- Unreported Judgment
SUPREME COURT OF QUEENSLAND
International Palace Pty Ltd v Novaheat Pty Ltd  QSC 75
INTERNATIONAL PALACE PTY LTD AS TRUSTEE FOR CYRUS MOLLAIAN INVESTMENT TRUST
ACN 104 303 326
NOVAHEAT PTY LTD ACN 074 386 431 AS
9532 of 2015
Supreme Court of Queensland at Brisbane
8 April 2016
12 and 19 January 2016; written submissions on 22 January 2016
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS - INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – where there is a commercial contract for the sale of land – where the contract is conditional upon satisfaction of due diligence period – where a vendor’s right to termination arises – where a purchaser subsequently waives a condition inserted for a purchaser’s benefit – whether a vendor’s right to termination is defeated
CONVEYANCING – BREACH OF CONTRACT FOR SALE AND REMEDIES – VENDOR’S REMEDIES – RESCISSION OR TERMINATION – PURSUANT TO CONDITION GIVING RIGHT TO RESCIND OR TERMINATE – where a purchaser fails to satisfy the due diligence condition – where a vendor terminates the contract because of a purchaser’s failure to satisfy the due diligence condition – whether the contract is voidable – whether there is a valid termination
PROCEDURE – ENDING PROCEEDINGS EARLY – SUMMARY DISPOSAL – OTHER MATTERS – where the defendant in the proceeding applies for a summary judgment on a counterclaim – whether pursuant to r 292 Uniform Civil Procedure Rules 1999 summary judgment should be given in respect of the counterclaim
Uniform Civil Procedure Rules 1999 (Qld), r 292
Bellmere Park Pty Ltd v Benson  QCA 102
Bellmere Park Pty Ltd v Benson  QSC 11
Donaldson v Bexton  1 Qd R 525
Electricity Generation Corporation v Woodside Energy Ltd & Ors (2014) 251 CLR 640
Gange v Sullivan (1966) 116 CLR 418
Suttor v Gundowda Pty Ltd (1950) 81 CLR 418
M Campbell for the plaintiff
V Brennan for the defendant
Chan Lawyers for the plaintiff
Simmonds Crowley & Galvin for the defendant
- This proceeding arises out of a written contract dated 17 June 2015 for the sale of vacant industrial land at 9 Cairns Street, Loganholme by the defendant to the plaintiff.
- The contract was the standard form REIQ “Contract for Commercial Land and Buildings”, with a number of special conditions. The Items Schedule to the contract included the following:
$750,000 + GST
$10,000 paid within 3 day of both parties signing contract. Balance of 10% paid on acceptance of due diligence
QDate for Completion
Date: ON OR BEFORE 30 DAYS FROM UNCONDITIONAL DATE.”
- The Items Schedule also contained a number of provisions relating to GST. The part of the Schedule entitled “GST 3” contained the questions “Does the Purchase Price include GST?”, with boxes to indicate “Yes” or “No” answers. There was an instruction to “Mark 1 box only”. This section of the Schedule then went on to provide:
“If yes, clause 34.4 (Purchase Price Includes GST) applies.
If no, clause 34.5 (Purchase Price Does Not Include GST) applies.
If neither box is marked or both boxes are marked, Clause 34.4 (Purchase Price Includes GST) applies.”
- In this contract, the “No” box was ticked.
- Clause 34.5 of the standard conditions which formed part of this contract provided:
“34.5Purchase Price Does Not Include GST
If this Clause 34.5 applies, the Purchase Price does not include the Seller’s liability for GST on the Supply of the Property. The Buyer must on the Date for Completion pay to the Seller in addition to the Purchase Price an amount equivalent to the amount payable by the Seller as GST on the Supply of the Property.”
- There were also a number of special conditions. Relevant for present purposes is Special Condition 5:
“(5)This contract is subject to and conditional upon due diligence period to be satisfied on or before 40 days from contract date.”
- Forty days from the date of contract was 27 July 2015.
- On 22 June 2015, the plaintiff’s solicitors wrote to the defendant’s then solicitors noting, amongst other things, the “following important dates”, namely:
“●Balance deposit of $72,500 due date is Monday, 27 July 2015.
●Special Condition 5: Due diligence due date is 27 July 2015”
- It appears that there was no further communication between the parties’ solicitors until late on the afternoon of 27 July 2015. At 5 pm that day, the defendant’s then solicitors faxed to the plaintiff’s solicitors a letter which enclosed “by way of service a notice of termination”. The enclosed Notice of Termination, which was addressed to the plaintiff and its solicitors, stated:
“1.By contract for the sale of land dated 17 June 2015 (contract) Novaheat Pty Ltd as trustee for Novaheat Trust of 30A Randall Street, Slacks Creek, QLD 4127 (seller) agreed to sell and International Palace Pty Ltd as trustee for Cyrus Mollaian Investment Trust of (buyer) agreed to purchase the property being the whole of the land in title reference 18349199 known as 9 Cairns Street, Loganholme (property) for $750,000.00.
- As a result of your default under the contract, we give you notice that the contract is terminated and entirely at an end. The deposit is forfeited to the seller who holds you responsible for all damages and losses resulting from your default.”
- On 28 July 2015, shortly before midday, the plaintiff’s solicitors sent an email to the defendant’s then solicitors saying:
“We refer to your attached letter of 27/7/15 and are instructed our client is not in breach of the contract.”
- The email went on to ask the defendant’s solicitor to call the plaintiff’s solicitor to discuss the matter. A little later on 28 July 2015, the defendant’s solicitor sent to the plaintiff’s solicitor saying:
“I confirm that my clients termination of the contract stands but that he will agree for the deposit to be released to your client.”
- On 29 July 2015, at 8.47 am, the plaintiff’s solicitor sent the following email to the defendant’s solicitor:
“We are instructed to advise as follows:
(1)Our client is not in breach of the contract and accordingly your client is not entitled to terminate the contract for breach of contract; the contract remains on foot.
(2)Our client is now satisfied with due diligence and will proceed to pay the balance of deposit to Ray White Surfers Paradise the Stakeholder.”
- At 8.56 am, the defendant’s solicitor responded with this email:
“I am instructed as follows:
- This was a time of the essence contract. I refer to your letter dated 22 June 2015;
- The critical dates of the contract were set out in your letter of 22 June 2015. Notification of satisfaction or otherwise in special condition 5 was to be given on or before 27 July 2015. Your client failed to give notification by that date;
- Pursuant to clause 13.1 of the terms of contract if your client failed to comply with a term or condition of the contract then the seller may terminate. My client chose to terminate.
- This contract is validly terminated and the matter at an end. My client has agreed at this point to release the deposit. If your client persists with its claim my client will reconsider its position with respect to the release of the deposit.”
- Later on 29 July 2015, the defendant’s then solicitors faxed a letter to the plaintiff’s solicitors saying:
“We refer to your emails of today’s date.
For the sake of absolute clarity our client’s position is as follows:
- The contract dated 17 June 2015 was subject to and conditional upon satisfaction of a due diligence period on or before 40 days from the contract date (special condition 5).
- Your letter dated 22 June 2015 confirmed that the date for due diligence was 27 July 2015.
- No notice was given by your client with respect to the condition within that 40 day period and therefore the special condition has not been satisfied.
- As a result of your clients failure to notify satisfaction with the special condition our client exercised its right to terminate the contract. As the contract is now terminated your client cannot purport to satisfy the condition 2 days after the due date.
- If your client lodges a caveat against our client’s title my client will pursue your client for any loss or damage arising from that lodgement.”
- It is not in issue that the plaintiff paid the further sum of $65,000 into the trust account of the Stakeholder, albeit that this deposit was receipted as having been made on 30 July 2015.
- On 13 August 2015, the plaintiff lodged a caveat over the property, claiming an interest as purchaser under the contract.
- On 7 September 2015, the defendant’s current solicitors wrote to the plaintiff’s solicitors, referring to Special Condition 5 and the provisions of the contract relating to the purchase price and deposit. The defendant’s solicitors said:
“We note that the initial tranche of deposit in the sum of $10,000.00 was due to be paid to the Stakeholder no later than Wednesday 22 June 2015. This sum was not in fact paid to the Stakeholder until 24 June 2015.
The sum of $10,000.00 was not paid in accordance with the provisions of the Contract.
By Special Condition 5 your client was required to provide advices as to satisfaction of the Clause by 5:00pm 27 July 2015. It failed to do so.
Consequently, your client was in breach of the Contract and our client entitled to terminate, rescind or otherwise avoid the sale for non-fulfilment by your client of the conditions set out above.
Our client has provided written notification of termination of the Contract.
Our client’s position remains that the Contract is at an end for the reasons stated above. However, even in the event we are wrong in our interpretation of the contract and the events which have subsequently transpired, your client is in further breach of the contract. That is so for the reasons set out below.
On 29 July 2015, your client purported to accept due diligence. The following day, it then paid the $65,000 to the Stakeholder. The payment was made both subsequent to our client’s termination and a day after due diligence.
Whilst we do not accept your client’s contention that our client was not entitled to determine the contract, we note that:-
- The further payment of $65,000.00 was not paid on acceptance of due diligence as required pursuant to Item Schedule O; and
- In any event, the payment made does not represent the ‘balance of 10%’. That is so because the purchase price is ‘$750,000.00 plus GST’. Consequently any payment which represented the balance of the deposit ought have been $72,500.00 (as opposed to $65,000.00).
In these circumstances and even if the contract remained on foot before 29 July 2015, your client was and remains in breach of the contract. To remove doubt, our client accepts your client’s failure to pay balance deposit as outlined above as a further breach of its obligations pursuant to the Contract and hereby terminates the contract.”
- The plaintiff’s solicitors responded on 11 September 2015 by a letter which said:
“We refer to your letter of 7/9/2015 and are instructed as follows:
(a)Our client denies that it paid the initial deposit of $10,000 out of time. Our client called your clients agent Steven McGregor on the 18/6/2015 to collect the deposit cheque which he did on the 19/6/2015 at 10am.
(b)Our client also denies your allegation that the balance of deposit payable after due diligence should have included the GST and therefore the amount payable was to be $72,500 as opposed to $65,000. The contract not only does not state that the gst is required to be paid with the deposit but in fact clause 34.5 of the contract clearly states that the ‘buyer must on the date of completion pay to the seller in addition to the purchase price pay the GST.’
(c)With regards to due diligence pursuant to Special condition 5 our client has continuing rights to waive the benefits of this clause after 5 pm 27/7/2015.
(d)Consequently our client does not accept that your client has the right to terminate the contract and the contract remains valid and afoot.
(e)Our client demands that your client sign the consent to SARA-IDAS Form 1 application and return to us in order that the application to the council may be lodged without delay.”
- On 23 September 2015, then, the plaintiff’s solicitors instituted the present proceeding by filing a claim and statement of claim. The relief sought included an order for specific performance of the contract. An amended statement of claim was subsequently filed on 6 November 2015.
- The defendant has defended the claim and brought a counter-claim by which it seeks a declaration as to the validity of the termination of the contract, and for declarations as to the amount of the deposit due to be forfeited.
- After some interlocutory skirmishing, the details of which are not relevant for present purposes, the present application came on before me. It is an application by the defendant for summary judgment on its counterclaim.
- The defendant’s arguments were, in summary, as follows:
- It was abundantly clear that the plaintiff had failed to comply with Special Condition 5, and this gave rise to the defendant’s right to terminate the contract, as it did;
- Alternatively, by paying only $65,000 rather than $72,500 as the second tranche of the deposit under the contract, the plaintiff breached the contract, giving rise to an entitlement for the defendant to terminate;
- As there is no factual dispute underlying each of these issues, it is appropriate to proceed on a summary determination;
- The plaintiff has no real prospect of defending either of the arguments referred to in 1 and 2. That being the case, there is no need for a trial because resolution of either of those arguments in the defendant’s favour serves only to confirm the defendant’s entitlement to terminate the contract.
Proper construction of Special Condition 5
- The defendant contended that the position of the parties under Special Condition 5, on its proper construction, was as follows:
(a)Whilst the plaintiff was at liberty to waive Special Condition 5 before the 40 day period expired, it did not do so. After that period expired, the contract remained on foot until one of the parties sought to avoid the contract. At best, the plaintiff could have notified the defendant of its satisfaction with due diligence after the 40 day period but prior to the defendant avoiding the contract.
(b)The defendant notified the plaintiff of termination of the contract for non-fulfilment of Special Condition 5 on 27 July and again on 28 July. The plaintiff did not purport to notify the defendant of satisfaction under Special Condition 5 until 29 July, by which time the contract was at an end.
(c)On that basis, the defendant must succeed on its counterclaim, it being conceded that, in those circumstances, the plaintiff is entitled to a return of all monies paid as deposit.
- For the plaintiff, it was argued:
(a)There are no authorities which consider the construction of clauses in the form of Special Condition 5;
(b)Authorities to which reference was made in argument deal with clauses which were in fundamentally different terms from Special Condition 5;
(c)Special Condition 5 needs to be considered “in light of all evidence adduced at trial”.
- These submissions for the plaintiff are unappealing for a number of reasons.
- The mere fact that a clause in this form has not previously been the subject of judicial scrutiny presents no impediment to the present determination. What is called for is the construction of a clause in a commercial contract by adopting an objective approach to determining the rights and liabilities of the parties. As was said by the plurality of the High Court in Electricity Generation Corporation v Woodside Energy Ltd & Ors, (omitting citations):
“The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitle to approach the task of giving a commercial contract a businesslike interpretation on the assumption ‘that the parties … intended to produce a commercial result’. A commercial contract is to be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.”
- Moreover, and in any event, there was no intimation by the plaintiff on the present application as to what evidence at trial would necessarily need to be considered for the purpose of properly construing Special Condition 5. An affidavit by the sole director of the plaintiff, Mr Mollaian, simply said in relation to Special Condition 5:
“Special Condition 5 of the Contract – Due Diligence
- I note that the Contract is subject to due diligence being satisfied by the Plaintiff on or before 40 days from the date of the contract, being 27 July 2015.
- I further note that Special Condition 5 does not provide that the Seller is entitled to rescind the Contract should the Purchaser fail to confirm satisfaction of due diligence by the due date. Accordingly I believe that the Plaintiff was entitled to waive the benefit of the due diligence Special Condition 5 of the Contract.”
- Nothing in Mr Mollaian’s affidavit, or in the submissions made on behalf of the plaintiff, identified any particular background circumstances to which regard should be had for the purposes of construing Special Condition 5.
- Special Condition 5 made the contract conditional upon a “due diligence period” which was “to be satisfied” within 40 days from the date of the contract.
- It is objectively clear enough that this clause was for the benefit of the plaintiff as purchaser – as Muir J (as he then was) said in the Court of Appeal in Bellmere Park Pty Ltd v Benson, due diligence “enquiries or investigations in the normal scheme of things are conducted by a purchaser to enable it to be satisfied about aspects of the property it is proposing to acquire”.
- It is also, I think, objectively clear that it was for the purchaser to be satisfied with such due diligence enquiries within the 40 day period – to construe the clause otherwise would lead to a situation of unacceptable certainty under which a vendor could terminate the contract because of its own view about the due diligence enquiries prior to the expiration of the due diligence period.
- If, during the 40 day period, the plaintiff as purchaser had concluded that it was not satisfied with the due diligence investigation, it had the right to terminate the contract by invoking Special Condition 5.
- Or, if it was satisfied with its enquiries, the plaintiff, within the 40 day period, could have expressly waived Special Condition 5, or fulfilled Special Condition 5 by confirming its satisfaction with due diligence.
- It did neither of these things, and, accordingly, at the expiration of the 40 day period Special Condition 5 must be regarded as having been unfulfilled. In such circumstances, the contract was voidable by either party, provided it was not itself in default. So much is the consequence of the principles derived from Suttor v Gundowda Pty Ltd and Gange v Sullivan. In that regard, I refer particularly to Donaldson v Bexton, in which Keane JA (as he then was) essayed this, and related, principles at length. For present purposes, it is sufficient to quote from the concurring judgment of Jerrard JA in which he said:
“The effect of the decisions in Suttor v Gundowda and Gange v Sullivan is that the contract – on non-fulfilment of the condition – was, despite its terms, voidable at the instance of either party, once the clause had neither been performed nor waived.”
- It is not to the point that Special Condition 5 was for the benefit of the plaintiff, as purchaser. As Keane JA said in Donaldson v Bexton:
“A conclusion that a condition is for the benefit of one party and may, therefore, be waived by that party does not support the resolution of the different question which arises in this case, namely, whether the first party may defeat a right to terminate which has accrued to the other party in accordance with the terms of the contract as understood in the light of the principles discussed in Suttor v Gundowda and Gange v Sullivan.”
- Further, as Keane JA went on to note in that judgment, where a purchaser does not waive a condition inserted for the purchaser’s benefit, the vendor’s right of termination cannot be defeated by a subsequent “waiver” by the purchaser. That observation is directly apposite to the present case. Upon the non-fulfilment of Special Condition 5, with the expiration of the 40 day period, the defendant, as vendor, had a right to terminate. It exercised that right before the plaintiff, as purchaser, purported to “waive” the benefit of Special Condition 5. The efficacy of the defendant’s termination could not be, and was not, defeated by the advice sent by the plaintiff’s solicitors on 29 July, which was the plaintiff’s first notification of satisfaction with due diligence.
- It follows that I am satisfied that, on a proper construction of Special Condition 5, the contract was validly terminated by the defendant prior to the plaintiff’s purported waiver. That finding is sufficient to found a judgment for the defendant on its counterclaim. The plaintiff has not pointed to any matters which would indicate that it has any real prospect of defending the counterclaim under the construction of Special Condition 5 which I have adopted. And given that this conclusion effectively disposes of the competing claims concerning the contract, there is clearly no need for a trial of the counterclaim. Accordingly, the discretionary considerations for the grant of summary judgment under r 292 of the Uniform Civil Procedure Rules 1999 are fulfilled.
- In light of my conclusion that the contract was validly terminated by the defendant by reference to Special Condition 5, it is not necessary for me to make determinations on the issues raised concerning the deposit. It is sufficient if I briefly record my views as follows.
- The defendant’s argument turned on the proposition that the Purchase Price under the contract was, as stated in Item N, “$750,000 plus GST”, i.e. the Purchase Price was a total of $825,000. The total deposit to be paid was ten per cent of that amount, being $82,500. When one deducted the initial deposit part payment of $10,000, that left the balance of $72,500 to be paid “on acceptance of due diligence”, in accordance with Item O. The plaintiff, after purporting to express its satisfaction with due diligence, only paid a further $65,000 by way of balance deposit. The plaintiff was thus in substantial breach of contract, entitling the defendant to terminate for breach. In support of this argument, the defendant also relied on the statement in the plaintiff’s solicitor’s letter of 22 June 2015 that “balance deposit of $72,500 due date is Monday 27 July 2015” as a concession on the part of the plaintiff that this was the proper construction of the contract. It was said that to interpret the “Purchase Price” otherwise would lead to ambiguity.
- The clear difficulty with this argument for the defendant, however, is that it is completely at odds with the specific GST provisions in the Items Schedule, referred to in paragraphs  and  above. That part of the Items Schedule made it abundantly clear that the Purchase Price did not include GST. By ticking the “No” box in that part of the Items Schedule, cl 34.5 was invoked, which expressly provided that the Purchase Price did not include the defendant’s liability for GST on the supply of the property.
- The contract needs to be read as a whole. Item N, on which the defendant’s argument rests, cannot be read in isolation from the rest of the contract. In the absence of anything further, it seems to me that the unequivocal answer in the part of the Items Schedule specifically addressed to GST issues that the Purchase Price did not include GST can only mean that the Purchase Price under this contract was $750,000. The “+ GST” annotation in Item N could be seen as an unnecessary, and unfortunate, adornment which was intended to signify that GST would be payable in addition to the Purchase Price of $750,000.
- At the very least, I would have accepted the likelihood of the necessity for evidence to be adduced on this issue.
- In any event, the plaintiff, on its evidence before me, raised an issue about the acceptance by the stakeholder of the second tranche of the deposit, and the defendant’s director, Mr Burnitt, placed in issue the authority of the stakeholder to receive that second tranche.
- In those circumstances, I would have been disinclined to accede to the defendant’s application for summary judgment on the counterclaim on the basis of its deposit argument.
- For the reasons stated above, there should be summary judgment for the defendant on the counterclaim. That judgment will include a declaration that the defendant validly terminated the contract dated 17 June 2015. In light of the defendant’s concession with respect to the return of deposit monies to the plaintiff, there may need to be consequential orders to give effect to that concession. In view of the granting of summary judgment for the defendant on the counterclaim, there should also be consequential orders to dispose of the proceeding. And I will, in the circumstances, hear the parties as to costs.
- I will hear counsel as to the necessary orders to give effect to this judgment, and as to costs.
 (2014) 251 CLR 640 at .
  QCA 102 at .
 Bellmere Park Pty Ltd v Benson  QSC 11, per White J at .
 (1950) 81 CLR 418.
 (1966) 116 CLR 418.
  1 Qd R 525.
 At .
 At .
 At .
 Affidavit of Burnitt sworn 27 November 2015, para 13.
- Published Case Name:
International Palace Pty Ltd v Novaheat Pty Ltd
- Shortened Case Name:
International Palace Pty Ltd v Novaheat Pty Ltd
 QSC 75
08 Apr 2016
No Litigation History