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The Portland Downs Pastoral Company Pty Ltd v Great Northern Developments Pty Ltd[2011] QSC 142

The Portland Downs Pastoral Company Pty Ltd v Great Northern Developments Pty Ltd[2011] QSC 142

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

The Portland Downs Pastoral Company Pty Ltd v Great Northern Developments Pty Ltd & Ors [2011] QSC 142

PARTIES:

THE PORTLAND DOWNS PASTORAL COMPANY PTY LTD

ACN 011 029 413

(plaintiff)

v

GREAT NORTHERN DEVELOPMENTS PTY LTD

ACN 094 805 286

(first defendant)

LAWRENCE PAUL ROBSON, CHRISTOPHER MALCOLM EDWARDS and CHRISTOPHER HAWKINS

(second defendants)

DISCOVERY BEACH PROJECT PTY LTD

ACN 100 500 981

(third defendant/not a party to this proceeding)

MOONBROOK HOLDINGS PTY LTD

ACN 089 494 673

(first third party/not a party to this proceeding)

DEREK WILLIAM McCARTNEY also known as DEREK WILLIAMS

(second third party/not a party to this proceeding)

FILE NO/S:

SC No 1576 of 2006

DIVISION:

Trial

PROCEEDING:

Trial

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

30 May 2011

DELIVERED AT:

Brisbane 

HEARING DATE:

9, 10, 11, 12 May 2011

JUDGE:

Chief Justice

ORDER:

Plaintiff’s claim against the first and second defendants is dismissed.  Costs reserved pending the presentation of any necessary submissions.

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – where plaintiff sold its share in joint venture agreement to develop real estate to the first defendant – where the share sale agreement provided that the payment of the purchase consideration was subject to the first defendant successfully negotiation a “total sum” for construction of the project of $26 million or less – where this sum could be adjusted if construction occurred post January 2003, which it did – where building contract provided for “Guaranteed Maximum Price” of $27,250,000 – where the final negotiated construction cost was around $31.5 million – where there was no adjustment of the $26 million sum – whether the specified sum excluded GST – whether the total negotiated construction cost was in fact $26 million or less

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – where plaintiff sold its share in joint venture agreement to develop real estate to the first defendant – where the share sale agreement provided that the purchase consideration of two units in the development was to be paid to the plaintiff “on Practical Completion” provided that practical completion was effected within two years of the agreement date, and this time period could be extended by the plaintiff – where alternatively, if practical completion was not achieved within two years, the first defendant must pay the Purchase Price of $700,000 to the plaintiff – where practical completion occurred on 5 November 2004, and the agreement had been dated 27 September 2002 – where there was no formal written extension of the two year time period – where the plaintiff expended around $212,000 in personalising the relevant units – where the defendants stated in correspondence that they expected to transfer the units “in accordance with the terms of the Agreement” – whether the second defendants were, or should have been, aware of the plaintiff’s actions in upgrading the relevant units –  whether an extension of the time period could be inferred in the circumstances

ESTOPPEL – ESTOPPEL BY CONDUCT – ACT, OMISSION OR ASSUMPTION – WAIVER – whether the defendants waived reliance on the plaintiff’s failure to give notice of extension

ESTOPPEL – ESTOPPEL BY CONDUCT – EQUITABLE ESTOPPEL GENERALLY – whether the defendants were estopped from denying their obligation to transfer the units 

Commonwealth v Verwayen (1990) 170 CLR 394, cited

Coulls v Bagot’s Executor and Trustee Co Ltd (1967) 119 CLR 460, considered

Jones v Dunkel (1959) 101 CLR 298, considered

JV Property Syndicates Pty Ltd v Croakybill Ltd [2005] QCA 479, considered

Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673, cited

Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153, cited

Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107, cited

United Dominions Trust (Commercial) Ltd v Eagle Aircraft Services Ltd [1968] 1 All ER 104, cited

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, cited

COUNSEL:

D J Campbell SC with C Fitzpatrick for the plaintiff

P L O'Shea SC with J W Peden for the first and second defendants

SOLICITORS:

Broadley Rees Hogan for the plaintiff

Frew Solicitors for the first and second defendants

CHIEF JUSTICE:

Introduction

  1. The plaintiff (“Portland”) claims relief in respect of an agreement for the sale of its share in a joint venture to the first defendant (“GND”).  The second defendants, Mr Robson, Mr Edwards and Mr Hawkins, who are the directors of GND, guaranteed GND’s performance under that agreement, and they are sued on that basis.  Mr Jaffe is the sole director of Portland.

Factual circumstances

  1. From mid-2002, the capital in the third defendant (“Discovery Beach”) was owned equally by Portland and Moonbrook Holdings Pty Ltd (“Moonbrook”), of which Mr Williams was sole director.  Discovery Beach was the registered owner of the “Surfair” property, comprising the original tower and subsequently acquired land on which two new towers would be constructed.
  1. On 1 August 2002, Portland and Moonbrook entered into a formal joint venture agreement, the culmination of an association over preceding months.  The business of the joint venture was the construction of the buildings and sale of the units within them.  The parties appointed Arden Property Group Pty Ltd (“Arden”) and Portland as the “development manager”, Arden as “project manager”, and a “project control group”, comprising one representative of Moonbrook and one of Portland (to act unanimously), which was obliged to meet at least monthly and discharge a comprehensive agenda.  The project control group was to manage and administer the joint venture business.  Under that agreement, Discovery Beach was to enter into a building contract as soon as possible after the requisite development approval was obtained.
  1. By September 2002, the venture had progressed to the point where the necessary finance had to be secured and a building contract formalized. Substantial difficulties had however arisen between the two joint venturers (see, for example, the memorandum of 31 August 2002, Ex 44, which I find was received by Mr Jaffe). In the result, by agreement dated 27 September 2002 (although executed on 13 November 2002), Portland agreed to sell, to GND, Portland’s 50 per cent interest in the joint venture and the share it held in Discovery Beach. The agreement specified a “completion date” of 27 September 2002 or as otherwise agreed.
  1. The property was to pass at completion, although the “purchase consideration” was to be paid subsequently. That was provided for by cl 2.3. The construction of that provision is central to the determination of this proceeding. It provides:

“2.3Purchase Consideration

(a)Notwithstanding that Completion has been effected, the Purchase Consideration is to be paid by GND to the Vendor as follows:

(i)on Practical Completion of the North Tower in the Development GND must cause to be transferred to the Vendor free from any security or third party interest the Portland Units from GND’s Interest in the Joint Venture, provided that Practical Completion of the North Tower is effected within 2 years of the Agreement Date; or

(ii)if Practical Completion of the North Tower is not completed within 2 years of the Agreement Date, (in the Vendor’s sole discretion, the Vendor may extend the period within which practical completion of the Portland Units is to be completed) then GND must make payment to the Vendor of the Purchase Price by way of bank cheque drawn on an Australian Registered Bank payable to the Vendor on that date which is 2 years from the Agreement Date, whichever occurs first.

(b)The delivery of the Portland units or the purchase price to the Vendor is subject to GND or any company of which GND is a shareholder successfully negotiating with the builder to construct the project for a total sum of $26,000,000.00 or less.  The parties acknowledge that the $26,000,000.00 sum referred to above incorporates an amount of $2,554,000.00 for the construction of the six beach houses and that if this component is increased the figure of $26,000,000.00 shall for the purposes of this clause be increased by the same amount.  The construction is based on the schedule of fixtures and finishes contained in the sales contract.  If construction occurs post January 2003 the $26,000,000.00 cost may be adjusted.  If the parties cannot agree on the reviewed value this shall be determined by an expert appointed by the President of the Queensland Law Society.

(c)If the building contract for the project exceeds $26,000,000.00 or the adjusted value GND has the choice of continuing with the development or:

(i)withdrawing from the project and sell its share to Moonbrook Holdings Pty Ltd ACN 089 494 673; or

(ii)sell its share to a third party provided that the Purchase Price is paid to the Vendor.

GND agrees to pay 15% per annum on any late payments due to the Vendor.”

  1. The term “Purchase Price” is defined as “$700,000 (inclusive of GST)”. The “Portland Units” are those which took on the designations 606 and 612.
  1. Mr Jaffe resigned as a director of Discovery Beach in early November 2002, and Portland’s share in Discovery Beach was transferred to GND.  Thereafter Mr Robson and Mr Williams were the directors of Discovery Beach.  It was they who attended meetings of the project control group.  Mr Williams carried out the negotiations which led to the building contract.
  1. After a period of negotiation, Discovery Beach entered into a “Design and Construct Contract – Lump Sum” with the builder Northbuild Constructions Pty Ltd, dated 23 May 2003.  It provided for a “Guaranteed Maximum Price $27,250,000 inclusive of GST”.  Building commenced at the beginning of June 2003.
  1. Practical completion of the North Tower, to which cl 2.3(a) refers, occurred on 5 November 2004.  The defined “Agreement Date” (cl 1.1(c)) of the share sale agreement is 27 September 2002, notwithstanding the later execution.  It will be noted, therefore, that practical completion of the North Tower did not occur within two years of the Agreement Date, in terms of the clause.  Again with reference to that clause, GND did not secure the transfer of the Portland units to Portland or pay Portland the amount of $700,000.
  1. On the evidence of the valuer Mr Fitzgerald, as at November 2004 the value of unit 612 was $1.1 million, and the value of unit 606 was $465,000. There is evidence of subsequent value. Unit 612 was sold in June 2009 for $777,000. Mr Fitzgerald assessed the value of unit 606 at that later time at $360,000. I accept Mr Fitzgerald’s valuations (including, for unit 612, as at June 2009, at $777,000) and consider that he made appropriate allowance for the features on which Mr O'Shea (for the defendants) focused in cross-examination, principally the idiosyncratic nature of the finishes in unit 612, and selling in the context of, but separately from, the developer’s marketing regime.
  1. Reverting to cl 2.3, Portland did not by any formal action extend the two year period for practical completion.  For example, it gave no notice of extension.  (Clause 8.1 of the share sale agreement provides that a “notice…permitted to be given…must be in writing…”).  Portland contends however that an actual extension should be inferred from a variety of circumstances to which I will come, and additionally relies on the doctrines of waiver and estoppel. 
  1. In the latter regard, Portland relies on “the actions of GND in permitting [Portland] to upgrade the [Portland] units and purchase the car parks”.  I accepted the oral and documentary evidence of Mr Jaffe (notwithstanding some lack of precision) that Portland expended substantial sums in upgrading the Portland units:  securing additional car parking for 612, $42,100 (Ex 17); additional car parking for 606, $18,500 (paid by the nominee purchaser Mr Dyba – Ex 18); tiling, approximately $80,000 (Ex 39); whitegoods and plumbing, $32,802.20 (Ex 14); marble and stone, $15,870 (Ex 38); and furniture, $22,835 (Ex 40).  Those amounts total approximately $212,000.  Discovery Beach had through Mr Williams agreed to Portland’s making those enhancements, by direct arrangement with the builder Northbuild (see page 1 of exhibit 37 and exhibit 16).
  1. The allegations of estoppel and waiver necessitate consideration of whether the directors of GND, Messrs Robson, Edwards and Hawkins, were aware at relevant times that Portland was expending money on those upgrades. Each of them gave evidence, which I accepted, of becoming actually aware of those upgrades, for the first time, well after they had been accomplished: Mr Robson in 2004/5, “around the time of practical completion”; Mr Edwards after completion of the units and in the case of the car spaces, at trial; and Mr Hawkins, after completion and in the case of the car spaces, in 2009. Mr Jaffe had not informed them about the changes.
  1. Mr Campbell SC who appeared for Portland, submitted that the relevant knowledge of Discovery Beach (of which Mr Robson was a director), should however be imputed to Portland, and that Portland should have become relevantly aware through its representative Mr Robson’s membership of the project control group, but in any case, that Portland cannot shelter behind lack of actual knowledge because this was a case of “wilful blindness”.
  1. It is convenient to record now my view that for “standing by” under this concept, Portland would need to establish that GND actually knew what was being done, or chose deliberately to “close its eyes” to what was being done.  My conclusion is that its directors did not have actual knowledge, and their (innocent) detachment from relevant events precludes a conclusion of “wilful blindness”.  I develop this a little more later in these reasons.
  1. Portland made many demands for the transfer of the units, through both Mr Jaffe and its solicitors.  Those demands did not elicit the expression of any refusal to transfer, and indeed on 16 February 2006 (Ex 22), the solicitors for GND wrote to the solicitors for Portland saying that GND expected to be in a position “to transfer the relevant units to (Portland) in accordance with the terms of the Agreement shortly”.
  1. This willingness to transfer may seem at odds with the contention for GND that it was not at any material time under a legal obligation to transfer the units to Portland.  The GND directors, particularly Mr Robson and Mr Edwards, offered a commercial explanation for that willingness to transfer, based on a wish to please Mr Williams (who was close to Mr Jaffe), their then expectation that large profits were likely to be made, and the division of the value of the units to be transferred among the three directors. 
  1. Mr Campbell characterized this as a piece of fanciful altruism, and invited me to reject the evidence. But insofar as it may matter, I record that I accepted the evidence, and that I concluded that GND was, by the time of that February 2006 letter for example, prepared to make the transfers for commercial reasons. As part of that, I took the view that by that time, the directors had probably not given close consideration to the purely legal position.
  1. After this litigation was commenced, the units were sold. (Portland had unsuccessfully caveated.)  This explains why specific performance is no longer sought, with the claim confined to damages.  Payment of the sum of $700,000 is not claimed. 

Witnesses

  1. In making those fundamental findings of fact, it was not necessary for me to resolve any large number of disputes, but I should record that I found the witnesses for the defendants credible and reliable.
  1. Mr Jaffe was an unsatisfactory witness, as the transcript readily reveals, although it is not clear to me to what extent his tragic medical condition contributed to that. I therefore say that without meaning any disrespect for Mr Jaffe. This is a case where queries surviving Mr Jaffe’s oral evidence can as necessary be answered by reference to the documents.
  1. I was asked to draw a Jones v Dunkel (1959) 101 CLR 298 inference, adversely to the defendants, from their failure to call Mr Williams as a witness. 
  1. There is evidence that Portland was receiving assistance or was offered assistance in the preparation of its case from or by Mr Williams, and that by the time of a directions hearing in December last year, Portland intended itself calling Mr Williams as a witness.
  1. There is no doubt that Mr Williams could have assisted with evidence on a host of issues, especially for example as to the extent to which the defendants were or were not actually aware of the improvements being carried out to the units. But I am not prepared to conclude that his likely evidence would have been adverse to one side but not the other. No Jones v Dunkel inference should properly be drawn.

The first issue:  the $26 million construction cost limit

  1. For convenience of reference, I again set out cl 2.3(b):

“(b)The delivery of the Portland units or the purchase price to the Vendor is subject to GND or any company of which GND is a shareholder successfully negotiating with the builder to construct the project for a total sum of $26,000,000.00 or less.  The parties acknowledge that the $26,000,000.00 sum referred to above incorporates an amount of $2,554,000.00 for the construction of the six beach houses and that if this component is increased the figure of $26,000,000.00 shall for the purposes of this clause be increased by the same amount.  The construction is based on the schedule of fixtures and finishes contained in the sales contract.  If construction occurs post January 2003 the $26,000,000.00 cost may be adjusted.  If the parties cannot agree on the reviewed value this shall be determined by an expert appointed by the President of the Queensland Law Society.”

  1. I should first deal with a matter of evidence. The directors of GND said that their intention was that Portland’s entitlement would only have to be met out of any profits remaining at the end of the development.  The share sale agreement does not so provide directly.  But the analysis put to me was that the $26 million construction cost limit was the mechanism by which that was to be achieved.
  1. Whether or not that smacks of ex post facto justification, it is in the end the language of the contract which is determinative, and I have reached the view that that language is clear.
  1. My conclusion nevertheless is that the parties chose the $26 million limitation as their “definition” of the gateway to profitability – and it was convenient to do that, to forestall any argumentation.
  1. The process of construction is not confined to the consideration of just the language, and I was referred to a summary of the principles which I attempted in JV Property Syndicates Pty Ltd v Croakybill Ltd [2005] QCA 479, paras 18 and 19, as to the relevance of surrounding circumstances known to the parties and the purpose and object of their transaction.  I will shortly mention some of those surrounding circumstances.  But first the language…
  1. Clause 2.3(b) rendered the obligation to deliver the Portland units, or pay the Purchase Price, subject to the negotiation of a “total” construction cost of no more than $26 million.  Construction did occur “post January 2003”, but there was no adjustment of that $26 million amount – as could have occurred under the provision:  see its second-last sentence.
  1. Clause 2.3(c) deals with the situation where the construction cost exceeds $26 million. It says:

“(c)If the building contract for the project exceeds $26,000,000.00 or the adjusted value GND has the choice of continuing with the development or:

(i)withdrawing from the project and sell its share to Moonbrook Holdings Pty Ltd ACN 089 494 673; or

(ii)sell its share to a third party provided that the Purchase Price is paid to the Vendor.”

  1. Accepting for the moment that the construction cost exceeded $26 million, then it is the fact that GND took the course of continuing with the development. Had it sold its share to a third party, the amount of $700,000 would have been payable to Portland.  Had it sold to Moonbrook, nothing would have been payable to Portland, reflecting a side arrangement between Moonbrook and GND that if GND withdrew for any reason, “Moonbrook would step in and take over” (Ex 64, p 185).
  1. I revert to the question whether the total negotiated construction cost was in fact $26 million or less. First, I address a contention, the subject of substantial submissions, that the specified amount of $26 million excluded GST.
  1. Ordinarily one would read a reference to a “total” construction cost as including GST – as with the “cost” of most things one may purchase at a shop for example.
  1. Mr Campbell referred however to cl 1.3, which relevantly provides:

“1.3Goods and Services Tax

This clause 1.3 applies to any Taxable Supply unless otherwise provided for in this Agreement:-

(a)the party making the Taxable Supply (“Supplier”) must issue a GST invoice to the other party (“Recipient”);

(b)an amount payable by a party under this Agreement in respect of the supply by another party which is a taxable supply under the GST Law, unless expressly provided otherwise, represents the GST exclusive value and price of the supply;

(c)the Recipient must pay to the Supplier the GST amount specified in the GST invoice at the time that it pays the Supplier the consideration for the Taxable Supply;

(d)despite clause 1.3(b) the Recipient need not pay the GST amount to the Supplier until the Supplier has issued the Recipient with a GST invoice…”

  1. Mr Campbell relied on sub-clause (b): the construction cost was payable by Discovery Beach, which was a party to the agreement, in respect of a “taxable supply” falling within the definition of that term.  The flaw is that cl 1.3(b) is dealing with any amount payable by Discovery Beach “in respect of the supply by another party”, defined to mean “a party to this Agreement” (cl 1.1(w)), not another outside entity such as Northbuild.  Clause 1.3 does not therefore avail Portland.
  1. The context of the agreement provides support for the conclusion that the specified $26 million included GST. Prior to the execution of the agreement dated 27 September 2002, Portland and GND had regard to feasibility studies which detailed a construction cost inclusive of GST.  Importantly, the May 2002 version (Ex 46) records a budget cost including GST of $26 million precisely.  That sum, also significantly, includes an amount of $2,554,500 including GST in respect of the beach houses, almost identical to the sum mentioned in cl 2.3(b) in that regard.  I doubted Mr Jaffe’s evidence that there were other feasibility studies including figures excluding GST – none were produced.  Finally, I mention Mr Williams having shown Mr Edwards a document (Ex 65) with building costs including GST estimated at just short of $26 million.
  1. GND left the negotiation of the construction cost to Mr Williams and Discovery Beach.  The negotiated total construction cost exceeded $26 million.  The sum specified in the May 2003 construction contract, $27.25 million, was not enough because of deletions made to satisfy the financier, but in respect of work which had to be done – with the cost “added back in” as variations and financed differently.  In any case, on the evidence of Northbuild’s managing director Mr Boddington, which I accepted, the overall scope of the work had not been determined by May, and the negotiations were not concluded until December that year, with a construction cost of the order of $31.5 million – well above the specified amount regardless of GST.
  1. In these circumstances, GND’s obligation to transfer the units to Portland did not arise.  The defences of waiver and estoppel are not raised in respect of this issue.  It follows, on this ground, that the claim cannot succeed.

Extension of time for practical completion

  1. For convenience, I again set out the terms of cl 2.3(a):

(a)Notwithstanding that Completion has been effected, the Purchase Consideration is to be paid by GND to the Vendor as follows:

(i)on Practical Completion of the North Tower in the Development GND must cause to be transferred to the Vendor free from any security or third party interest the Portland Units from GND’s Interest in the Joint Venture, provided that Practical Completion of the North Tower is effected within 2 years of the Agreement Date; or

(ii)if Practical Completion of the North Tower is not completed within 2 years of the Agreement Date, (in the Vendor’s sole discretion, the Vendor may extend the period within which practical completion of the Portland Units is to be completed) then GND must make payment to the Vendor of the Purchase Price by way of bank cheque drawn on an Australian Registered Bank payable to the Vendor on that date which is 2 years from the Agreement Date,whichever occurs first.”

  1. This means that provided practical completion of the North Tower was effected by 27 September 2004, GND must, on practical completion, cause the Portland units to be transferred to Portland.  Practical completion, as we know, was not effected by then.  It occurred on 5 November 2004.
  1. Paragraph (ii) provides that in that event, GND must pay Portland the amount of $700,000 on the date two years from the Agreement Date, that is, on 27 September 2004.  As I have noted, that amount has not been claimed in this proceeding.
  1. GND contends that there was no extension of the period for practical completion, so that when practical completion had not been achieved by 27 September 2004, the obligation to transfer the units ceased (cl 2.3(a)(i)), and the substitute obligation, to pay $700,000, arose (cl 2.3(a)(ii)). On the present assumption that there was no extension of time, that construction of the provision is clear and certain.
  1. Counsel for GND relied on these supporting considerations:

“This conversion of rights after two years is not only the natural interpretation of the clause, but it makes commercial sense.  Specifically:

(a)Both parties need to be aware of their potential obligations once the two year period expires;

(b)There is no evidence that at the date of the agreement, the parties thought one of the obligations was more valuable than the other.  The plaintiff appears to be proceeding on the (false) premise that the units were more valuable than the cash;

(c)The obligation to transfer the units expires on 27 September 2004, unless it is extended prior to that date.  The clause is akin to an option, which if not exercised, expires.  This interpretation is supported by the use of mandatory language such as “GND must make payment … on that date which is 2 years from the Agreement Date.”  Furthermore, the use of the language “if … then …” is also indicative of an option;

(d)If the period were able to be extended after the expiry of the two years, the clause would operate as an eternal option, rendering uncertain whether the units could be sold to a third party.  By way of example, if the two year period passes and the plaintiff says nothing, and then DBP proceeds to sell the units, the plaintiff could wait until after a sale agreement has been entered into, to test the waters on market value, for example, then give notice and step in and demand transfer of the units to itself, or alternatively claim the $700,000 depending on the sale prices reached.

(e)The clause should not be construed in such a way as to give Portland Downs a benefit which it clearly does not have on the plain wording of the clause.”

  1. Counsel for GND referred, in an analogous context, to United Dominions Trust (Commercial) Ltd v Eagle Aircraft Services Ltd [1968] 1 All ER 104, 109 and Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673, 677.
  1. I endorse the strength of those supporting considerations, including the contention that any extension of the two year term for practical completion must have been made prior to the effluxion of that period. Absent an extension, then at the end of that period, the parties ordained that the right to the transfer of the units was replaced by a right to payment of the sum of $700,000. As was submitted for GND, Portland “cannot extend the two year period after that period has expired, because after that date, the obligation [to transfer the units] has already converted to the monetary one.  There is no longer a time period to extend.”
  1. I turn now to the question whether time was extended. Extending time fell within Portland’s “sole discretion”.  Because we are dealing with the regulation of contractual rights and obligations, to have effectively extended time, Portland must have communicated to GND that it was doing so.  It is inconceivable the parties would have contemplated otherwise, leaving the contractual relationship in a state of consequent uncertainty.
  1. Mr Campbell acknowledged that Portland did not give notice to GND that it extended the time for practical completion.  Mr Jaffe gave no evidence of any extension, or notice of extension.  For reasons already expressed, if such notice was required, it should have been given in writing (cl 8.1).  The obvious point of that provision is avoiding disputes about what may have been said, and avoiding the very argument raised here, about what should be interred from conduct.
  1. Mr Campbell submitted an extension actually occurred because of the aggregation of a number of features. As he submitted:

“Although no extension was sought in writing, the existence of such an extension can be inferred from the following evidence:

(a)time was not of the essence in the share sale agreement;

(b)no reason was given as to why the two year period was originally chosen.  It is submitted that it was a generous time period within which it was anticipated the project would be constructed.  There was no evidence that the date of 27 September 2004 had any added significance one way or the other;

(c)the Defendants were in control of arranging for the building contract and, despite the requirement of clause 6.16 of the Joint Venture Agreement, a building contract was not entered into “as soon as possible after the Development Application is obtained”.   They were the party which had the driving hand with regard to the speed of the project;

(d)pursuant to the building contract completion of stage 1 was to take 55 weeks, which meant that practical completion of the Portland units should have taken place in June 2003 (Exhibit 6, schedule 15 at p 86);

(e)Substantial variations of the construction contract were made by DBP.  The effect of such changes inevitably caused a blow out in construction time;

(f)By at least August 2004 the Defendant knew (as a result of a letter sent by Williams) that settlement of Stage 1 was likely to take place in September 2004:  Exhibit 21.  The Settlement dated had blown out and Williams was unduly optimistic as to when settlement could take place.”

  1. Either Portland in fact extended time or it did not.  It should not be left as a matter for inference whether or not it did.  In any event, I do not consider that collection of circumstances warrants the conclusion that Portland did in fact extend time.
  1. Mr Campbell also referred to Portland’s being allowed to upgrade the units where the defendants must have considered that practical completion by 27 September 2004 was unlikely, warranting a conclusion “that GND had agreed to extend” the period to the date of actual completion. But the right to extend is reserved by the provision to the sole discretion of Portland.
  1. Also, that Portland undertook that work does not establish its having extended time in some way not expressly communicated to GND.  On 8 September 2004, some 19 days before the expiration of the specified two years, Mr Jaffe was, as was submitted, “still keeping his options open:  he was negotiating an agreement with Mr Williams whereby he could take the money, and get a ‘refund’ of his expenditure [on upgrading the units] from Discovery Beach”.  See exhibit 37, including its reference as at 8 September 2004 to “Portland’s current intention to require GND to procure the transfer of the Portland [units]” (emphasis added).  This shows Portland had not definitively decided to take the units, rather it was still possible that Portland may choose to let the 27 September 2004 deadline pass and take the Purchase Price of $700,000 instead.
  1. Further mention should now be made of the concession that the units were to be, or should be, transferred to Portland.  I have already referred to the GND directors’ commercial motivation in that regard.  As to the statement in GND’s solicitors’ letter of 16 February 2006, I am content to adopt the submission of Counsel for GND:  “even if it was a general acknowledgement of liability, and had been pleaded as such, such an acknowledgement has no legal effect.  If a person wrongly confesses to a crime, that does not make the person guilty of the offence.”  Also, the directors of GND were, as I accept, primarily driven by those commercial motivations.

Waiver and estoppel

  1. What then is the effect of the pleas of waiver and estoppel?
  1. The plea that GND waived reliance on Portland’s failure to give notice of extension misconceives the nature of the contract.  The failure to give such notice, where the ability to extend the period fell within Portland’s sole discretion, did not amount to a breach of the contract.  It resulted simply in conversion of a right to transfer of the units into a right to payment of $700,000.
  1. As to the plea of estoppel, the relevant work was done after the two year period had expired without prior extension. The contract itself provided the consequences of the expiration of the two year period, and the consequences of extending or not extending that period prior to its expiration. See, comparably, the observations of Gibbs CJ in Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153, 157.
  1. In the light of my earlier findings, and my acceptance of the creditworthiness of the evidence of the second defendant directors, I would in any case have difficulty characterizing this as a case of “wilful blindness”, warranting the conclusion that GND stood by and permitted Portland to act to its detriment (cf. Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 428-9). 
  1. But in any event, the only equitable response necessary to provide the minimum necessary relief to restore the parties, would be a refund of the post-27 September 2004 expenditure, by which time the two year period had passed, so nothing done by either party had any effect on the failure to extend time (Commonwealth v Verwayen (1990) 170 CLR 394, 411).  That was not sought.  (Somewhat along similar lines, in the 8 September 2004 agreement discussed earlier at  para 52, Mr Jaffe confirmed that if Portland elected not to take a transfer of the units, the amount of that expenditure would be refunded.)

Conclusion

  1. It follows that the plaintiff’s claim against the first and second defendants should be dismissed. I order accordingly, and reserve costs pending the presentation of any necessary submissions (in the event a costs order is not agreed).

Miscellaneous

  1. I have sufficiently, I believe, indicated the evidence I accepted, should for example a calculation of damages become necessary. But if further findings are considered necessary, they should be sought.
  1. It remains to mention the nomination of Mr Dyba as purchaser of lot 606, and the circumstance that he was not a party to the proceeding. While it is not necessary for me to express a concluded view, I would not have thought that nomination (cl 2.4) would affect the recovery of damages by the plaintiff: it was not a promise “to confer a benefit upon a third party” within the meaning of Coulls v Bagot’s Executor and Trustee Co Ltd (1967) 119 CLR 460, 501-2 and Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107, 118-9.
Close

Editorial Notes

  • Published Case Name:

    The Portland Downs Pastoral Company Pty Ltd v Great Northern Developments Pty Ltd & Ors

  • Shortened Case Name:

    The Portland Downs Pastoral Company Pty Ltd v Great Northern Developments Pty Ltd

  • MNC:

    [2011] QSC 142

  • Court:

    QSC

  • Judge(s):

    de Jersey CJ

  • Date:

    30 May 2011

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2010] QSC 46715 Dec 2010Plaintiff applied for an order that third party proceedings be tried separately to the primary proceeding and for an order that primary proceeding be expedited; where plaintiff's sole director and principal witness has incurable terminal condition; application granted: Applegarth J
Primary Judgment[2011] QSC 14230 May 2011Plaintiff commenced proceedings seeking payment for the sale of its interest in a joint venture to the first defendant and guaranteed by the second defendants; claim dismissed: de Jersey CJ
Primary Judgment[2011] QSC 16109 Jun 2011On the question of costs of [2011] QSC 142, order that the plaintiff pay the defendants costs: de Jersey CJ
QCA Interlocutory Judgment[2011] QCA 18404 Aug 2011Defendants applied for security for costs of the plaintiff's appeal against [2011] QSC 142; security for costs ordered: Muir JA
Appeal Determined (QCA)[2012] QCA 1824 Feb 2012Plaintiff appealed against orders made in [2011] QSC 142; appeal dismissed with costs: Chesterman and White JJA and M Wilson AJA

Appeal Status

Appeal Determined (QCA)

Cases Cited

Case NameFull CitationFrequency
Commonwealth v Verwayen (1990) 170 CLR 394
2 citations
Jump To
Cite 1 - (1990) 170 CLR 394
Cite 2 - (1990) 170 CLR 394
Coulls v Bagot's Executor and Trustee Company Ltd (1967) 119 CLR 460
2 citations
Jump To
Cite 1 - (1967) 119 CLR 460
Cite 2 - (1967) 119 CLR 460
Jones v Dunkel (1959) 101 CLR 298
2 citations
Jump To
Cite 1 - (1959) 101 CLR 298
Cite 2 - (1959) 101 CLR 298
JV Property Syndicates Pty Ltd v Croakybill Ltd [2005] QCA 479
2 citations
Jump To
Cite 1 - [2005] QCA 479
Cite 2 - [2005] QCA 479
Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673
2 citations
Jump To
Cite 1 - (1987) 9 NSWLR 673
Cite 2 - (1987) 9 NSWLR 673
Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153
2 citations
Jump To
Cite 1 - (1983) 153 CLR 153
Cite 2 - (1983) 153 CLR 153
Trident General Insurance Co Ltd v McNiece Bros Pty Limited (1988) 165 CLR 107
2 citations
Jump To
Cite 1 - (1988) 165 CLR 107
Cite 2 - (1988) 165 CLR 107
United Dominions Trust (Commercial) Ltd v Eagle Aircraft Services Ltd [1968] 1 All E.R. 104
2 citations
Jump To
Cite 1 - [1968] 1 All E.R. 104
Cite 2 - [1968] 1 All E.R. 104
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
2 citations
Jump To
Cite 1 - (1988) 164 CLR 387
Cite 2 - (1988) 164 CLR 387

Cases Citing

Case NameFull CitationFrequency
Portland Downs Pastoral Company Pty Ltd v Great Northern Developments Pty Ltd [2012] QCA 183 citations
1

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