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Babstock Pty Ltd v Laurel Star Pty Ltd[2022] QCA 63

Babstock Pty Ltd v Laurel Star Pty Ltd[2022] QCA 63

SUPREME COURT OF QUEENSLAND

CITATION:

Babstock Pty Ltd & Anor v Laurel Star Pty Ltd & Anor [2022] QCA 63

PARTIES:

BABSTOCK PTY LTD
ACN 010 443 124
AS TRUSTEE FOR THE KENMAN REAL
ESTATE UNIT TRUST
(first appellant)
WAG PROPERTY MANAGEMENT PTY LTD
ACN 136 174 242
AS TRUSTEE FOR THE WAG UNIT TRUST
(second appellant)
v
LAUREL STAR PTY LTD
ACN 624 444 862
AS TRUSTEE FOR THE ALAN AND DOROTHY MARBURG FAMILY TRUST
(first respondent)
DOROTHY ANN MARBURG
(second respondent)

FILE NO/S:

Appeal No 106 of 2021
DC No 2326 of 2018

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

District Court at Brisbane – [2020] QDC 305 (Barlow QC DCJ)

DELIVERED ON:

29 April 2022

DELIVERED AT:

Brisbane

HEARING DATE:

6 May 2021

JUDGES:

Fraser and Bond JJA and Wilson J

ORDERS:

  1. Allow the appeal.
  2. Set aside the orders made in the District Court on 3 December 2020 and order instead:
    1. a.
      Judgment for the first plaintiff against the defendants in the sum of $250.00.
    1. b.
      The defendants pay or cause to be paid to the first plaintiff the sum of $250.00, comprising the balance of the deposit under the Business Contract.
  3. Set aside the order made in the District Court on 19 January 2021.
  4. Remit the proceedings to the District Court for the determination in accordance with law of the remaining issues in the proceeding.
  5. The respondents are to pay the appellants’ costs of the appeal.
  6. The costs of the proceedings in the District Court are to be costs in the proceedings upon the remitter.

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – REPUDIATION AND NON-PERFORMANCE – REPUDIATION – ANTICIPATORY BREACH – where by a Business Contract dated 1 December 2017, the first appellant (“the Seller”) agreed to sell its letting business, excluding its appointments by property owners as rental agent and its business name, to the first respondent (“the Buyer”) – where by a Rent Roll Contract of the same date the Seller agreed to sell its appointments by property owners as rental agent, then of 148 rental properties, to the Buyer – where on 10 May 2018, the Buyer’s solicitors sent to the Seller’s solicitors a letter by which the Buyer purported to rescind both contracts for misrepresentation, misleading and deceptive conduct and unconscionable conduct or alternatively, by that letter the Buyer purported to terminate the Rent Roll Contract for breach of contract and it purported to terminate the Business Contract for breach of contract or pursuant to a special condition of that contract – where the Seller contended that the Buyer’s letter of 10 May 2018 amounted to a wrongful repudiation of the contracts – where on 18 May 2018, the Seller purported to terminate the contracts for what the Seller contended was an ongoing wrongful repudiation by the Buyer – where the Seller has appealed pursuant to s 118(2) of the District Court of Queensland Act 1967 (Qld) – whether the primary judge erred in any of the ways identified in the Seller’s notice of appeal in deciding that the Buyer had validly terminated the Rent Roll Contract for the alleged repudiation of the Seller

District Court of Queensland Act 1967 (Qld), s 118(2)

Dainford Ltd v Smith (1985) 155 CLR 342; [1985] HCA 23, cited

DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; [1978] HCA 12, cited

Green v Sommerville (1979) 141 CLR 594; [1979] HCA 60, cited

Jeppesons Road Pty Ltd v Di Domenico [2005] QCA 391, cited

Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623; [1989] HCA 23, cited

Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; [1985] HCA 14, cited

Shevill v Builders Licensing Board (1982) 149 CLR 620; [1982] HCA 47, cited

COUNSEL:

D Savage QC, with B W J Kidston, for the appellants
A J H Morris QC for the respondents

SOLICITORS:

Carter Capner Law for the appellants
Sarinas Legal for the respondents

  1. [1]
    FRASER JA:  By a contract (“the Business Contract”) dated 1 December 2017, the first appellant (“the Seller”) agreed to sell its letting business, excluding its appointments by property owners as rental agent and its business name, to the first respondent[1]  (“the Buyer”).  By another contract of the same date (“the Rent Roll Contract”) the Seller agreed to sell its appointments by property owners as rental agent, then of 148 rental properties, to the Buyer.  The expression “rent roll” describes the collection of such appointments made in favour of the Seller from time to time.  The second respondent, Ms Marburg, guaranteed the obligations of the Buyer under both contracts.
  2. [2]
    On 10 May 2018, the Buyer’s solicitors sent to the Seller’s solicitors a letter by which the Buyer purported to rescind both contracts for misrepresentation, misleading and deceptive conduct and unconscionable conduct.  Alternatively, by that letter the Buyer purported to terminate the Rent Roll Contract for breach of contract and it purported to terminate the Business Contract for breach of contract or pursuant to a special condition of that contract.  The Seller contended that the Buyer’s letter of 10 May 2018 amounted to a wrongful repudiation of the contracts.  On 18 May 2018, the Seller purported to terminate the contracts for what the Seller contended was an ongoing wrongful repudiation by the Buyer.
  3. [3]
    Litigation ensued.  After a trial in the District Court of a claim brought by the Buyer and a counterclaim brought by the Seller, the primary judge accepted the Buyer’s contention that it had validly terminated the Business Contract pursuant to a special condition of that contract.  That is not in issue in this appeal.
  4. [4]
    The primary judge also accepted the Buyer's contention that by its letter of 10 May 2018 it had validly terminated the Rent Roll Contract for repudiation by the Buyer.  The parties having agreed upon the amount payable by the Seller in that event, judgment was given for the Buyer in the sum of $42,844.86.  The Seller’s counterclaim for a much larger amount was dismissed.  The primary judge considered that the conclusion that the Buyer had validly terminated both contracts made it unnecessary to consider the Buyer’s alternative claim that it had validly rescinded both contracts for misrepresentations, misleading and deceptive conduct, and unconscionable conduct by the Seller.
  5. [5]
    The Seller has appealed pursuant to s 118(2) of the District Court of Queensland Act 1967 (Qld).  The issue is whether the primary judge erred in any of the ways identified in the Seller’s notice of appeal in deciding that the Buyer had validly terminated the Rent Roll Contract for the alleged repudiation of the Seller.
  6. [6]
    I will discuss first the Seller’s contention that the primary judge’s finding that the Seller had repudiated the Rent Roll Contract was not supported by the evidence or the proper conclusion to draw from the evidence.[2]
  7. [7]
    Clause 2.1 of the Rent Roll Contract provides, “Subject to the provisions hereof the Seller agrees to sell to the Buyer and the Buyer agrees to purchase from the Seller the Business”.  The word “Business” is defined to mean “the Rent Roll, the subject of this Agreement”.  The contract provided for the Seller to fulfil its obligation to “sell” the rent roll to the Buyer either by assigning the property owners’ appointments of the Seller to the Buyer or by procuring the property owners to make fresh appointments of the Buyer as rental agent for the properties:
    1. (a)
      The Rent Roll Contract specified a period during which the Buyer would have access to specified records relating to the rent roll, and during which the Buyer could terminate that contract if not satisfied with its due diligence conducted in that period.  Thereafter, clause 3.5 empowered the Buyer within one business day to give to the Seller a written notice requiring the Seller “in the fulfillment of the Seller’s obligations as set out in clause 5.2, either for an identified Property or Properties or all Properties to either:

3.5.1 subject to the terms of the Seller’s existing Appointment, provide to the subject Property Owner/s a notice of assignment including the name and business address of the Buyer in accordance with the terms of the Seller’s Appointment or alternatively the Seller must procure from the subject Property Owner/s an agreement in writing to the assignment pursuant to the provisions of Section 113 of the Act; or

3.5.2 procure the execution of a new Appointment from the Property Owner/s.”

(In relation to cl 3.5.1, the Property Occupations Act 2014 does not in fact provide for a property owner to agree to an assignment, in writing or otherwise.  Its provisions are to very different effect: see [9] of these reasons.)

  1. (b)
    By clause 3.6, if the Buyer does not give a notice under clause 3.5, “the Seller shall be at liberty to fulfil the Seller’s obligations pursuant to Clause 5.2 in such manner as the Seller may determine at the Seller’s sole discretion”.
  2. (c)
    After specified provisions of the contract were satisfied and notice of satisfaction was given to the Seller, clause 5.2 obliged the Seller to “take all reasonable steps to obtain in writing from each relevant Property Owner an Appointment or an Assignment in favour of the Buyer in respect of each of the Properties and in each case on the same terms and conditions as the Appointment presently existing in favour of the Seller.”  (As to assignments, cl 5.2 proceeds upon a legal misconception that a property owner who has appointed a rental agent could assign that appointment to a third party.)
  3. (d)
    Clause 6.1, which creates obligations upon “The Seller in conjunction with the Buyer” concerning an introduction by way of a letter from both parties to the Property Owners, provides for “the Appointment or Assignment” to be posted in the same envelope by the Seller to the Property Owners.
  1. [8]
    The primary judge found that the Buyer had not given the Seller a notice under clause 3.5, so that the Seller was entitled to fulfill its obligations under clause 5.2 by “obtaining in writing from each Property Owner an Assignment in favour of [the Buyer]”.[3]  Of course, the Seller remained entitled to fulfil that obligation by instead obtaining appointments by property owners of the Buyer.
  2. [9]
    Although under the general law,[4] the Seller could assign only the benefit of its appointment as a property owner’s rental agent, legislation applicable in this case transformed the assignment of an appointment conforming with that legislation into a valid appointment by the property owner of the assignee.  The primary judge succinctly explained the position:

““Assignment” is defined as “an assignment of an Appointment from the Seller to the Buyer notified in writing in such manner prescribed by the Act.”  “Act” is defined as meaning the Property Agents and Motor Dealers Act 2000, the Property Occupations Act 2014 “or any subsequent Act and includes any amendment and regulations thereto.”  The Property Occupations Act applied at the date of the contract and is the Act to turn to for the manner of notification.  It relevantly provided that the assignee of an appointment must give each client written notice of the assignment within 14 days after the assignment.  Subsection 113(4) provided that an assigned appointment is taken, for section 102, to be an appointment by the client of the proposed assignee and to continue to have effect according to its terms.

Somewhat perplexingly, the Act ignores the distinction between an assignment and novation of a contract.  Generally, one can only assign the benefits of a contract, not the burdens.  The parties to a contract can only change by novation of the contract between the remaining and new parties.  However, the Act appears to treat an “assignment” of an appointment as operating as if it were the novation of an appointment.  I shall proceed on that basis.”[5]

  1. [10]
    The Rent Roll Contract provided for two settlements.  After agreed extensions of time, the “First Settlement Date” was 11 May 2018.  The “Second Settlement Date” was 14 days from the First Settlement Date.  Clauses 15.1 and 16.1 of the contract made the date of settlement (but not the time on the settlement date) of the essence of that contract.
  2. [11]
    As the primary judge considered,[6] the Rent Roll Contract did not require the Seller to produce assignments or new appointments in respect of any particular number of properties by either of the settlement dates.  No provision of the contract expressly imposes any such requirement.
  3. [12]
    The repudiation by the Seller found by the primary judge was an anticipatory breach by the Seller of clause 10.1.4 of the Rent Roll Contract.  Clause 10.1 required the Seller, in consideration of payment of the purchase price, to deliver to the Buyer “on the relevant settlement date of each particular transferred Property” many documents and other things including:

“10.1.4 a new Appointment or Assignment in respect of each relevant transferred Property, duly executed by the relevant transferred Property Owner and, if applicable, in a form approved by the Buyer pursuant to Clause 6, appointing the Buyer as its managing agent for that Property on terms no less favourable than the existing form;”

  1. [13]
    The Seller argued at the trial that in the events that had occurred cl 10.1.4 did not require assignments to be executed by the owners.  The primary judge rejected the argument.  The primary judge held that, whilst all that was required under the Property Occupations Act 2014 to effect an Assignment was for the Seller to give the Property Owner notice in writing on behalf of the Buyer that the appointment had been assigned to the Buyer, clause 10.1.4 of the Rent Roll Contract required in the case of an assignment (as it did in the case of a new appointment) that the Seller deliver to the Buyer on the relevant settlement date of each particular transferred property an assignment “duly executed by the relevant transferred Property Owner”.[7]  The primary judge concluded:

“Thus, at settlement for a particular property, if an appointment of Babstock had been assigned to Laurel Star rather than a new appointment having been obtained, Babstock was obliged to have taken the extra step of having the property owner sign the notice of assignment, in essence by way of acknowledgment of the assignment. This was notwithstanding that the assignment would be effective, under the Act, without such an acknowledgment. This extra step, while unnecessary under the Act, was one that the parties had agreed as necessary for settlement. It is unnecessary to speculate about the reasons for that requirement.”[8]

  1. [14]
    The Seller challenges the primary judge’s construction of cl 10.1.4.[9]  This section of my reasons proceeds upon the premise that the primary judge’s construction is correct.
  2. [15]
    The primary judge considered that the Seller’s obligation under cl 10.1.4 was essential, such that a repudiation of it entitled the Buyer to terminate the contract.[10]  The Seller also challenges this conclusion.  Again, this section of my reasons proceeds upon the premise that the primary judge’s conclusion is correct.
  3. [16]
    In a passage in Shevill v Builders Licensing Board[11] that was endorsed in Progressive Mailing House Pty Ltd v Tabali Pty Ltd[12] and Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd,[13] Gibbs CJ expressed the general principle that repudiation of a contract occurs “…if one party renounces his liabilities under it – if he evinces an intention no longer to be bound by the contract (Freeth v Burr[14]) or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way (Ross T Smyth & Co. Ltd. v. T. D. Bailey, Son & Co.[15]; Carr v. J. A. Berriman Pty. Ltd.[16]).”
  4. [17]
    The primary judge did not find that the Seller renounced the Rent Roll Contract.  The effect of the primary judge’s findings is instead that by 10 May 2018 the Seller had communicated its intention of fulfilling its future obligation under cl 10.1.4 by providing to the Buyer at the settlement dates in exchange for the contractual price assignments that were not executed by the property owners.  The primary judge reasoned as follows:

“Although it was not addressed in the correspondence around that time, Babstock clearly had no intention of providing to Laurel Star, at settlement on 11 May 2018, any assignments executed by the owners.  It did not consider that it had any obligation to do so.  Nor, on 10 May 2018, was it in a position to obtain such executed assignments by 11 May for each of those properties.  Although, under the contract, settlement was due on 11 May 2018 only for properties in respect of which an assignment had been “obtained” (which, in my view, means an assignment executed by the owner), it is clear that Babstock was intending to insist on settlement of the properties in the list even though it had not obtained such assignments.  Furthermore, it had no intention of obtaining executed assignments from owners in anticipation of the second settlement date 14 days later: the reference to including some properties in the second settlement concerned only the issues then being raised by Laurel Star, not the question of executed assignments.

The evidence – including the terms of Mr Kenman’s letter to the owners and of the notices of assignment, together with the conversation between Mr Kenman and Mr Marburg on 28 or 29 March 2018 referred to in Mr Marburg’s email to his solicitor on 29 March – demonstrates that Mr Kenman did not consider that it was necessary for Babstock to obtain signed acknowledgements from owners in order to comply with its obligations under the contract.  He had no intention to do so.  The defendants maintained that position up to and throughout the trial of this proceeding.  Babstock clearly had no intention to settle on the terms provided by the contract.” [17]

  1. [18]
    Some expressions in that passage arguably convey that the primary judge took into account the Seller’s subjective intention not to procure property owners to execute assignments the Seller intended to provide at settlement.  Consistently with the passage quoted from Gibbs CJ’s reasons in Shevill v Builders Licensing Board, the subjective intention of a party alleged to have repudiated a contract by evincing an intention no longer to be bound by it or by an intention to fulfill it only in a manner substantially inconsistent with its obligations and not in any other way is irrelevant; whether there has been repudiation by a party to a contract is to be determined by its “objective acts and omissions and not upon uncommunicated intention”.[18]
  2. [19]
    The primary judge took into account that the Seller maintained its opinion that it was not necessary for it to obtain signed acknowledgements from property owners up to and at the trial.  The fact that the Seller invited a judge to adjudicate upon its contention that cl 10.1.4 had not required it to obtain signed acknowledgements by the owners sheds no light upon the answer to the question whether, by some act or omission of the Seller before the Buyer purported to terminate that contract, the Seller had communicated an intention to fulfill its obligation under that clause only in a manner inconsistent it.
  3. [20]
    The primary judge observed that on 10 May 2018 the Seller was not in a position to procure execution by the owner of each of the properties in the list of properties it had by then provided to the Buyer for settlement.  Considered in isolation from its context, that might be thought to suggest a finding of anticipatory breach constituted by an uncommunicated inability to perform the contract.  Any such impression is dispelled by the context:
    1. (a)
      The primary judge did not make the finding necessary to establish such an anticipatory breach, that as at 10 May the Seller was “wholly and finally disabled from performing its contractual obligations when the time for performance, so far as it is of the essence, should arrive”.[19]
    2. (b)
      Such a finding could not be made in light of the unusual terms of this contract.  As the primary judge immediately went on to acknowledge, consistently with the primary judge’s analysis of the contract mentioned in [11] of these reasons, the Rent Roll Contract did not oblige the Seller to effect settlement in respect of any particular property on either settlement date.  (The Seller was presumably obliged to take reasonable steps to obtain assignments or appointments for settlement, but there is no issue about that in this appeal.)
    3. (c)
      Another reason why such a finding could not be made is that such evidence as was adduced upon the topic is to the contrary.  The Buyer did not seek to contradict the Seller’s submission that the evidence demonstrated that on 11 May 2018 the Seller was in fact in a position to fulfil its obligation under cl 10.1.4 by delivering two appointments executed by property owners appointing the Buyer as managing agent.[20]  Nor did the Buyer point to evidence capable of justifying a finding that the Seller could not have procured execution of an assignment by any owner of a property in the rent roll by the latest time allowed for settlement on the First Settlement Date of 11 May 2018 or by the Second Settlement Date.
  4. [21]
    The primary judge’s conclusion that the Seller repudiated the Rent Roll Contract ultimately depends upon the findings that the Seller “did not consider that it was necessary for [it] to obtain signed acknowledgements from owners in order to comply with its obligations under the contract” and it “had no intention to do so”.  Those findings accurately describe an effect of the Seller’s communications to the Buyer before the latter purported to terminate the Rent Roll Contract.  For the following reasons, however, the Seller did not thereby repudiate that contract.
  5. [22]
    In an email from Mr Kenman to Mr Marburg on 9 February 2018, Mr Kenman asked Mr Marburg if he was happy with Mr Kenman’s proposed letter to clients advising of the sale and, if he was happy, whether Mr Kenman could also send them a letter of introduction from himself at the same time.  The attached draft letter (which left the lessor’s name and address blank) includes an announcement by Mr Kenman that he had decided to step aside from owning the real estate agency and statements identifying Mr Marburg as the principal of the business operation which would commence on 4 April 2018 (which was then the date for the First Settlement).  Under the heading “Important Notes”, the draft letter states that it encloses for each Owner’s records two documents, one of which is described as “Notice of Assignment of Appointment of Agent”.  As to this evidence:
    1. (a)
      The primary judge observed that the draft letter did not ask the owner to sign and return the attached draft assignment.  The primary judge also referred to an example Notice of Assignment and noted that it did not include provision for the Owner to sign the document.[21]
    2. (b)
      I would add that a reasonable person in the Buyer’s position would have understood from the relevant statement in the Seller’s draft letter (that the assignment was enclosed “for each Owner’s records”) that the process described by Mr Kenman did not include a request of owners to execute the assignments.
    3. (c)
      Importantly, the context in which the Seller described that process was a request by the Seller for the Buyer to comment upon it.
  6. [23]
    By email on 19 February 2018, Mr Marburg thanked Mr Kenman for forwarding his “letter to clients” and stated that he would work on his letter that day, to send to Mr Kenman.  On 20 February 2018, Mr Marburg emailed his draft letter of introduction to Mr Kenman and invited any suggestions for alterations Mr Kenman might make.  Mr Marburg also suggested a change to Mr Kenman’s draft letter, to remove from it a reference to Ms Marburg, who would not be involved in the business.  In subsequent emails on 20 and 21 February 2018, Mr Kenman and Mr Marburg agreed upon further changes to Mr Marburg’s draft letter.  As to this evidence:
    1. (a)
      These emails evidence the Buyer’s engagement in the cooperative approach to the parties’ preparation for settlement which the Seller had initiated in Mr Kenman’s email of 9 February.
    2. (b)
      In that context, Mr Marburg’s reply on 20 February asking for a correction only of a presently irrelevant part of Mr Kenman’s draft letter would convey to a reasonable person in the Seller’s position that the Buyer was content with the Seller implementing the process described in the Seller’s draft letter to owners, which did not involve the Seller asking the owners to execute the Seller’s assignments.
  7. [24]
    On 15 March 2018, Mr Marburg thanked Mr Kenman for the email of 14 March in which Mr Kenman informed Mr Marburg that Mr Kenman had started “notifying” owners of the Assignment of their Appointments to the Buyer, “giving them over 14 days notice, with the hand over taking effect Wednesday 4th April.”  Mr Kenman explained that the landlords would receive the explanatory letter from the Seller, the introductory letter from the Buyer, and “the assignment notification with the new company details and date of handover”.  The email also noted that Mr Kenman would follow up the landlords “(where possible) with a phone call advising of same”.  As to this evidence:
    1. (a)
      Mr Kenman’s email on 14 March continues the parties’ cooperative approach by volunteering information about the progress of the process he had earlier described, which did not include asking owners to execute the Seller’s assignments.
    2. (b)
      In that context, the circumstance that Mr Marburg thanked Mr Kenman for his email without making any further comment tended to confirm the impression already created that the Buyer was content with that process.
  8. [25]
    On 28 March 2018, Mr Marburg sent an email to Mr Kenman in which Mr Marburg asked Mr Kenman for information.  Amongst other things, Mr Marburg asked Mr Kenman, “Could you please advise on client responses regarding “assignment” of the Agreements”, and he stated that the Buyer’s solicitor was pursuing settlement for the contracted date of 4 April 2018.  On the same day, Mr Kenman sent Mr Marburg an email which responded only to other things in Mr Marburg’s email.  The primary judge found, however, that Mr Marburg and Mr Kenman also had a discussion, which was along the lines of that described in an email from Mr Marburg to his solicitor (the Buyer’s solicitor) on 29 March 2018.  In that email, Mr Marburg confirmed that Mr Marburg had “spoken to the seller regarding advice on “assignment” of the client Agreements” and recorded:

“I was informed that as the seller had advised all clients of the pending change in ownership, all they asked for was a response if any client did not want to continue with the Agreement under our management.

No client has indicated that they would not assign the agreement.

Is this an accepted method at change-over?”

There was no evidence whether or not the solicitor gave Mr Marburg an answer to that question.

  1. [26]
    Mr Marburg for the Buyer and Mr Kenman for the Seller gave evidence about their discussions.  Consistently with the emails exchanged between Mr Marburg and Mr Kenman, the primary judge accepted that the parties had “discussed transferring the appointments by notices of assignment”[22] and “at some stage, Mr Kenman and Mr Marburg had a conversation in which Mr Kenman proposed obtaining assignments of existing appointments and Mr Marburg agreed that that would be satisfactory”.[23]  The primary judge accepted Mr Marburg’s evidence that he did not agree to any variation of the contract and did not accept Mr Kenman’s evidence to the contrary, but the primary judge was not satisfied that Mr Marburg had told Mr Kenman that Mr Marburg required signed acknowledgments from property owners.  In that respect, the primary judge found that “while the parties agreed that it would be sufficient for [the Seller] to give notices of assignment to owners rather than obtaining new appointments of [the Buyer], each of the parties had a different understanding of what was required to put that into effect” and the parties “never agreed on a particular method”.[24]
  2. [27]
    The primary judge concluded that the emails exchanged on 28 March and the discussion described in Mr Marburg’s email of 29 March tended to support Mr Marburg’s evidence that he had not by that time agreed to dispense with owners’ confirmations of the assignments and they did not support Mr Kenman’s evidence about the variation to the Rent Roll Contract to that effect alleged by the Buyer.[25]  As to that evidence:
    1. (a)
      The parties’ cooperative approach to preparing for settlement continued in this exchange of emails and in the discussion.
    2. (b)
      The request in Mr Marburg’s email on 28 March for advice about owners’ responses about the assignments conveys only that he sought to be informed of any reactions by owners upon being informed by Mr Kenman that the Seller had assigned their appointments of the Seller and the assignments would take effect on 4 April.  This again tends to confirm or is at least consistent with the Buyer being content with the Seller transferring the appointments by way of assignments which owners would not be asked to execute.
    3. (c)
      The description in Mr Marburg’s email to his solicitor on 29 March of Mr Marburg’s conversation with Mr Kenman shortly after that request confirms merely that Mr Kenman had taken the preparatory steps necessary to effect settlement by that method described in Mr Kenman’s earlier communications.  There is no suggestion in that email that Mr Marbug indicated to Mr Kenman that the Buyer might not be content with the process Mr Marburg had implicitly endorsed in earlier exchanges with Mr Kenman.
    4. (d)
      Upon the primary judge’s findings about Mr Marburg’s evidence of the discussion, Mr Marburg did not raise in discussion with Mr Kenman a question along the lines of the question he asked his solicitor about the acceptability of Mr Kenman’s approach.
    5. (e)
      The mere fact that Mr Marburg asked that question of his solicitor has no relevance to the question whether by some act or omission of the Seller it repudiated the contract.
  3. [28]
    The primary judge did not advert to a letter sent by the Buyer’s solicitor on 5 April 2018.  In that letter, the Buyer’s solicitor informed the Seller’s solicitor that the Buyer agreed to extend the date for settlement to 18 April 2018.  The letter noted, under the heading “Requirements on Settlement”, that “We anticipate that your client has undertaken certain preparatory action towards transfer of the properties the subject of the First Settlement rent roll asset base”.  Thereafter the letter refers to many details concerning the proposed settlement and matter to be undertaken in anticipation of the settlement.  A reasonable person in the Seller’s position would have understood that letter to be consistent with the Buyer remaining content to settle upon the basis that the Assignments provided by the Seller would not be executed by the owners.
  4. [29]
    To summarise the relevant context, the Seller’s allegedly repudiatory intention was communicated to the Buyer during a cooperative approach to settlement in which the Seller invited the Buyer to express a view about the Seller’s process of transferring the appointments to owners and the Buyer responded in terms which conveyed that the Buyer was content with the proposed process.  It does not follow that the Seller proved the alleged variation to the Rent Roll Contract.  As already mentioned, the Seller does not now contend that there was any such variation, but this evidence nevertheless supplies powerful support for the Seller’s argument that it did not repudiate the contract in the manner alleged by the Buyer.
  5. [30]
    Two aspects of the primary judge’s findings are also important: the primary judge found that the absence of an intention of the Seller to provide assignments executed by the property owners was not addressed in correspondence around the time of that settlement, and the primary judge did not find that at any time before the Buyer purported to terminate the Rent Roll Contract the Buyer had informed the Seller that the Buyer held a different view about the Seller’s obligation under cl 10.1.4.
  6. [31]
    Upon these findings, even if the analysis in [22] – [29] of these reasons is disregarded, the evidence accepted by the primary judge does not justify a conclusion that the Seller repudiated the Rent Roll Contract.  In DTR Nominees Pty Ltd v Mona Homes Pty Ltd[26] Stephen, Mason and Jacobs JJ, Aickin J agreeing, explained the principle applicable in a case of the present kind:

“No doubt there are cases in which a party, by insisting on an incorrect interpretation of a contract, evinces an intention that he will not perform the contract according to its terms.  But there are other cases in which a party, though asserting a wrong view of a contract because he believes it to be correct, is willing to perform the contract according to its tenor.  He may be willing to recognize his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation.  In either event an intention to repudiate the contract could not be attributed to him. …”

  1. [32]
    Stephen, Mason and Jacobs JJ applied the principle using language which I consider to be applicable in this case upon the evidence accepted by the primary judge:

“In this case the appellant acted on its view of the contract without realizing that the respondents were insisting upon a different view until such time as they purported to rescind.  It was not a case in which any attempt was made to persuade the appellant of the error of its ways or indeed to give it any opportunity to reconsider its position in light of an assertion of the correct interpretation.  There is therefore no basis on which one can infer that the appellant was persisting in its interpretation willy nilly in the face of a clear enunciation of the true agreement.”

  1. [33]
    Similarly, in Dainford Ltd v Smith,[27] Gibbs CJ, after recording that the purchasers of a home unit who alleged the vendor had repudiated the sale contract had not informed the vendor that it was obliged to give a required notice before settlement, observed there was no reason to believe the vendor would have failed to give the notice if it had been pointed out that this was what the contract required.
  2. [34]
    Those passages in DTR Nominees Pty Ltd v Mona Homes Pty Ltd and Dainford Ltd v Smith are consistent with what Mason J (Murphy and Aickin JJ agreeing) described in Green v Sommerville[28] as a general principle of the law of contract that “the court will not readily infer from a party’s insistence on a wrong construction of a contract that [the party] is unwilling to perform it according to its true construction”.
  3. [35]
    At the hearing of the appeal, senior counsel for the respondent submitted that the primary judge’s conclusion that the Seller repudiated the Rent Roll Contract was justified by statements in a letter sent by the Seller’s solicitor to the Buyer’s solicitors on 9 May 2018.  The relevant statements are as follows:

“We have been advised you now act for the buyer in these transactions settlement of which (“First Settlement” in the case of the Rent Roll Contract) has been agreed to occur on this Friday 11 May.

Instructions are to compel settlement of both transactions on the due date.

In relation to the Rent Roll sale, we enclose herewith:-

  1. 1.
    Sellers response to Buyers concerns notified on 04/05/18.  Notwithstanding that by far the majority of your client’s concerns are misplaced, of all purported “deficiencies” – most of which require the mere completion of an admin task or otherwise conform with model property management practice – all but 3 will have been attended to by Friday.  For any Properties in respect of which required RTRAA documentation has not been returned by then, but is subsequently received, will be included in the second settlement; and
  1. 2.
    Updated property schedule for those managements to be included in the First Settlement.

Please be advised that in addition to the properties referred to in the attached updated property schedule, there will be at least five further properties that will be in the subject of the second settlement.

If your client does not intend to settle as required, please advise promptly.  In such an event, the Seller will of course pursue the Buyer and Dorothy Marburg for all losses but early notification will at least avoid the significant cost and inconvenience of arranging settlement and all relevant parties to attend.

The Buyer is hereby put on notice that the loss to the Seller from the Buyer’s default in the sale of the Rent Roll may exceed its entire value.  In this regard please note the following:-

  1. (a)
    One hundred and fifty Owners have all been notified – at the Buyer’s request and after the business was professionally audited having passed with flying colours – that the change in the management of their Properties would occur from April.

  1. (f)
    A default in the purchase of the Rent Roll will result in substantial consequential losses to the Seller.

Kindly seek your client’s instructions in regard to the above items and revert to us as soon as possible.”

  1. [36]
    One issue debated at the hearing of the appeal concerns the meaning of the third last of the quoted paragraphs, particularly the expression “as required”.  The letter demands settlement and threatens pursuit of the Buyer and guarantor if the Buyer defaults.  It does so in a context in which, upon the primary judge’s construction of the contract, the Seller had previously communicated its intention to fulfil its obligation under cl 10.1.4 in a way that would not accord with that clause.  The letter itself, however, is directed only to the fulfilment by the Buyer of its contractual obligations.  There is no reference in the letter to the Seller’s understanding of what cl 10.1.4 requires or its intention in that respect; as the primary judge observed, the Seller’s intention in that respect was not addressed in the correspondence around that time.  In this context, the expression “as required” is naturally understood as a reference to what is required of the Buyer by the Rent Roll Contract, rather than to what is required of the Buyer upon the Seller’s understanding of its contractual obligations under that contract.
  2. [37]
    In any event, when regard is had also to the concluding request for a response by the Buyer, it is not a reasonable construction of the letter that the Seller is prepared to fulfil its obligation under cl 10.1.4 only in a manner substantially inconsistent with whatever may be the true construction of that clause and not in any other way.
  3. [38]
    The conclusion that the Seller did not repudiate the Rent Roll Contract is required also for a different reason.  Because the Rent Roll Contract did not require the Seller to effect the transfer of any particular number of properties by the First Settlement Date (see [11] of these reasons), whether or not the Seller could deliver to the Buyer at settlement any assignment in compliance with cl 10.1.4, the evidence demonstrated (see [20](c) of these reasons) that the Seller could fulfil its obligation under cl 10.1.4 by delivering two appointments executed by property owners appointing the Buyer as managing agent.  The only consequence of the Seller being unable to deliver assignments in compliance with cl 10.1.4 would be that the Buyer would not be obliged to pay so much of the purchase price as related to the non-conforming assignments; as the primary judge noted, the amount of the purchase price payable on the first settlement date was calculated with reference to factors which included identification of the properties included in the settlement, so that the amount to be paid was to be determined “by ascertaining which properties were to be the subject of settlement on that day”.[29]
  4. [39]
    The mere circumstance that on the day before settlement the Seller communicated an intention to settle upon a large number of properties which would require the delivery of assignments could not be thought to preclude the Seller from reacting at settlement to any contention by the Buyer that the assignments did not conform with the contract by settling only upon a small number of conforming appointments.  There could thus be no anticipatory breach of cl 10.1.4 such as might justify the Buyer in terminating the contract merely on account of any communication by the Seller before settlement that it would not at settlement deliver assignments in conformity with the contractual requirements.
  5. [40]
    For these reasons I would hold that the Seller did not repudiate the Rent Roll Contract in the manner alleged by the Buyer.  It follows that the Buyer did not validly terminate the Rent Roll Contract for repudiation.  I would allow the appeal for that reason.
  6. [41]
    I would also accept that an alternative ground for allowing the appeal is that, upon the proper construction of cl 10.1.4, in the events which had occurred the Seller was not required to obtain execution by the property owners of assignments delivered by the Seller at settlement.
  7. [42]
    Upon a grammatical analysis, cl 10.1.4 does require an assignment to be “duly executed by the relevant transferred Property Owner”, but the context must be taken into account.  The context includes the legal nature of an assignment and the applicable provisions of the Property Occupations Act 2014 (see [7] (a) and (c), and [9] of these reasons).  Acknowledging the force of the primary judge’s analysis, I consider the better view is that, in the context in which cl 10.1.4 appears, the expression “duly executed by the relevant transferred Property Owner” qualifies “Appointment” but not “Assignment”.
  8. [43]
    The meaning of a provision of a commercial contract is to be decided by reference to the understanding of reasonable business persons of the text, taking into account the context and the purpose of the contract; and, subject to any contrary intention, it is generally to be assumed that the parties to such a contract intended it to make commercial sense.[30]
  9. [44]
    For the reasons given by the primary judge, execution of an assignment by the relevant property owner would have no legal effect.  Although cl 5.2 in terms required the Seller to take reasonable steps “to obtain in writing from each relevant Property Owner an Appointment or Assignment in favour of the buyer”, an assignment by the owner of its appointment of the Seller is a legal impossibility.  It is also inconsistent with the definition of “Assignment” in the Rent Roll Contract as “an assignment of an Appointment from the Seller to the Buyer notified in writing in such manner prescribed by the Act.”
  10. [45]
    The same legal misconception infects the second of the two alternatives allowed to the Seller by cl 3.5.1 and the last clause of cl 5.2.  There is also a conflict between cl 3.5.1 and cl 5.2.  The first alternative in cl 3.5.1 is that the Seller gives the property owner a notice of assignment.  That is what the Seller did.  Upon the face of the introductory text of cl 3.5 and cl 3.6, the effect of the Buyer not giving the Seller a notice pursuant to cl 3.5 was that “the Seller in the fulfillment of the Seller’s obligations as set out in Clause 5.2” was entitled to do that which it did.  Since the different requirement in cl 5.2 involves a legal impossibility and cl 3.6 expressly entitles a Seller to fulfill its obligations pursuant to cl 5.2 “in such manner as the Seller may determine at the Seller’s sole discretion”, I would construe these provisions as entitling the Seller to do that which it did.  It remains necessary to construe cl 10.1.4, the apparent purpose of which is to give effect to the agreement for sale described in the earlier clauses, including those just discussed.
  11. [46]
    In the absence of any express reference to the function of execution by the owner, the context in which the expression “duly executed” appears suggest a form of execution that will result in legal effect being given to the document so executed.  The expression in cl 10.1.4 “a new Appointment … duly executed by the … Property Owner” is an apt description of the operative act of the Seller which will be effective in law to create a new appointment.  On the other hand, the expression “duly executed by the …Property Owner” is distinctly inapt as a reference to an Assignment under the applicable legislation, which must be duly executed by the Seller if it is to have its intended effect in law.
  12. [47]
    Furthermore, the primary judge’s construction treats execution by an owner of an assignment by the Seller to the Buyer as a mere acknowledgment of that assignment by the property owner, but a mere acknowledgement would have no legal effect and the clause does not convey that the required execution is merely an acknowledgment.
  13. [48]
    The grammatical meaning is also uncommercial.  An effect of construing the clause as requiring due execution by the relevant transferred property owner of any assignment to be delivered at settlement would be to reduce the number of assignments capable of being delivered at settlement by the Seller by the number of owners who refused or merely failed to comply with a request by the Seller that the owner execute the Seller’s assignment to the Buyer of that owner’s appointment of the Seller.  In the ordinary course of things it is likely that some owners would either not wish to comply with such a request or simply not bother to do so.
  14. [49]
    On the other hand, such executions of assignments by owners as the Seller might procure would produce no commercial benefit to the Seller or the Buyer.  The Rent Roll Contract contains specific provisions designed to maximise the number of property owners willing to appoint the Buyer as agent or to remain as a client of the Buyer after the owner’s appointment of the Seller is transferred to the Buyer.  Clause 6.1 is one such provision.  Yet, neither the Seller nor the Buyer sought to include within the letters of introduction to the property owners a request that the property owners execute the Seller’s assignments.
  15. [50]
    There is no evidence suggesting that reasonable parties in the position of the Seller or the Buyer would see any commercial benefit in a legally ineffective requirement that the owners execute the Seller’s assignments.  I have considered whether the Buyer might benefit by such execution providing a form of assurance that the owner would not terminate the statutory contract formed under the Property Occupations Act 2014 upon notice being given of the assignment.  It is surely much more likely that any owner’s decision in that respect would depend upon the Buyer’s performance of its obligations under that contract; and an owner who, if asked, would be prepared to sign the Seller’s assignment would presumably also be equally likely not to terminate the assigned appointment if that owner was not asked to sign the assignment.
  16. [51]
    The various inconsistencies between and legal misconceptions in clauses of the Rent Roll Contract, the inaptness of the text of cl 10.1.4 if it is construed as requiring owners to execute assignments merely as an acknowledgement, and the lack of business sense in such a requirement, justify rejection of the construction which better accords with the literal meaning in favour of the construction that the expression “duly executed by the relevant transferred Property Owner” does not apply in relation to the “Assignment”.

Disposition and orders

  1. [52]
    Having reached the opinion that the Seller has an overpowering case that it did not repudiate the Rent Roll Contract in the way alleged by the Buyer, and having also found that the better view of that contract is that the way the Seller intended to comply with the relevant provision would not have involved a breach of it, it does not seem to me necessary or appropriate to go on to consider the many other grounds of appeal upon which the Seller relies.[31]
  2. [53]
    The substantive orders made in the District Court on 3 December 2020 and the costs order in favour of the respondents made on 19 January 2021 should be set aside.  The appellants acknowledge that, there being no appeal against so much of the substantive orders as required them to repay a $250.00 deposit they received under the Business Contract and to pay or cause to be paid to the first respondent $250.00 comprising the balance of that deposit, orders to that effect should be made.  It is necessary for the proceedings to be remitted to the District Court for determination of the remaining issues.
  3. [54]
    Contrary to a submission for the appellants, no reason appears why the primary judge might be disqualified from hearing the matter on remitter.  The only grounds upon which I would hold that the appeal succeeds do not involve any rejection of any finding made by the primary judge about the oral evidence.
  4. [55]
    As to costs, whilst it is true that the appellants did not pursue many grounds of appeal in their amended notice of appeal, the grounds upon which I would hold that the appellants should succeed in any event required reference to much of the evidence at trial.  I am not persuaded that there should be any erosion of the costs which should be awarded to the appellants upon the footing that they are the successful parties in the appeal.  Costs of the proceedings in the District Court should await the resolution of the matter on remitter.
  5. [56]
    I would make the following orders:
  1. Allow the appeal.
  2. Set aside the orders made in the District Court on 3 December 2020 and order instead:
  1. a)
    Judgment for the first plaintiff against the defendants in the sum of $250.00.
  1. b)
    The defendants pay or cause to be paid to the first plaintiff the sum of $250.00, comprising the balance of the deposit under the Business Contract.
  1. Set aside the order made in the District Court on 19 January 2021.
  2. Remit the proceedings to the District Court for the determination in accordance with law of the remaining issues in the proceeding.
  3. The respondents are to pay the appellants’ costs of the appeal.
  4. The costs of the proceedings in the District Court are to be costs in the proceedings upon the remitter.
  1. [57]
    BOND JA:  I agree with the reasons for judgment of Fraser JA and with the orders proposed by his Honour.
  2. [58]
    WILSON J:  I agree with the reasons of Fraser JA and the orders proposed by his Honour.

Footnotes

[1]When the Business Contract and Rent Roll Contract were executed, the Buyer was D & A Marburg Investments Pty Ltd as Trustee for the Alan & Dorothy Marburg Family Trust.  The first respondent was subsequently appointed as Trustee of that Trust and was substituted as the Buyer by a Deed of Amendment of 27 March 2018.

[2]Amended Notice of Appeal ground (j), paragraphs iii and v.

[3]Reasons [111].

[4]See Property Law Act 1974 (Qld), s 199.

[5]Reasons [111] – [112].  I have omitted internal references.

[6]Reasons [155], [167].

[7]Reasons [115] – [118].

[8]Reasons [119].

[9]Amended notice of appeal ground (a).

[10]Reasons at [184].

[11](1982) 149 CLR 620 at 625 – 626 (Brennan J agreeing and Murphy J substantially agreeing).

[12](1985) 157 CLR 17 at 33 (Mason J, Dawson J agreeing and Deane J generally agreeing) and at 40 (Brennan J).

[13](1989) 166 CLR 623 at 643 (Brennan J) and 666 (Gaudron J).

[14](1874) L.R.9C.P. 208, at P.213.

[15][1940] 3 All E.R. 60, at P.72.

[16](1953) 89 CLR 327, at P.72.

[17]Reasons [158] – [159].

[18]Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 657-658 Deane and Dawson JJ.

[19]Sunbird Plaza Pt Ltd v Maloney (1988) 166 CLR 245 at 262 and 264 (Mason CJ, Deane, Dawson and Toohey JJ agreeing), and 280 (Gaudron J).

[20]In this respect, the appeal record book includes copies of an email from the Seller’s solicitor to the Buyer’s solicitor at about 2 pm on 11 May 2018.  Attachments to that email include two documents which appear on their face to be duly executed appointments by property owners of the Buyer as the owner’s managing agent.

[21]Reasons [130] – [131].

[22]Reasons [139].

[23]Reasons [141].

[24]Reasons [141] – [143].

[25]Reasons [138].  The Seller did not pursue the grounds in its amended notice of appeal contending that the contract was varied in that way.  It is therefore not necessary to consider whether the evidence discussed in this section of the reasons is capable of justifying such a contention.

[26][1978] HCA 12; (1978) 138 CLR 423 at 432.

[27](1985) 155 CLR 342 at 350.

[28](1979) 141 CLR 594 at 611.

[29]Reasons [151] – [154].

[30]Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 554 [16] and [17] (Kiefel, Bell and Gordon JJ, citing Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at 656 – 657 [35].

[31]cf Boensch v Pascoe [2019] HCA 49; 268 CLR 593 at [7] – [8], [101].

Close

Editorial Notes

  • Published Case Name:

    Babstock Pty Ltd & Anor v Laurel Star Pty Ltd & Anor

  • Shortened Case Name:

    Babstock Pty Ltd v Laurel Star Pty Ltd

  • MNC:

    [2022] QCA 63

  • Court:

    QCA

  • Judge(s):

    Fraser JA, Bond JA and Wilson J

  • Date:

    29 Apr 2022

  • Selected for Reporting:

    Editor's Note

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

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