed on 10 December 1998 between the appellant Seamark Pty Ltd and Devpro, the latter being a partnership formed between Woodcroft Trading Co Pty Ltd (“WTC”) and Macpro Pty Ltd (“Macpro”), formed to undertake land development.  The agreement between Devpro and Seamark concerned the development of a parcel of land at the corner of Progress Road and Garden Road at Richlands, known as “Progress Corner”.  The learned trial judge gave reasons for judgment on 18 December 2006, upholding claims by Devpro for payment to it of a Development Fee under the agreement, and a further, much smaller, claim for a quantum meruit payment.  On 20 December 2006 the judge settled the final order that the appellant pay the respondent the sum of $1,106,154.11, including interest in the sum of $257,508.61 from 26 August 2003 to 20 December 2006.  Seamark’s grounds of appeal, amended by leave granted on 15 June 2007, attack the order and reasons for it on a variety of grounds.

The actors

[2] WTC was led or managed by a Mr Woodcroft-Brown and Macpro by a Mr Grant McLennan.  Mr Woodcroft-Brown was a Civil Engineer whose involvement in developments in Brisbane was on the basis of identifying sites and then finding financiers to allow development to proceed under his supervision.  In or about March 1998 he learnt of Progress Corner as a potential site for a drive-through KFC outlet, on land which included a service station patronised by heavy vehicles coming off the Ipswich Motorway and out of existing industrial areas which the motorway served.  The land was adjacent to Progress Road, a busy thoroughfare giving access to a large residential development.  Devpro acquired an option to purchase the site, and Mr Woodcroft-Brown was later introduced to Mr Harold Shand of Seamark Pty Ltd.  Mr Shand, formerly a practicing solicitor, was then looking for an investment project with a short turnover, and he and Mr Woodcroft-Brown ultimately agreed to a plan whereby the appellant Seamark would acquire the land, it would be subdivided (with Seamark retaining ownership of the service station site), and the respondent Devpro would develop and then sell the balance.  Subdivisional approval was given by the Council on 2 December 1998, and Seamark entered into a contract on 18 June 1998 to purchase the site for approximately $2.6million.  On 10 December 1998 the agreement the subject of this litigation, a Development Agreement, was executed between Seamark and Devpro.  The principal matter litigated in this action was Devpro’s claim under that agreement to what was styled a Development Fee. 

Some Agreement terms

[3] The agreement defined[1] the “Project” as:

“the subdivision of the Parcel and the construction of the Buildings on the Development Land and its surrounds in accordance with the Plans and Specifications, the leasing of the Buildings and the sale of the Development Land and Buildings.  The project does not include the ownership of the Ampol Land.”

The “Buildings” were defined as:

“the building or buildings comprising a fast foods store, a restaurant and a shop as defined in the Town Plan to be erected on the Development Land in accordance with the Plans and Specifications and where the context so admits any part of the Buildings.”

“Plans and Specifications” were defined to mean:

“the plans and specifications to develop the Development Land which have been approved by the Council and the Owner and any variations or amendments agreed upon pursuant to the provisions of this Agreement.” 

When the agreement was executed, there were no plans and specifications which had been approved by the Council, but a number of different sketches had been considered by Mr Woodcroft-Brown and Mr Shand during the negotiation phase.  They had settled on one described as “Sketch A”[2] as that which they would pursue.  It showed a drive-through fast food premises on the north west corner, diagonally opposite an L-shaped building containing a fast food outlet of 130m2, a retail area of 300m2, and a separate fast food outlet area of 340m2.  That L-shaped building adjoined the service station land, which was to the east.

[4] As it happened the L-shaped building, which came to be described as Stage 1, was all that was constructed under the agreement.  That was because by November 1990 all hope of obtaining a tenant for a drive-through fast food outlet had dissipated.  On or about 9 December 1999 a material change of use application was lodged, approved on 17 May 2000, for permission to have retail as well as fast food use of the site.  But the parties did not make any alteration or amendment to the agreement and the definition of “Buildings”.  “Stage 2” came to be envisaged as a complimentary L-shaped building along the north east of the site, but was not constructed, because of difficulty in securing future tenants.  Stage 1 as constructed did include a fast food store (a Dominos Pizza store), a restaurant (a Subway outlet, which was within the definition of “restaurant” in the Town Plan), and a video shop, as well as other tenancies.  The approved plan for what was termed Stage 1 showed 12 tenancies, and it appears that what was built allowed for that many.

[5] The learned trial judge concluded that since both parties to the agreement knew that no plans and specifications had been approved at the time it was entered into, they must be taken to have intended to use the future perfect tense – that is:

“The plans and specifications... which shall have been approved”

in the definition of “Plans and Specifications” in the agreement.  I agree, and there was no serious challenge to that construction on the appeal.  But so construing “Plans and Specifications” does not necessarily assist in the construction of “Buildings”, which is a critical part of the appellant’s alternative case.  It argued that the learned judge was wrong to understand that term when used in Clause 13 of the agreement as restricted to the buildings specifically described in the definition of “Buildings”, namely a fast food store, a restaurant, and a shop.  The pleadings show agreement between the parties that the project pursuant to the Development Agreement was originally the construction, leasing and sale of a fast food restaurant, a shop and a drive-through food store,[3] and the pleadings describe the context in which the Development Agreement was made.  That context is relevant to its proper construction; the parties left the definitions in their agreement unamended if and when its execution varied from what was originally contemplated. 

[6] The Development Agreement essentially required that the appellant make the land available for development and provide finance, and that the respondent was to be:

“... responsible for the construction and administration of the Project on a day to day basis to ensure development of the Development Land in accordance with the Plans and Specifications, the leasing of the Buildings (subject to the Owner’s consent) and the sale of the Development Land and Buildings (subject to the Owner’s consent) and shall use its best endeavours to complete the Project in accordance with the Plans and Specifications by the Sunset Date and..”

There followed a list of obligations placed on the respondent. The Sunset Date was extended by agreement to 15 April 2001. 

Did the appellant validly terminate?

[7] Clause 16.6 read:

“If completion of the Project is delayed beyond the Sunset Date (as extended pursuant to Clause 16.2) the Owner may at any time terminate this Agreement by notice in writing to the Developer, in which event the Developer shall have no further Claim of any kind whatsoever against the Owner arising under this Agreement or by reason of any act or thing done or to be done by the Developer on the Owner’s behalf except the right to terminate this Agreement, provided however that such termination shall be without prejudice to any existing liability of the Owner to pay the expenses payable by it under this Agreement then already incurred.”

The first and principal ground of appeal contends that the appellant did validly terminate the agreement by notice in writing on 28 May 2002.  It was common ground that the date of completion of the project was the date of sale of the development land (excluding the Service Station, which Seamark retained) on       27 June 2003, for $4million.  That date of completion was well after the date on which the appellant claimed to have exercised the right to terminate under Clause 16.6.  If that termination was valid, then the respondent was not entitled to the Development Fee which the learned judge ordered the appellant pay it, in an amount of $840,017.50, together with interest thereon.  The learned judge had found the respondent was entitled to that Development Fee, in accordance with Clause 13 of the Agreement.

[8] Clause 13 read:

13. Development Fee

13.1If the Buildings are fully leased at the Date of Completion of the Project, the Owner shall pay to the Developer within 60 days from the Date of Completion of the Project a Development Fee calculated as follows:-

Development Fee = A + B + C

Where: -

A = 5% of the Development costs less the Developer’s Fee paid to the Developer by the Owner in accordance with Clause 12.

B = 20% of the Growth Rental. 

C = 45% of the Profit.

13.2If the Buildings are not fully leased at the Date of Completion of the Project, the Owner shall pay to the Developer within 60 days from the Date of Completion of the Project a Development Fee calculated as follows:

Development Fee = A + B + C

Where:-

A = 5% of the Development Costs less the Developer’s Fee paid to the Developer by the Owner in accordance with Clause 12.

B = 20% of the Gross Rental (if any). 
C = % of the Profit: a proportion of the profit as agreed.”

[9] It was also common ground that the parties had been unable to agree on the proportion of the profit to be paid under Clause 13.2 as the component C of the Development Fee, if the Buildings were not fully leased at the Date of Completion.  Since the appellant contended that on the proper construction of “the Buildings”, they were not fully leased at the date of completion (27 June 2003), it contended that Clause 13.2 applied, with the result that the respondent was not entitled to any fee.  That result followed from the failure to agree to item C of that fee, and from the fact that the respondent had abandoned an argument that there could be a severance of the un-agreed component from the two other items.

[10]  The learned trial judge described the project as fraught with delays and other problems variously attributable to Council requirements, lack of mutual respect between Mr Woodcroft-Brown and Mr Shand, Mr Shand’s overriding the tender process initiated by Mr Woodcroft-Brown and insisting upon the appointment of a builder of Mr Shand’s choosing, an extremely poor relationship between Mr Woodcroft-Brown and Mr Bennett, the builder’s principal, the need to negotiate with Caltex, and difficulties attracting tenants.  The judgment records Mr Shand being intent upon the appointment of a builder trading as Boss Constructions, with Mr Bennett as the principal, although the judge found that Mr Shand’s reason for enthusiasm for Mr Bennett’s company was not revealed, even at the trial.  The judge also found that Mr Woodcroft-Brown had remonstrated about the appointment of Boss Constructions, to no avail, and that Mr Shand had not supplied Mr Woodcroft-Brown with a copy of the building contract between Seamark and Boss Constructions, despite repeated requests.  The judge found that Mr Shand assumed the role of superintendent under the contract, effectively excluding Mr Woodcroft-Brown from the supervisory and co-ordinating role assigned to the latter under the Development Agreement, and that Mr Shand had deliberately given Mr Woodcroft-Brown mixed messages about his wish to proceed with the project, in order to keep pressure on Devpro. 

[11]  The judge found that Mr Shand’s strategy was to pretend to Mr Woodcroft-Brown and Devpro that Mr Shand wanted to build Stage 2; in fact Mr Shand wanted to flush out a potential buyer of the land, who might be interested in a larger scheme that would include the land on which Stage 2 would be built.  But he had no intention of building Stage 2 in the absence of solid tenant interest.  Devpro continued to seek tenants for Stage 2, and Mr Woodcroft-Brown eventually introduced the Director and Chief Executive Officer of the Queensland Lions Soccer Club, and Pivotal Holdings Pty Ltd, to Mr Shand.  Ultimately the Queensland Lions Soccer Club acquired the development land for $4million, (not including the service station) and settlement was on 23 June 2003.  Devpro claimed a right to the Development Fee under Clause 13.1, contending that the “Buildings” as defined in the agreement were fully leased at the date of completion of the project, and that it was entitled to the fee calculated in accord with Clause 13.1.  That claim was upheld by the learned judge.

First ground of argument

[12]  The appellant’s first argument was that the learned trial judge had erred in concluding that a letter by it, dated 28 May 2002, in which it purported to terminate the Development Agreement in accordance with Clause 16.6, was not effective to do so.  The learned judge so held because the judge concluded that Seamark had earlier irrevocably elected not to exercise that right.  The learned judge’s conclusions were expressed in paragraph [60] of the reasons for judgment as follows:

“By 16.6 the first defendant could terminate the Development Agreement ‘at any time’ after 15 April 2001 because the Project was not complete.  It was confronted with the choice of terminating the agreement or keeping it on foot.  The right of termination was a continuing one, not required to be exercised properly.  Whether the first defendant exercised its right to election must be inferred from its conduct after 15 April 2001.  As the High Court observed in Immer (No 145) Pty Ltd v The Uniting Church in Australia Property Trust (NSW)[4]

‘The point is that where the right to rescind is a continuing one, it is not so readily concluded that the party entitled to rescind has abandoned that right completely as opposed to taking no action to exercise the right at the time in question.’

Nevertheless, once an election is made, it cannot be exercised again.  Here the first defendant by Mr Shand made a deliberate decision not to terminate in reliance on Clause 16.6 because the project was then commercially unsaleable and by memoranda dated 24 May 2001 and 5 July 2001 it called on the plaintiff to perform its obligations under the agreement.  As its senior counsel conceded, Mr Shand’s conduct effected an election not to terminate.”

[13]  The Sunset Date originally fixed in the agreement was December 31, 1999 but that was amended to 30 April 2000, and by further agreement pursuant to Clause 16.2, to 15 April 2001.  Devpro wrote a memorandum dated 23 March 2001 to the appellant, for the attention of Mr Shand, which suggested that they agree on the timing and Sunset Date for Stage 2.[5]  Mr Shand replied to that particular suggestion, in a memorandum dated 3 April 2001, that:

“Stage 2 – First and foremost, the timing and sunset date will be driven by the tenants.  Get the tenants in place and I can then make some considered decisions rather than agreeing to dates that cannot be achieved.”

[14]  Mr Shand did not exercise on the appellant’s behalf the right to terminate on or about 15 April 2001, and his evidence in cross-examination was that he had made a deliberate decision at that time not to do that, because the project was then commercially unsaleable.[6]  What he did do was write to the first respondent on      24 May 2001, in a short note that read:

“Re Richlands

I think you and Grant promised a tenancy update yesterday.  Can you let me know what is going on?  I am keen to have building work under way as soon as possible so it can be completed in time for November opening.”[7]

He had earlier sent Mr Woodcroft-Brown an action list on 2 May 2001,[8] listing “outstanding matters”, and what each of Mr Shand, Mr Woodcroft-Brown, and Mr McLennan were required to do.  That list self-evidently assumed the Development Agreement continued, and the document concluded with the statement that “I am now in a position to move forward without the constraints that the failure to sell Toowoomba caused.”  The last remark referred to problems with another project of his in Toowoomba. 

[15]  He sent another memorandum dated 5 July 2001, which relevantly read:

“2.The other issues all relate to tenancies where a lot seems to be happening but nothing is getting reported e.g.

  • A potential tenant for the hot bread shop in stage I.
  • A tenant for the other vacancy in stage I.
  • The position with the Supermarket & newsagency in stage 2.
  • Fauldings in stage 2.

Can you please get me some feedback and give me a list of the potential tenants with their contact details so I can find out exactly where they are up to.”

[16]  Mr Shand agreed in cross-examination that he had (thereby) required Mr Woodcroft-Brown and Mr McLennan on behalf of the first respondent to continue to find tenants for Stage 1, and agreed that the only obligation they had to do that was pursuant to the Development Agreement.  He also agreed that at a later time he had instructed them to begin finding tenants for Stage 2, and that again the only obligation they could have had to do that was pursuant to the agreement.  He acknowledged that he then wanted them to perform their obligations to achieve the objects of the Development Agreement.

[17]  In a further memorandum dated 17 September 2001, Mr Shand asked Mr Woodcroft-Brown:

“2.Richlands
What is the state of play with the tenants and the convenience store.  Is anything going to happen or should we just shut Stage 2 down and wait till things improve and tenants or developers start to approach us?  Otherwise we just seem to be wasting time and money and effort.”

On 1 October 2001 Mr Shand wrote again to Mr Woodcroft-Brown, and that communication included the following:

“4.Tenants at Richlands continue to be a concern.  The Sunset Clause on our joint venture agreement, which had been extended twice, has long since expired.  I think it is important that we move to re-introduce a Sunset Clause so we can bring about some closure on the development would appreciate your suggestions of a date by which you expect to bring about some real progress in the leasing of Stage 2.  As you observe, this impacts on the performance of tenants in Stage I.  We need to finalise our involvement in the project so we can get on with other developments and I am sure you are in the same position.”

[18]  Devpro relied on those communications to support the finding of an election to forgo the right of termination given by Clause 16.6.  But the appellant argued there were other, later, communications from both parties, in which Mr Shand impliedly asserted in his correspondence a right to terminate, and Mr Woodcroft-Brown impliedly accepted (or did not challenge) that the right may exist.  That acceptance was first suggested by a memorandum from Mr Woodcroft-Brown dated 1 November 2001, which included the request:

“...that any decision to sell the property or terminate the joint venture is held over until February 2002.  There has never been a Sunset Date agreed on for Stage 2, and a reasonable period will be needed to tenant and build this stage.  February is therefore not the Sunset Date but a decision date.”

[19]  The right of termination implicitly acknowledged was one contended for by senior counsel for Seamark at the trial, namely that it was open to Seamark (not withstanding any earlier election to forego or abandon its rights of termination under Clause 16.6) to call for the project to be completed within a reasonable time, and in the event that it was not, to terminate the Development Agreement.  The learned trial judge understood that argument to be based on the general principle that where an agreement is not of a finite duration, it may be brought to an end by one party on reasonable notice to the other.[9]  The judge recorded that senior counsel for Seamark had submitted that the evidence supported the conclusion that in the period from about October 2001 to 28 May 2002, Mr Shand had made it clear to Mr Woodcroft-Brown, that unless the project was completed promptly, or the plaintiff either alone or with others took it over on terms satisfactory to Seamark, Seamark would terminate the agreement.

[20]  The learned judge held that termination on that basis had not been pleaded, and that in any event the factual foundation for the submission was not made out, because Mr Shand had not made his position unequivocally clear to Mr Woodcroft-Brown, and on the contrary had deliberately continued to send mixed messages.  On the appeal senior counsel for Seamark relied only on the argument that the Development Agreement had been terminated by the notice given on 28 May 2002, exercising the right given under Clause 16.6, and did not contend that termination had occurred after the giving of reasonable notice by Seamark; none of the learned judge’s findings of fact about Mr Shand and his dealings with Mr Woodcroft-Brown were challenged on the appeal.  That absence of challenge is relevant because Mr Woodcroft-Brown’s letter of 1 November 2001, remarking there had been no Sunset Date agreed for Stage 2, and describing his opinion of a difference between a Sunset Date and a decision date, is fairly explicable on an understanding and acceptance of a right to terminate after reasonable notice, rather than on the basis of Clause 16.6.

[21]  Mr Shand replied on 5 November 2001 to Mr Woodcroft-Brown’s communication of 1 November 2001, contending there was no Sunset Date for Stage 2 because there was never any distinction in the documents between Stage 1 and Stage 2:

“i.e. the Sunset Date was to finish the entire project.  I don’t agree with your idea of February being a decision date.  We need to bring things to a head for a decision by 30 November 2001.”[10]

[22]  He then wrote on 10 December 2001 to Mr Woodcroft-Brown.  That communication included that:

“As you said earlier, we need to set a decision date to get on or get out.  I have finalised all the outstanding issues with Caltex to extend the lease term.  To be on the safe side, I need to notify formally of our intentions.  I understand there a (sic) no current unconditional lease commitments in place.  I therefore propose to terminate any Joint Venture arrangements, which may exist between us with effect from 31 January 2002.  I will terminate any leasing appointments and you are instructed not to appoint any leasing agents from today.”

That memorandum did not assert that Mr Shand was relying on the appellant’s behalf on Clause 16.6 of the Development Agreement.  Despite that declaration, Mr Shand later wrote to Mr Woodcroft-Brown on 22 April 2002, that he wanted to “fast track”, in the hope:

“This will encourage the existing tenants in Stage 1 and fire up some of the wavering prospective tenants in Stage 2...  Seamark wants to wrap it up by completing the development and moving on with other projects it has...”

That communication was inconsistent with any termination on 31 January 2002.  But then Mr Shand wrote a letter dated 28 May 2002 to Mr Woodcroft-Brown.  It relevantly read:

“I therefore give notice under the Development Agreement of the termination of the Development Agreement as contemplated by Clause 16.6 of the agreement.  Consistent with the owner’s obligations under that Clause, I am enclosing a cheque for $23,367.30 for outstanding fees claimed by you.”

Devpro did not accept that any such right to terminate any longer existed.

[23]  The appellant argues that the learned judge mistook the concession in its written argument, which was only that if a power to terminate pursuant to Clause 16.6 was one which it was required to exercise promptly, then the evidence justified the conclusion that Mr Shand’s conduct had effected an election not to exercise the power.  The appellant pointed to the conclusion by the learned judge that the right of termination given by that clause was a continuing one, not required to be exercised promptly, and submitted that its concession was misapplied.  That may be accurate, but the issue is not the concession but whether the learned trial judge was correct in concluding that the appellant had, by its conduct, effected an election not to terminate.  As to that, the appellant submitted that while Mr Shand conceded having made a deliberate decision on or about 15 April 2001 not to terminate in reliance on Clause 16.6, because of the difficulty in selling the project, it did not follow that that involved an election which was communicated to Devpro.  The appellant argued that the memoranda dated 24 May 2001 and 5 July 2001 did not evidence a deliberate decision not to terminate, nor communication of an election. 

[24]  It referred to the judgment of Mason J in Sargent v ASL Developments Ltd (1975) 131 CLR 634 at 655 as follows:

“A person is said to have a right of election when events occur which enable him to exercise alternative and inconsistent rights, i.e. when he has the right to determine an estate or terminate a contract for breach of covenant or contract and the alternative right to insist on the continuation of the estate or the performance of the contract.  It matters not whether the right to terminate the contract is conferred by the contract or arises at common law for fundamental breach – in each instance the alternative right to insist on performance creates a right of election.

Essential to the making of an election is communication to the party affected by words or conduct of the choice thereby made and it is accepted that once an election is made it cannot be retracted. (Citations omitted).  No doubt this rule was adopted in the interest of certainty and because it has been thought to be fair as between the parties that the person affected is entitled to know where he stands and that the person electing should not have the opportunity of changing his election and subjecting his adversary to different obligations.

A person confronted with a choice between the exercise of  alternative and inconsistent rights is not bound to elect at once.  He may keep the question open, so long as he does affirm the contract or continuance of the estate and so long as the delay does not cause prejudice to the other side.  An election takes place when the conduct of the party is such that it would be justifiable only if an election had been made one way or the other...  So, words or conduct which do not constitute the exercise of a right conferred by or under a contract and merely involve a recognition of the contract may not amount to an election to affirm the contract.”[11]

[25]  The appellant also referred the Court to the statements in Immer (No 145) Pty Ltd v The Uniting Church in Australia Property Trust (NSW) (at 182 CLR 38 and 39) where the following remarks of Stephen J in Sargent v ASL Developments[12] were quoted:

“The words or conduct ordinarily required to constitute an election must be unequivocal in the sense that it is consistent only with the exercise of one of the two sets of rights and inconsistent with the exercise of the other.”

The joint judgment by Deane J, Toohey J, Gaudron J, and McHugh in Immer went on (at CLR 39):

“The consequences of election may well be serious for the party electing; in particular, election involves the abandoning of a right that is available.  A party can only be held to have elected ‘if he has so communicated his election to the other party in clear and unequivocal terms” (citing from “The Kanchenjunga” [1990] 1 Loyd’s Rep 391, at p 398 per Lord Goff of Chieveley).

[26]  Their Honours added, a little later, (at CLR 42, in the passage cited by the learned trial judge) that:

“The point is that where the right to rescind is a continuing one, it is not so readily concluded that the party entitled to rescind has abandoned that right completely as opposed to taking no action to exercise the right at the time in question.”

The appellant relies on those statements of the applicable law in support of its contention that Mr Shand had simply not exercised the right to terminate before May 2002, and that its communications before that had merely involved a recognition of the contract, while taking no action to exercise the still existing right given by the contract to terminate.  The appellant argued that an unequivocal abandonment had to be demonstrated, to show an election, and none had been shown. 

[27]  The appellant did not suggest that the learned judge had erred in any way in the judge’s description of the applicable law or relevant authorities.  The communications coming from Mr Shand and quoted herein show that he did assert inconsistent positions to Mr Woodcroft-Brown, as the learned judge found.  He both required that Devpro continue to perform its obligations under the agreement, and represented that Seamark would too; but occasionally asserted a right and an intention to terminate their agreement, while also requesting an agreement that yet another Sunset Date be fixed.  Finally, he asserted a right to terminate based on the Sunset Date which had been reached a little over a year earlier.  But the point made by Mason J in Sargent v ASL Developments Ltd was that Mr Shand and Seamark could not exercise inconsistent rights and were required to elect between them, and Mr Shand by his conduct communicated both the requirement that Devpro continue to fulfil the contractual role it had, and that Mr Shand accepted the agreement continued.  It was open to the learned judge to conclude, as the judge did, that Mr Shand’s conduct effected an election to terminate.

[28]  I therefore agree with the learned trial judge that the appellant’s conduct after April 2001 asserted a position inconsistent with the continued option available to it, to terminate the agreement in reliance on Clause 16.6.  It had communicated an affirmation of the continuance of the contract in clear and unequivocal terms, and that was an election not to terminate in reliance on Clause 16.6.  It was no longer open to it to rely on that clause in May 2002. 

Were the Buildings fully leased?

[29]  Mr M Stewart SC, senior counsel for Seamark, submitted in his next argument that the learned judge had erred in construing the term “Buildings” in Clause 13.1 of the agreement, and had accordingly erred in concluding that those buildings were fully leased as at the date of completion of the project.  That had the result that the learned judge erroneously assessed the Development Fee owing to the plaintiff in reliance on Clause 13.1 of the agreement.  Mr Stewart SC submitted that on the proper construction of “Buildings”, the evidence showed that there was one which had not been leased as at the date of completion, and accordingly Clause 13.2 applied.  Since it applied, and since there had been no agreement between Devpro and Seamark as to the profit percentage in item C of that calculation, Mr Stewart SC submitted that Clause 13.2 was unenforceable for uncertainty.  He referred to Relwood Pty Ltd v Manning Holmes Pty Ltd [1990] 1 Qd R 481 (where a guarantee provided for a credit limit “to be agreed” and - there being no such agreement - the guarantee did not come into operation) and to Randazzo v Goulding [1968] Qd R 433.  The latter case concerned an option to renew a lease, provided the rental to be paid should be “mutually agreed upon between the parties”, which had not happened.  The Full Court held that, there being no agreement, the clause imposed no binding obligation; both Hoare J and WB Campbell J referred to the absence of any machinery to meet the situation of a failure to agree, as part of the reasoning that the clause had no legal effect, in the absence of agreement. 

Mr Stewart SC also submitted that Mr Couper QC for the respondent was in error in submitting that the agreement did provide a mechanism or machinery for fixing the percentage, should the parties fail to agree.

[30]  The first matter to consider is the proper construction of “the Buildings” in Clause 13.1.  Mr Stewart SC submitted, correctly in my opinion, that the object of that clause was to provide an incentive to Devpro to act in a way which maximised the profit which would be received by Seamark.  He submitted that the learned trial judge had correctly accepted that the best way to do that was to build and lease as many premises as possible.  While the judge accepted that submission, the judge also accepted the submission by Devpro’s senior counsel, that to that end the parties had agreed that the whole of Stage 1 would be built, but that agreement had not enlarged the obligation of Devpro, described in the Development Agreement, before it became entitled to the Development Fee under Clause 13.1.  The judge concluded that because the three tenancies designated in the definition of “Buildings” in the Development Agreement were leased as at 27 June 2003, that was sufficient for Devpro to be entitled to the Development Fee. 

[31]  Mr Stewart SC submitted that that construction undermined the object of providing Devpro with an incentive to maximise Seamark’s profit, and that the expression “the Buildings” in Clause 13.1 should be construed as the buildings depicted in the plans and specifications that came to be approved by the local authority, and which were constructed in accordance with that approval.  He argued that the word “comprising” in the definition of “Buildings” in the agreement should be read as “including”; and that in any event since Clause 1.2 of the agreement included an agreement that words denoting the singular should include the plural and vice versa, the reference to “a fast foods store, a restaurant and a shop” in the definition of “Buildings” included fast food stores, restaurants, and shops.  He also submitted that all of the tenancies depicted in the plans that were approved for Stage 1, and all the buildings that were constructed, fell within one or other of those three categories; so that considered together, they did comprise a fast food store, a restaurant or a shop.  He argued that only that construction made commercial sense.

[32]  Mr Couper QC submitted that the use of the singular in Clause 13.1 must have been deliberate, because the sketch (“sketch A”)[13] quite clearly showed that the parties at that early stage were considering more than three shops or tenancies.  Nevertheless, when it came to the question of what had to be built and sold for Devpro to earn its Development Fee, the parties defined those matters by reference to only three particular shops, each of a different variety. He submitted that decision was deliberate, and that while Devpro wanted to know what it had to do to be paid, both parties were aware that the more tenancies let on the site, the larger the profit was likely to be on the sale of the site.  The definition of “the Profit” in the agreement shows that, as one might expect, Devpro’s 45 per cent would be more if there was in fact a bigger profit; so Devpro had the same financial incentive as Seamark, to build and let as many premises as would increase the value of the site.  The definition of “Buildings” accordingly described the minimum necessary for Devpro to earn its fee under 13.1.  “Comprising” in the definition meant what it said; those premises had to be built and let, to get the fee.

[33]  That was the submission accepted by the learned judge.  It puts the bar rather low for Devpro, but it is clear that when the Development Agreement was signed the parties then did envisage many more than three tenancies.  Had the use of the singular not been deliberate, as Mr Couper QC contended, it would have been very easy either to express Clause 13.1 differently, or to define “Buildings” differently.  The construction reached by the learned judge accorded with the pleaded context in which the agreement was reached, with the fact that the parties even then contemplated the construction of buildings containing considerably more than three tenancies, with a profit motive to enliven Devpro, and with the express restrictions or limitations in the definition of “Buildings”.  I agreed with the learned judge that the construction, as intended, of “Buildings” with a considerably larger number of tenancies did not enlarge the agreed obligation on Devpro before it qualified for the Development Fee.

Were the “Buildings” “fully leased”?

[34]  If that conclusion be wrong, then I accept the submission by Mr Stewart SC that the learned judge was in error in the conclusion that the buildings were fully leased as at the date of completion.  The evidence was quite clear that one tenancy, which had been negotiated before the completion date, had not been executed by either the intended tenant or the landlord by that date. The learned judge accepted the submission that the negotiations between Seamark and the tenant were concluded when the last term was agreed shortly before the completion date, and all that remained to be done was the execution of the lease.  The judge accepted that it was “practically too late for the lease to be executed, and it was thought better for the purchaser to grant the lease as lessor”[14], and the judge accordingly accepted that if the judge was in error as to the construction of “Buildings”, then they were nevertheless fully leased.

[35]  On the appeal Mr Stewart SC put an uncontested chronology before this Court, which established that the evidence was that there were negotiations on the terms of the lease after the date of completion, held between the intending tenant and the ultimate purchaser of the site, and the terms of the proposed lease were amended after that date.  The learned judge was therefore in error in fact in accepting the submission that the terms had been agreed upon before the completion date; they had not been.  As at the date of completion the proposed tenant had not signed a lease, nor paid the deposit, and the final terms were only agreed upon, the deposit paid, and the lease executed by the new lessor and the lessee, after the date of completion.  In those circumstances, if the appellant’s construction of “Buildings” in Clause 13.1 is correct, the buildings were not fully leased at the date of completion of the project.  Accordingly, Clause 13.2 would apply, and I accept the appellant’s submission that that clause was unenforceable for uncertainty. 

[36]  Mr Couper QC challenged that last conclusion, and repeated on the appeal the submissions made to the learned trial judge, that Clause 22 of the Development Agreement provided a dispute resolution provision to which the Court could have regard if Clause 13.2 applied, and that Clause 28 provided the criteria by which the dispute should be resolved.  Clause 22 read:

22.DISPUTE RESOLUTION 

22.1 In the event of any dispute between the Parties concerning this Agreement or any matter arising under it which is not resolved by agreement between them within 15 Business Days after notice from one to the other, the dispute may be referred by any Party for the final decision of a person (“the Expert”) appointed in accordance with Clause 22.2 who must give a decision in writing on the matter.  The Party who wishes to refer a matter to the Expert must serve on the other Party a written reference giving full particulars of the matter and must serve on the other Party a written reference giving full particulars of the matter and thereupon the Parties must attempt to reach agreement on the appointment of the Expert.

22.2 If after 5 Business Days from service of the written reference the Parties are unable to agree upon the appointment of the Expert, any Party may request the President for the time being of the Queensland Law Society Inc. to nominate a person having the qualifications set out in Clause 22.3.

22.3 The Expert referred to in Clause 22.1 must be a professional person in the discipline most appropriate to the character of the dispute and must be an individual member, or a director of a corporate member, of the Expert’s professional body with not less than 10 years continuous professional experience in his discipline.

22.4 In determining a matter referred to him, the Expert shall act as an expert and not as an arbitrator.

22.5 In the event that any Party:-

(a)does not agree with the wish of the other that a matter be referred to the Expert for determination;

(b) is not satisfied with a decision of the Expert,

it shall be at liberty to apply to the court for its determination upon the matter.  Unless the Parties agree to waive time limits, an application to the court must be made:-

under Clause 22.5(a), not later than 10 Business Days after the service of a written reference on that Party under Clause 22.1;

under Clause 22.5(b), not later than 15 Business Days after that Party receives the written decision of the Expert.

22.6 Where a determination of the court amends or alters a decision of the Expert the determination of the court supersedes the decision of the Expert.

22.7 Nothing in this Clause shall be construed to prevent the Parties from agreeing that the Expert’s decision is final and binding in respect of a particular matter and, except in a case of error of law, any such agreement has effect according to its terms.”

[37]  Clause 28 read as follows:

28. “FULL FAITH AND FURTHER ASSURANCE

28.1 Each Party will:-

perform its Obligations and be just and faithful to the other in all its activities and dealings concerning the Project, and any other matter provided for in this Agreement; and at all times, whether or not expressly required to do so, give a full and true account to the other Party of all mattes within its knowledge relating to the Project.

28.2 Each Party will execute all further documents and do all other things as are necessary or desirable to give full effect to this Agreement.”

[38]  Mr Couper QC submitted in the respondent’s written argument that Clause 28.1 involved the notion that the percentage profit would be determined by reference to what was a fair and reasonable percentage between the parties.  His written submission continued that even in the absence of a clause such as 28.1, there would be implied into the agreement a term that the amount to be paid to the developer as a percentage would be a fair and reasonable percentage.  In his oral submissions, he submitted that Clause 28.1 provided an inherent obligation that when coming to an agreement on a percentage payable under Clause 13.2, the agreement would be as to a reasonable percentage or a reasonable sum.  Those submissions referred to Foley v Classique Coaches Ltd (1934) 2 KB 1, Xstrata Queensland Limited v Santos Ltd & Ors [2005] QSC 323 at [34]-[37], Sudbrook Trading Estates Ltd v Eggleton [1983] 1 AC 444, Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 (particularly from Brennan J at 614-616) and to Helmos Enterprises Pty Ltd v Jaylor (2005) 12 BPR 23, 021 at 23031-23, 034.

[39]  An immediate problem with that submission is that it assumes what is not obvious, that the parties’ inability to agree on the proportion of the profit to be paid under Clause 13.2 was a:

“...dispute between the Parties concerning this Agreement or any matter arising under it which is not resolved by agreement between them” (Clause 22.1). 

[40]  But assuming that it was, the respondent had not at any time sought to avail itself of the provisions of that clause to agree to a proportion of the profits, and none of the steps required under that clause were taken.  The respondent did not refer the “dispute” to a person appointed in accordance with Clause 22.2, as it might have done.  As to that failure, the respondent relied on, inter alia, Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607 and Mackay v Dick (1881) 6 App Case 251, for the argument that the appellant, by a wrongful assertion that the agreement had been terminated, prevented there being any attempt by Devpro to agree to a percentage for element C of Clause 13.2.  Mr Couper QC submitted that if there was a requirement that there be such an attempt to reach agreement, before the dispute resolution Clause 22 was triggered, then that requirement was to be taken to have been fulfilled by reason of Seamark’s wrongful claim of termination.  Accordingly, the provisions of Clause 22 fell to be applied as if Devpro had given the requisite notice under Clause 22.1, and as if a person had been appointed in accordance with Clause 22.2 to give a decision in writing on the matter.  Assuming, without deciding against the argument, that such beneficial constructions of both the agreement and the events are available to Devpro, the court or other decision maker would then be obliged to give a decision on what proportion of the profit should be agreed between the parties, as a reasonable or fair and reasonable one.

[41]  Mr Couper QC submitted that Clause 28 provided the standard or basis upon which the court (or the Expert) would determine any dispute between the parties, including as to the agreed amount of the profit.  That applicable standard derived from the requirement that each party be “just and faithful” to the other in all dealings concerning “… any … matter provided for in this Agreement.”  But the agreement in Clause 28 was not an agreement by either party that it would put aside its self-interest, and consider the interests of the other, when bargaining for a share of the profit.  The cases on which the respondent relied do not lead to that construction either.  In Foley v Classique Coaches Ltd, the respondent plaintiff was a retail dealer in petrol, and the appellant defendants were the owners of motor coaches, who carried on business on premises adjoining those of the plaintiff.  The plaintiff agreed to sell that property to the defendants, and the sale was subject to conditions which included that the defendants would enter into an agreement with the plaintiffs to buy from them the fuel the appellant used in his business.  That part of the agreement was expressed:

“1.The vendor shall sell to the company and the company shall purchase from the vendor all petrol which shall be required by the company for the running of their said business at a price to be agreed by the parties in writing and from time to time”.

[42]  For three years the appellants bought petrol from the respondent in pursuance of that agreement, at prices charged by the respondent in accounts delivered to the appellants each week.  Then disputes arose as to the price and quality of the petrol.  Eventually the appellants contended that no agreement in writing as to price had ever been made, and that they were not bound to get petrol from the respondent.  A Court of Appeal headed by Scrutton LJ upheld the decision of Lord Hewart C.J., essentially because there was no doubt that the parties intended to make a binding contract and had acted for three years as if they had, including executing the agreement to sell the land, which was sold only because of the promise to buy petrol in the future.  The Court implied a term that, in the absence of agreement as to the price, a reasonable price must be paid, holding that if the parties could not agree on what was a reasonable price, then (there being an arbitration clause) arbitration must take place.  That result was reached in part by the finding that there was a concluded contract for the sale of the land, which had included the agreement that the purchaser would buy fuel from the vendor, and in part because there was the arbitration provision. 

[43]  The respondent’s position here is much weaker.  What was in dispute in Foley v Classique Coaches was the price to be paid for a commodity, petrol, generally commercially available and for which a reasonable price could be calculated.  The matter now under appeal involves agreement on a proportion of overall profits.  Nothing in the development agreement or the evidence would give any assistance in deciding what is either a fair, or a reasonable, percentage of the overall profit for each of the parties.  It is a very different exercise from finding, on the basis of evidence, a reasonable price for a commercially available commodity.

[44]  The respondent also relied on Sudbrook Trading Ltd v Eggleton, but that case too involved determining the price of something (land), which could be established by evidence.  In Sudbrook, four separate leases had been made in 1949, 1955, 1966 and 1968 of four adjacent industrial premises, let for various terms of years all expiring on December 24, 1997.  Clause 9 of the lease dated November 18, 1959, provided an option to the lessees to “purchase the reversion in fee simple in the premises hereby demised … at such price not being less than £12,000 as may be agreed upon by two valuers, one to be nominated by the lessor and the other by the lessee and in default of such agreement by an umpire appointed by the … valuers.”   The other leases contained option clauses in identical terms, save as to the minimum price.  The lessees exercised their options to purchase the reversions, but the lessors refused to appoint a valuer.  The lessees sought declarations that upon the true construction of the leases the option clauses conferred upon them valid options to purchase the reversions in fee simple at a valuation, and that those options had been validly exercised, and they asked for specific performance.  The House of Lords held by majority that the contract in each case upon its true construction was a contract for sale to the lessees at a fair and reasonable price, to be assessed by applying objective standards, namely those used by valuers.[15] 

[45]  The majority judgments treated the machinery provisions in Clause 9, for the appointment of two valuers (or an umpire appointed by them), as a “convenient and sensible machinery for ascertaining what is a fair and reasonable price”[16], or as subsidiary and non-essential[17] (or a convenient) way of ascertaining a fair and reasonable price at the date when the option was exercised.[18]  Those majority judgments declined to hold the provisions for the mode of ascertaining the value were an essential part of the agreement.  Their Lordships went on to hold that since the only thing that prevented the agreed machinery operating was the lessors’ own breach of contract in refusing to appoint their valuer, the lessors should be ordered to perform their contractual obligations to convey the fee simple for payment of a fair and reasonable price, the latter to be assessed by applying the objective standards of valuers.  Simply because the machinery provided by the parties had broken down, there was no reason for the court not to substitute other machinery to carry out what had been concluded to be the main purpose, namely fixing a fair or reasonable value for the purchase price of the property.  It is an important part of the majority reasoning that in that matter the court was satisfied that value could be established by the expert evidence of valuers.  Although the decision is a significant one for legal principle, it applies when an agreed or contracted mode of ascertaining a value, which value can be established by evidence, is subsidiary and non-essential.  In this matter, the mode of fixing the percentage of profit was by agreement between the parties, a matter not susceptible to proof by evidence from others, and one which made the mode essential.

[46]  The respondent relied on the remarks by Brennan J, as his Honour then was, in Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 at 614-61.  There His Honour understood the judgment in Sudbrook Trading v Eggleton to be that a contract for sale which required the price to be fixed by a valuer to be a contract for sale at a fair value to be ascertained by the valuer or, in default, by the court.  But that approach does not help this respondent, because there was no agreement that it would be paid a percentage fixed by another person or party, and (by implication) that it would (only) be a fair percentage.  The joint judgment in Booker Industries v Wilson Parking, of Gibbs CJ, Murphy J and Wilson J, is really against the respondent; it reads:

“It is established by authority, both ancient and modern, that the courts will not lend their aid to the enforcement of an incomplete agreement, being no more than an agreement of the parties to agree at some time in the future.  Consequently, if the lease provided for a renewal ‘at a rental to be agreed’ there would clearly be no enforceable agreement.  On the other hand, it is also well established that the parties to a contract may leave terms – even essential terms – to be determined by a third person:  see the cases cited in Godecke v Kirwan[19].  In the present case, the lease itself provides the entire mechanism for determining the rental for the renewed term.  There is no further agreement required of the parties.”[20]

[47]  The joint judgment in Booker Industries applied the decision of the House of Lords in Sudbrook Trading Estates Ltd v Eggleton to the extent that the joint judgment held that decision was consistent with earlier Australian authorities, such as Butts v O’Dwyer[21] and Kennedy v Bercoe.[22]  In Booker Industries the High Court considered a lease containing a provision entitling the lessee to an option for an extension for a further three years at:

“Such rental as may be mutually agreed between Lessor and the Lessee and failing agreement then such rental as may be fixed by an arbitrator nominated in accordance with the provisions of Clause 3.05(b).” 

Clause 3.05(b) provided for the appointment of a single arbitrator to be nominated by the President for the time being of the Queensland Law Society Inc.  The joint judgment held that Butts v O’Dwyer, Kennedy v Bercoe, and Sudbrook Trading Estates v Eggleton were authority for the proposition that if the other conditions specified in the lease were performed, both parties were obliged to do all that was reasonably necessary to procure the nomination by the President of the Law Society of an arbitrator, and under an obligation to request the President to nominate one.  But that was as far as the joint judgment went in applying the decision in Sudbrook Trading Estates Ltd v Eggleton.  The joint judgment is not authority overturning the views in the majority judgments in Hall v Busst (1961) 104 CLR 206 that for a promise to pay a reasonable price to be sufficiently certain to give an agreement for sale legal efficacy, there must be an established market for the commodity the subject of the bargain.[23]

[48]  The respondent submitted that Brennan J in Booker, and Young CJ in Helmos Enterprises Pty Ltd v Jaylor, referred to a well established principle that where a contract has come into existence and been performed, courts will do all that is possible to imply terms to enable it to be carried out.  Mr Couper QC submitted that the only implication required was the natural one that the price to be determined would be a reasonable price in the circumstances.  But, with respect, the parties did not agree that a profit would be determined; they stipulated that Devpro would be paid an agreed portion of it.  I therefore disagree with Mr Couper’s submission that Clauses 13.2, 22, and 28 entitles Devpro to ask the court to fix a fair and reasonable, or reasonable, profit percentage for Devpro as the proportion “agreed upon” between the parties.

[49]  Nor do I accept the submission of Mr Couper QC that in any event the authorities cited support the implication of a term that the amount to be paid to Devpro under 13.2 as part of C would be either a fair and reasonable percentage of the profit, or a reasonable one.  If the submission is correct, and if the parties had agreed a percentage under 13.2 – as they did under 13.1 – then on Mr Couper’s submission, either party could still object to the payment or receipt of the agreed percentage, and contend before an expert appointed under Clause 22, or a court under Clause 22.5, that the agreed amount, while agreed, was not a fair and reasonable percentage (or reasonable percentage) as required by law.  That would be a very curious result. 

Calculation of the Development Fee

[50]  The appellant’s third major ground of challenge to the judgment attacked the judge’s quantification of the Development Fee payable to Devpro under, as the learned judge found, Clause 13.1.  Devpro pleaded it was entitled to $931,860.60, and the learned judge ultimately ordered payment of a Development Fee calculated at $840,017.50.   An important part of the learned judge’s method of calculation was the conclusion that the Development Costs should be assessed at $2,292,801.  The Development Costs were a significant component in the calculations of the Development Fee under Clause 13.1, and as Mr Stewart SC submitted in the appellant’s written outline, any reduction in the Development Costs increased the Profit and the overall Development Fee payable.  The learned judge had accepted that the Development Costs actually incurred were $2,940,464, as the appellant contended, but the judge reduced those by a figure of $647,663, for the following reasons.

[51]  Devpro contended in its pleading that when Seamark appointed Boss Construction as builder, Mr Shand had agreed on behalf of Seamark that it would take responsibility for all risk (including excess of building costs over the tender prices obtained by Devpro) arising from the appointment of Boss Construction as builder.  The Boss contract price was $1,565,473, and the actual amount paid to it was $2,363,274.  (There were other components of the Development Costs).  Other tenders obtained by Devpro were less than the Boss contract price, with the lowest being one by J Kelly of $1,305,782, and Devpro’s own estimate of the costs being $1,387,255. 

[52]  The learned judge did not accept Devpro’s pleaded case that Seamark had agreed to be responsible for all building costs over the tender prices obtained by Devpro.  Instead, the learned judge accepted that Mr Woodcroft-Brown’s own evidence[24] established an agreement as pleaded by Seamark, namely that when Seamark appointed Boss Construction:

“Mr Shand, on behalf of it, and Mr Woodcroft-Brown, on behalf of the plaintiff, orally agreed in approximately November or December, 1999 that a quantity surveyor would be appointed and that, to the extent that the building costs actually incurred as a result of the appointment of Boss Constructions exceeded the sum assessed by the quantity surveyor as representing a reasonable construction price for the works actually constructed by Boss Constructions, the first defendant would bear the difference;”

[53]  The judge was satisfied that there was an agreement in those terms, but was also satisfied that Mr Shand never intended to appoint a quantity surveyor, and that representations that he made to Mr Woodcroft-Brown that he had the appointment in hand, and that an appointment had been made, were deliberately false.  Those findings were not challenged and nor were the following ones:

“[88]… Mr Shand was a hard-headed business man who was increasingly frustrated by delays associated with a development he had hoped would take only about 18 months.  I was unimpressed by his explanations of having perceived the necessity to pursue strategies to bring the development to a commercially acceptable conclusion.  He was high-handed and at times blatantly misleading in his dealings with Mr Woodcroft-Brown.  He paid scant regard to his obligations under Clause 28 of the Development Agreement to be just and faithful in all matters provided for in that agreement and at all times to give the plaintiff a full and true account of all matters within his knowledge relating to the Project. 

[89]Having appointed Boss as a builder, Mr Shand was cavalier in the extreme in his administration of contract claims.  Progress claims submitted by Boss should have been accompanied by supporting documentation and certified by an architect pursuant to Clause 11.1 of the Development Agreement.  Mr Shand arranged for Lloyd Bennett & Associates, a firm of which Mr Bennett was the principal to be appointed as the architect, and then paid the claims without sighting supporting documentation.”

[54]  The learned judge went on:

“[90]By the time the dispute came to trial, it was no longer practicable to engage a quantity surveyor:  the Development Land and Buildings had been sold and the builder had destroyed its records.  This eventuality will not prevent the Court from assessing the amount payable to the plaintiff.  If there is evidence from which it can otherwise determine what would have been a reasonable construction cost, the Court must do the best it can to quantify the plaintiff’s loss.”

[55]  The learned judge cited, for that last proposition, The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, at 83;  Ted Brown Quarries Pty Ltd v General Quarries (Gilston) Pty Ltd (1977) 16 ALR 23, at 26 and 37;  and Ray Teese Pty Ltd v Syntex Australia Ltd [1998] 1 Qd R 104 at 109-110.  I respectfully observe that the passages cited supported the learned judge’s contention, and the appellant did not submit otherwise.  Instead, the appellant complained that the learned judge, in calculating a reasonable construction cost, had effectively awarded the plaintiff damages for an agreement it did not plead and which the parties did not make.

[56]  Part of the appellant’s argument on that was that there was no evidence to support the conclusion by the judge that it was no longer practicable at the date of trial (August and September 2006) to engage a quantity surveyor.  The reality is that the learned judge was correct.  There were no records, the buildings had been sold, and the first time that Mr Woodcroft-Brown saw an executed copy of the building contract between Boss Constructions and Seamark was in February 2006.  Seamark’s counsel repeatedly made the point on this appeal that the term pleaded by it, and found by the learned judge, namely that the parties had agreed “a quantity surveyor would be appointed”, was not an agreement that Seamark would appoint a quantity surveyor, and was something Devpro could do itself, and by itself.  As an academic proposition that is accurate, but without a copy of the building contract – for which, on the evidence accepted by the learned judge, Mr Woodcroft-Brown had repeatedly and unsuccessfully made requests – Devpro would have had considerable difficulty in giving sensible instructions to any quantity surveyor.  Further, the judge found that Mr Shand deliberately and falsely represented to Mr Woodcroft-Brown that Mr Shand had appointed a quantity surveyor.

[57]  What follows from all that is that it was both no longer practicable to engage a quantity surveyor when the matter came to trial, and that there was a very good reason why Devpro had not taken that step before.  The appellant’s argument was that Devpro failed to take that step because it pleaded and asserted at the trial a different agreement, namely that Mr Shand would be responsible for all excesses of actual costs over tender prices; but that submission does not face the finding that Mr Woodcroft-Brown was falsely told that Mr Shand had appointed a quantity surveyor.  Mr Woodcroft-Brown was not given any reason to consider that two quantity surveyors were necessary.

[58]  The learned judge set about the task of calculating from the evidence a reasonable construction price for the works actually constructed by Boss Constructions, and began by settling upon $1,400,000 as the starting point for a tender figure.  The judge reached that by reference to the actual contract price submitted by Boss Constructions, and the other tenders offered;  the appellant does not challenge that figure settled upon by the judge, or the reasoning leading to it, but complains about the judge undertaking the task at all.  The learned judge then considered the variations, for which reasonable allowance had to be made, and then made a comprehensive and detailed survey of those, allowed some and disallowed others. 

[59]  Once again, none of those careful and thorough calculations by the judge are subject to any challenge as to accuracy, validity, or any complaint that the outcome is not a fair and reasonable one.  Nor is there any challenge on the facts to the conclusion reached by the learned judge, as to the amount that was a reasonable construction cost, fixed by the judge, and then used by the judge to assess the applicable Development Fee.  The calculations made by the learned judge relied on evidence called from a Mr Greenhalgh, a Civil Engineer, whom the judge described as having meticulously reviewed the variation claims; and the judge largely rejected evidence given by Mr Bennett, the principal of Boss Constructions, whom the judge described as an unimpressive witness.  That conclusion was not challenged, and nor was the learned judge’s reliance on and acceptance of the evidence of Mr Greenhalgh.  There was no challenge on the appeal to the accuracy of Mr Greenhalgh’s calculations, upon which the judge relied.

[60]  The complaint on appeal was simply that the learned judge, in calculating a reasonable construction cost, had imposed on the appellant a liability for damages in a case not pleaded by Devpro.  That was that Clause 13.1 had been varied by the term it pleaded, and which the judge found to have been made, namely that a quantity surveyor would be appointed and that the appellant would bear the difference between reasonable construction costs assessed by that quantity surveyor and the price paid to Boss Constructions.  The appellant contended the learned judge then set about finding what a quantity surveyor would have determined to be a reasonable price for the work Boss Constructions did, and then found that Seamark was in breach of that agreement by not appointing a quantity surveyor, and that the Development Costs in Clause 13.1 were to be calculated by reference to those reasonable construction costs, to be proved by evidence.

[61]  It is quite true that Devpro did not plead a case in those terms, but nor did the learned trial judge so hold.  The reasons for judgment do not reveal that the judge did as Mr Stewart SC contended.  Instead, the learned judge did as the judge described, namely found that the Development Agreement had not been terminated; found that Clause 13.1 applied; found that the parties had agreed as Seamark pleaded and the judge found regarding the difference between what Boss Constructions would be paid and what a quantity surveyor would assess as representing a reasonable construction price for the works actually constructed; found it was impracticable to engage a quantity surveyor by the time of the trial; but nevertheless performed the task necessitated by the judge’s role of calculating the Development Fee and Costs described in the agreement made by the parties.  That required the court to calculate a reasonable construction cost, and it was not argued that the judge had not done that.  The fact that the same or similar enquiries or conclusions would have resulted, had the case been pleaded and presented differently, is neither here nor there.  The learned judge was required to calculate the Development Fee, to which the plaintiff was entitled, doing the best the judge could.  

[62]  The respondent also advanced an argument in reliance on the statements by Brennan J in Booker Industries, which argument depended upon the premise that the machinery provisions agreed between the parties for the determination of reasonable construction costs had been frustrated by the appellant’s failure to appoint a quantity surveyor.  That failure, the respondent contended, should not “stymie” a court from ascertaining those reasonable construction costs, because the court would not allow the conduct of one party to defeat, the mechanism to stop it carrying out the assessment.[25]  The submission assumed that Seamark breached the agreement by not appointing a quantity surveyor, but that conclusion was not established either by the pleading or the evidence accepted by the learned judge.  The judge did not purport to rely at all on the principle the respondent derived from Booker Industries or like cases, when the judge was assessing the Development Fee, and reliance on that argument was an unnecessary exertion by the respondent’s counsel.

[63]  The appellant also complained that there was no pleaded issue as to the reasonable construction cost, and alternatively that quantifying those costs required evidence as to the opinion of a quantity surveyor.  As to the latter point, what mattered was whatever evidence there was, and the appellant did not argue that the evidence relied on by the judge did not establish the reasonable construction costs.  As to the first point, while the pleadings did not put in issue the amount of “reasonable construction costs”, senior counsel for the respondent is correct in the submission that those issues, if not pleaded, were certainly raised at the trial.  As his written outline of argument contends in paragraph 37 thereof, Seamark’s quantum document, exhibit 10, was tendered by consent (at AR 267-268) at the trial by the plaintiff’s counsel, who informed the learned judge that the tender was designed to define the remaining issues with respect to quantum.  There was no demurr from the statement that “the issue as to costs concerns Items 1 and 2, the sum was paid to the builder and the prolongation claim, it also relates to the builder, so that’s the remaining issue”[26].  The plaintiff led evidence regarding the reasonableness of those costs and variation claims, without objection, and the appellant led evidence from Mr Bennett going to those same issues.  It follows that the learned judge calculated the fee claimed by the plaintiff in accordance with the evidence led without objection, and the issues identified as in dispute, by the senior counsel appearing for the two parties.  The learned judge was not in error in any way in doing that, and that attack on the judgment should be dismissed.

[64]  It is worth adding that the appellant’s Exhibit 10 calculated the Development Costs of the Project – as did the learned judge – with respect to all of the buildings on the site, and that is the only commercially sensible way of calculating those costs or the defined Profit.  The appellant did not suggest on this appeal that there was any inconsistency between the judge (and the parties, when they calculated the Development Fee for the judge, based on the judge’s reasons) doing that, and the judge’s narrowed construction of “the Buildings” in 13.1.

Section 51AC claim under the Trade Practices Act 1974

[65]  The learned trial judge recorded that Devpro did not pursue its claim for damages pursuant to s 51AC and 82 of the Trade Practices Act 1974 (Cth), and this Court was told it made no submissions on that at trial.  Its written submission on the appeal contended that it was necessary to consider that claim, if the court rejected its other submissions, which I do not; but I make these brief observations.  The plaintiff’s pleaded case in its paragraph 10 was that by reason of the matters pleaded in its paragraphs 2 to 2L, Seamark’s refusal to pay the Development Fee claimed by the plaintiff was unconscionable conduct.  The matters pleaded in paragraphs 2 to 2L alleged the performance of the Development Agreement by Seamark in a particular way, including the failure to agree on a new Sunset Date, and conduct preventing the project proceeding to Stage 2, and an allegation that Devpro continued to perform its obligations under the agreement up until the completion date.  There is no allegation of an agreement to appoint a quantity surveyor to determine the reasonableness of the prices charged by Boss Constructions, or of a failure to appoint one.  But the respondent’s written submissions on that pleading rely on the submission that the appellant was seeking to avoid paying the full Development Fee by reason of the absence of the appointment of a quantity surveyor and the calculation of a reasonable cost by a quantity surveyor, and that in the circumstances the court should find that reliance on that absence was unconscionable.  As the appellant submitted, that was not the unconscionable conduct which was pleaded, and the matter was not argued before the learned trial judge.  Finally, it is difficult to see how it would be unconscionable for the appellant to refuse to pay a Development Fee it was not obliged to pay.

[66]  Finally, the appellant contended that a small portion of the damages, ordered to be paid by way of quantum meruit, should be set aside in full, because the claim should have been brought by Woodcroft or its principal, Mr Woodcroft-Brown, and not by Devpro.  That was because the learned judge found that it was Mr Woodcroft-Brown who was asked to do the work, for the which the quantum meruit was ordered.  At best that is a complaint that the proceeding was brought in the name of the wrong plaintiff, a matter not pleaded or raised in any way at the trial; and Mr Woodcroft-Brown was entitled, if he wished, to sue on the basis that other work he was doing was for the benefit of the partnership.

[67]  I would dismiss the appeal, and order that the appellant pay the respondent’s costs of the appeal, assessed on the standard basis.

[68]  WHITE J: I have read the reasons for judgment of Jerrard JA and agree with his Honour that the appeal ought be dismissed.

[69]  His Honour has carefully and fully set out the relevant facts and competing submissions about them on behalf of the parties.  As his Honour notes, there was no dissent from the findings of fact made by the learned trial judge, nor, indeed, was there disagreement about the applicable legal principles.  Rather, the parties sought to draw different consequences from the application of the principles to the facts as found.

[70]  This is particularly the case with the important question whether the appellant validly terminated the agreement with the respondent by notice in writing on 28 May 2002 pursuant to clause 16.6 of their agreement.  To my mind, the facts plainly establish that Mr Shand was not simply acknowledging the continuation of the contract after he was entitled to terminate, Sargent v ASLD Developments Limited[27].  As Mr Shand’s evidence demonstrated he deliberately blew “hot and cold” on the agreement but the clear preponderance of evidence established that Mr Shand elected to continue with the agreement when confronted with a choice and communicated that choice not to terminate to the respondent by his conduct.

[71]  I agree with the manner in which his Honour has disposed of the other arguments.

[72]  ATKINSON J: I have read the reasons for judgment of Jerrard JA and White J.  I agree that the appeal should be dismissed and with their Honours’ reasons for doing so

Footnotes

[1] The definitions in the agreement applied “unless the subject or context is inconsistent.”

[2] Reproduced at AR 769.

[3] Paragraph 2(a) of the Further Amended Statement of Claim, admitted by paragraph 3 of the second Further Amended Defence (at AR 2427 and 2511 respectively).

[4] (1992-1993) 182 CLR 26, 42.

[5] At AR 1401.

[6] At AR 318.

[7] At AR 1418.

[8] At AR 1417.

[9] The learned judge discussed these matters at [61] of the reasons for judgment.

[10] At AR 1458.

[11] At CLR 655, 656.

[12] At (1974) 131 CLR at 646.

[13] Reproduced at AR 769.

[14] At reasons [77].

[15] At [1983] A.C. at p. 479 per Lord Diplock, p. 483 per Lord Fraser of Tullybelton and p. 487-488 per Lord Scarman and Lord Bridge of Harwich.

[16] Per Lord Diplock at 479.

[17] Per Lord Fraser at 483.

[18] Per Lord Scarman at 488.

[19] (1973) 129 CLR 629 at 645.

[20] At 149 CLR 604 and 605.

[21] (1952) 87 CLR 267.

[22] (1960) 105 CLR 521

[23]Per Dixon CJ at 104 CLR 216.  “(But that could only be when a recognised value or standard of value measuring the price existed).” And per Menzies J at CLR 234.

[24]At AR 185, quoted by the learned judge at [87] of the reasons.

[25] Transcript at page 73.

[26] At AR 267.

[27] (1975) 131 CLR 634 per Mason J at 658

Close

Editorial Notes

  • Published Case Name:

    Devpro (a firm) v Seamark & Anor

  • Shortened Case Name:

    Devpro (a firm) v Seamark

  • MNC:

    [2007] QCA 241

  • Court:

    QCA

  • Judge(s):

    Jerrard JA, White J, Atkinson J

  • Date:

    27 Jul 2007

  • White Star Case:

    Yes

Litigation History

No Litigation History

Appeal Status

No Status