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  4. Waymark Hotels Properties No 20 Pty Ltd v Prentice Properties Pty Ltd - [2023] QSC 117

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Waymark Hotels Properties No 20 Pty Ltd v Prentice Properties Pty Ltd[2023] QSC 117

Waymark Hotels Properties No 20 Pty Ltd v Prentice Properties Pty Ltd[2023] QSC 117

SUPREME COURT OF QUEENSLAND

CITATION:

Waymark Hotels Properties No 20 Pty Limited & Anor v Prentice Properties Pty Ltd & Ors [2023] QSC 117

PARTIES:

WAYMARK HOTELS PROPERTIES NO 20 PTY LIMITED ACN 662 746 929 ATF WARWICK PROPERTY TRUST

(first applicant)

CRITERION WARWICK OP CO PTY LIMITED ACN 662 749 582

(second applicant)

v

PRENTICE PROPERTIES PTY LTD ACN 009 997 513 ATF THE PRENTICE PROPERTIES TRUST

(first respondent)

CRITERION HOTEL MOTEL PTY LTD ACN 087 306 036

(second respondent)

ANTHONY ERNEST PRENTICE ATF THE SEI STAFF SUPERANNUATION FUND

(third respondent)

JENNY MAURICETTE PRENTICE ATF THE SEI STAFF SUPERANNUATION FUND

(fourth respondent)

ANTHONY ERNEST PRENTICE

(fifth respondent)

FILE NO/S:

BS No 4224 of 2023

DIVISION:

Trial Division

PROCEEDING:

Hearing

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

29 May 2023

DELIVERED AT:

Brisbane

HEARING DATE:

24 April 2023; Further written submissions received on 28 April 2023 and 2 May 2023

JUDGE:

Kelly J

ORDER:

  1. It is declared that the following contracts are valid and enforceable:
    1. (a)
      The Business Sale Contract dated 27 October 2022 for the sale of the business known as the Criterion Hotel Warwick, conducted at 84-86 Palmerin Street, Warwick and at Detached Bottle Shops at 108 Wood Street, Warwick and Shop 1 Rose City Shopping World, Warwick, between the first respondent as seller and the second applicant as buyer (“the Business Contract”);
  1. (b)
    The Contract for Commercial Lots in a Community Titles Scheme dated 27 October 2022 for the sale of Lot 2 on BUP 102967 between the second respondent as seller and the first applicant as buyer (“the Hotel Land Contract”);
  2. (c)
    The Contract for Commercial Lots in a Community Titles Scheme dated 27 October 2022 for the sale of Lot 1 on BUP 102967 between the third and fourth respondents as sellers and the first applicant as buyer (“the Commercial Property Contract”);
  3. (d)
    The Contract for Commercial Land and Buildings dated 27 October 2022 for the sale of 14 Wallace Street Warwick between the first respondent as seller and the first applicant as buyer (“the Vacant Land Contract”);
  1. (e)
    The Contract for Commercial Land and Buildings dated 27 October 2022 for the sale of 108 Wood Street Warwick between the first respondent as seller and the first applicant as buyer (“the Wood Street Contract”).
  1. (f)
    The Umbrella Agreement dated 27 October 2022 between the first and second applicants, collectively being referred to as the Buyers, and the first to third respondents, collectively being referred to as the Sellers and the fifth respondent as guarantor, as amended by the Deed of Variation dated 20 December 2022 (“the Umbrella Agreement”).
  1. It is ordered that the Umbrella Agreement, the Business Contract, the Hotel Land Contract, the Commercial Property Contract, the Vacant Land Contract, and the Wood Street Contract be specifically performed.
  2. I will hear the parties as to any necessary orders and directions required for the implementation of the specific performance order.
  3. I will hear the parties as to costs.

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – FORMATION OF CONTRACTUAL RELATIONS – MATTERS NOT GIVING RISE TO BINDING    CONTRACT    –    VAGUENESS    AND UNCERTAINTY – CERTAINTY AS TO PRICE – where there are separate agreements involving an overarching broader transaction – where there are separate written contracts for the sale of land and a business – where an Umbrella Agreement sets out related arrangements to give effect to the separate transactions – where the Umbrella Agreement was expressed to prevail in event of inconsistency – where the Umbrella Agreement nominated the deposit and purchase price for the sale and purchase of the land and the business – where parties left to individually apportion the deposit and purchase price as between the separate contracts for the sale of the land and the sale of the business – where the respondents contend that the separate contracts for the sale of the land and the business are illusory and void for uncertainty on the basis that there was no agreement as to deposit and purchase price – where the respondents contend that there is no objective contractual machinery agreed to determine the purchase price under each contract – where the performance of three other contracts of sale was alleged to be dependent upon the validity of the contract for the sale of land and the contract for the sale of the business – where the applicants seek declaratory relief and specific performance of each of the various contracts and the Umbrella Agreement – whether the contracts are valid and enforceable and ought to be specifically performed

A New Tax System (Goods and Services Tax) Act 1999 (Cth)

Income Tax Assessment Act 1997 (Cth), s 14- 215

Taxation Administration Act 1953 (Cth), s 14- 200

Axelsen v O'Brien (1949) 80 CLR 219

Brew v Whitlock (No 2) [1967] VR 803

Capital Securitisation Limited v Jammal [2007] NSWSC 1073

Delaney v Delaney [2022] VSCA 48

Fitzgerald v Masters (1956) 96 CLR 420

Hall v Busst (1960) 104 CLR 206

Ipex Software Services Pty Ltd v Hosking [2000] VSCA 239

Thompson v Riggall [2010] QCA 144

Thorby v Goldberg (1964) 112 CLR 597

Toohey v Gunther (1928) 41 CLR 181

Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106

Trustees Executive & Agency Company Ltd v Peters (1960) 102 CLR 537

COUNSEL:

G Handran KC and M Downes for the applicants

D de Jersey KC for the respondents

SOLICITORS:

Mahoneys for the applicants

Stephen Rudz and Associates Lawyers for the respondents

Matters of Background

  1. [1]
    The first respondent owns and operates the Criterion Hotel business in Warwick (“the Business”). A hotel and accommodation business and attached bottle shops trade as part of the Business. The hotel and accommodation business is located at 84-86 Palmerin Street[1] (“the Hotel Land”). The bottle shops operate out of 108 Wood Street, Warwick (“Wood Street”) and Shop 1, Rose City Shopping World, Warwick (“Rose City”). The second respondent owns the Hotel Land. The first respondent owns Wood Street and leases Rose City. The first respondent also owns a parcel of vacant land at 14 Wallace Street, Warwick (“the Vacant Land”). The third and fourth respondents own a commercial property[2] located next to the Hotel Land (“the Commercial Property”).
  1. [2]
    On 27 October 2022, written contracts were executed for the sale of the Business, the Hotel Land, Wood Street, the Vacant Land and the Commercial Property. Those contracts may be described as follows:
  1. (a)
    A Business Sale Contract dated 27 October 2022 for the sale of the Business between the first respondent as seller and the second applicant as buyer (“the Business Contract”);
  2. (b)
    A Contract for Commercial Lots in a Community Titles Scheme dated 27 October 2022 for the sale of the Hotel Land between the second respondent as seller and the first applicant as buyer (“the Hotel Land Contract”);
  3. (c)
    A Contract for Commercial Lots in a Community Titles Scheme dated 27 October 2022 for the sale of the Commercial Property between the third and fourth respondents as sellers and the first applicant as buyer (“the Commercial Property Contract”);
  4. (d)
    A Contract for Commercial Land and Buildings dated 27 October 2022 for the sale of the Vacant Land between the first respondent as seller and the first applicant as buyer (“the Vacant Land Contract”); and
  5. (e)
    A Contract for Commercial Land and Buildings dated 27 October 2022 for the sale of Wood Street between the first respondent as seller and the first applicant as buyer (“the Wood Street Contract”).
  1. [3]
    On 27 October 2022, the first and second applicants, collectively being referred to as “the Buyers”, and the first to third respondents, collectively being referred to as “the Sellers”, executed a further written agreement headed Umbrella Agreement (“the Umbrella Agreement”). It may be observed that the third respondent was not a Buyer under either the Business Contract or the Hotel Land Contract. The fifth respondent is a party to the Umbrella Agreement in his personal capacity as a guarantor. The fourth respondent is not a party to the Umbrella Agreement.
  1. [4]
    It is not controversial that all the agreements to which I have referred, were executed at the same time.
  1. [5]
    The Umbrella Agreement nominated the deposit and purchase price for the Business and the Hotel Land and left it to the parties to individually apportion that price as between the Business Contract and the Hotel Land Contract. The Commercial Property Contract, the Vacant Land Contract and the Wood Street Contract each specified a purchase price. Relevantly:
  1. (a)
    The purchase price under the Commercial Property Contract was $450,000, with a deposit of $45,000;
  2. (b)
    The purchase price under the Vacant Land Contract was $150,000, with a deposit of $15,000; and
  3. (c)
    The purchase price under the Wood Street Contract was $350,000, with a deposit of $35,000.
  1. [6]
    On 20 December 2022, the parties to the Umbrella Agreement entered into a Deed of Variation (“the Deed of Variation”), which is relevant because it reduced two payments contemplated by the Umbrella Agreement, being “the Deposit” and “the Initial Purchase Price”.
  1. [7]
    The respondents contend that the Business Contract and the Hotel Land Contract are illusory and void for uncertainty.[3] That contention is advanced on the basis that “no concluded agreements were entered in terms of [the Business Contract] and [the Hotel Land Contract], because the purchase price under each contract was not agreed and there is no objective contractual machinery agreed to determine the purchase price under each contract”.[4] The respondents further contend that “… if [the Business Contract] and [the Hotel Land Contract] … do not proceed to settlement because they are not binding, then [the Commercial Property Contract, the Vacant Land Contract and the Wood Street Contract] are terminable for non-fulfilment of [their special conditions]”.[5] It may be observed that the respondents made no substantive submission about the validity or enforceability of the Umbrella Agreement.
  1. [8]
    The applicants have commenced these proceedings by way of originating application and seek declaratory relief that the Umbrella Agreement, the Business Contract, the Hotel Land Contract, the Commercial Property Contract, the Vacant Land Contract and the Wood Street Contract are each valid and enforceable and should be specifically performed. The respondents relied upon their contentions about the uncertainty and incompleteness as the basis for resisting specific performance.
  1. [9]
    As the arguments at various times were directed to specific terms of the various agreements, it is necessary to set out some of their relevant terms.

The agreements

The Umbrella Agreement

  1. [10]
    The Umbrella Agreement defined the term “Sale Agreements” as meaning “each and all of … the Business Contract and [the Hotel Land Contract]”.[6]
  2. [11]
    The recitals to the Umbrella Agreement provide as follows:

“Background

  1. Under the terms of the Sale Agreements, the Buyers agree to buy, and the Sellers agree to sell [the Hotel Land] and the Business in accordance with the terms set out therein.
  2. The parties have agreed to enter into this agreement to set out the related arrangements to give effect to the transactions contemplated by the Sale Agreements.
  3. The Guarantor has agreed to guarantee the performance of the obligations of the Sellers under this agreement and the Sale Agreements.”
  1. [12]
    Clause 1 of the Umbrella Agreement contains the following definitions and provisions relating to interpretation:
  1. (a)
    “The Effective Date” for the purposes of the Umbrella Agreement was the date of its execution, 27 October 2022;
  2. (b)
    “Business” had the meaning given to it in the Business Contract, that is, the Business;
  3. (c)
    “Property” had the meaning given to it in the Business Contract, that is, the Hotel Land;
  4. (d)
    “Conditions” meant the Business Conditions and the Property Conditions;
  5. (e)
    “Business Conditions” had the meaning given to it in the Business Contract;
  6. (f)
    “Property Conditions” meant the conditions precedent set out in the Hotel Land Contract;
  7. (g)
    “The Deposit” meant “$825,000.00 on account of the total of all the deposits to be paid by [the second applicant] and [the first applicant] under the Sale Agreements”;
  8. (h)
    “Completion” meant “the completion of the sale and purchase of [the Hotel Land] and the Business in accordance with clause 5;
  9. (i)
    “Purchase Price” meant “the aggregate of the Initial Purchase Price and the Stock Purchase Price subject to any adjustments set out in the Sale Agreements being the price for [the Business] and [the Hotel Land]”;
  10. (j)
    “Initial Purchase Price” meant “$8,250,000.00, for the purchase of … the Business and [the Hotel Land]”;
  11. (k)
    “Stock Purchase Price” meant the Stock Amount as defined in the Business Contract;
  12. (l)
    “Satisfaction Date” had the meaning given to it in the Business Contract;
  13. (m)
    “Transaction Documents” relevantly meant the Umbrella Agreement, the Business Contract, the Hotel Land Contract, the Commercial Property Contract, the Vacant Land Contract and the Wood Street Contract; and
  1. (n)
    An obligation or a liability assumed by two or more persons bound them jointly and severally and a right conferred on two or more persons benefitted them jointly and severally.[7]
  1. [13]
    The Umbrella Agreement then included the following substantive clauses:
  1. “2.
    Sale Agreements
  1. (a)
    On the Effective Date:
    1. the Sellers must each duly execute and deliver to the Buyers counterparts of the relevant Sale Agreements and other Transaction Documents to which they are a party;
    2. the Buyers must each duly execute and deliver to the relevant Seller counterparts of the Sale Agreements and other Transaction Documents.
  2. (b)
    Within 5 Business Days after the Satisfaction Date, the Buyers must pay the Deposit to the Deposit Holder, to be held by the Deposit Holder as independent stakeholder.
  1. 3.
    Conditions Precedent
  1. 3.1
    Conditions

Clause 4 will not become binding on the parties and Completion cannot take place, unless the Conditions have been satisfied or waived.

  1. 3.2
    Reasonable endeavours

Subject to the terms of the Sale Agreements, each party must use all reasonable endeavours to ensure that the Conditions are satisfied as soon as practicable after the Effective Date and in any event before the Sunset Date and in particular:

  1. (a)
    each Seller must co-operate with, and comply with all reasonable requests of the Buyers for the purposes of procuring the satisfaction of the Conditions and must not take any action that will or is likely to hinder or prevent the satisfaction of the Conditions; and
  2. (b)
    the Buyers must keep the Sellers informed of any fact, matter or circumstance of which they become aware that may result in the Conditions not being satisfied in accordance with their terms.
  1. 4.
    Sale and Purchase
  1. 4.1
    Sale and purchase

On Completion the Buyers must buy and the relevant Sellers must sell the Business and [the Hotel Land] pursuant to the terms and conditions of the relevant Sale Agreements.

  1. 4.2
    Consideration
  1. (a)
    The consideration for the sale by each Seller of the Business and [the Hotel Land] owned by them to the relevant Buyer shall be the payment by the Buyers of the Purchase Price to the Sellers in accordance with this clause 4.
  2. (b)
    The parties agree that each party may apportion the Purchase Price (including the Deposit) as each party determines in its discretion including taking into account its own accounting advice.
  1. 4.3
    Payment of Purchase Price
  1. (a)
    The Purchase Price must be paid as follows:
    1. on Completion, the Buyers must pay the Initial Purchase Price less the Deposit to the Sellers in accordance with clause 4.2 and clause 9; and
    2. the Buyers must pay the Stock Purchase Price in accordance with the terms of the Business Contract.
  2. (b)
    On Completion the parties will direct the Deposit Holder to pay:
    1. the Deposit to the Sellers in part payment of the Purchase Price;
    2. one half of the Deposit Interest as at the end of the Business Day immediately before the Date of Completion (less any applicable withholding tax) to the Sellers; and
    3. one half of the Deposit Interest as at the end of the Business Day immediately before the Date of Completion (less any applicable withholding tax) to the Buyers.
  3. (c)
    Payment by the Buyers in accordance with this clause 4.3 shall be in full satisfaction of the Buyers’ obligations under the Sale Agreements and the Buyers shall not be concerned with the apportionment of the Purchase Price between the Sellers.
  1. 4.4
    Release of deposit
  1. (a)
    If the Sellers accept the Buyers’ repudiation of this agreement before Completion or the Sellers terminate this agreement:
  1. (i)
    under clause 3.5 in circumstances where the Buyers have not complied with their obligations under clause 3.2; or
  2. (ii)
    under clause 5.6,

without limiting the Sellers other rights or remedies available under this agreement or at law, the Deposit and all Deposit Interest (less any applicable withholding tax) must be paid to the Sellers.

  1. (b)
    If the Buyers accept the Sellers' repudiation of this agreement before Completion or this agreement is terminated other than in the circumstances set out in clause 4.4(a), the Deposit and all Deposit Interest (less any applicable withholding tax) must be paid to the Buyers.
  1. 5.
    Completion
  1. 5.1
    Time and place for Completion

Completion must take place at Shand Taylor Lawyers, Level 2, Mosaic Offices, 826 Ann Street, Fortitude Valley, Old at 2.00 pm on the Date of Completion, or at any other place, date or time as the parties agree in writing.

  1. 5.2
    Parties’ obligations to effect Completion

At Completion (or at such other time as agreed by the Sellers and the Buyers), each party must perform, or procure the performance of, all obligations which they are required to perform under the Sale Agreements (Completion Obligations).

  1. 5.3
    Interdependence of obligations at Completion
  1. (a)
    The Completion Obligations are interdependent and must be performed, as nearly as possible, simultaneously unless the parties otherwise agree in writing.
  2. (b)
    If any Completion Obligation under one Sale Agreement is not performed on or before Completion then, without prejudice to any rights available to any party, as a consequence, Completion will not occur under any of the Sale Agreements and to the extent that actions have been taken then the parties must do everything reasonably required to reverse those actions.
  3. (c)
    Completion under one Sale Agreement may not occur independently of Completion under all of the other Sale Agreements.
  1. 5.4
    Rescission and Cross Default
  1. (a)
    If a Seller or Buyer rescinds (as opposed to terminates for default) any of the Sale Agreements in accordance with any rights they have under that Sale Agreement, then all Sale Agreements and this agreement shall be contemporaneously rescinded without limiting any antecedent rights of the parties under this agreement or any of the Sale Agreements.
  1. (b)
    If a Seller is in default under any clause in a Sale Agreement to which it is a party, and it fails to remedy such default within any period prescribed in the relevant Sale Agreement, then both Sellers are deemed to be in default of all of the Sale Agreements and the Buyers may exercise any rights that they may have under each Sale Agreement and this agreement.
  1. 5.5
    Notice to complete

Without limiting any right or obligation under any of the Sale Agreements, if Completion does not occur in accordance with this clause 5 because of the failure of any party (Defaulting Party) to satisfy any of its obligations under a Sale Agreement or otherwise in accordance with this clause 5 then:

  1. (a)
    the Buyers (where the Defaulting Party is a Seller); or
  2. (b)
    the Sellers (where the Defaulting Party is a Buyer),

(in either case the Non-Defaulting Party), may give the Defaulting Party a notice requiring the Defaulting Party to satisfy those obligations within a period of 5 Business Days after the date of the notice and specifying that time is of the essence in relation to that notice.

  1. 5.6
    Remedies for failure to comply with notice
  1. (a)
    Without limiting any right or obligation under any of the Sale Agreements, if the Defaulting Party fails to comply with a notice given under clause 5.5, the Non- Defaulting Party may without limiting its other rights or remedies available under this agreement or at law:
    1. immediately terminate this agreement, in which case the Non-Defaulting Party may seek damages for breach of this agreement; or
    2. seek specific performance of this agreement, in which case:
      1. if specific performance is obtained, the Non- Defaulting Party may also seek damages for breach of this agreement; and
      2. if specific performance is not obtained, the Non-Defaulting Party may then terminate this agreement and may seek damages for breach of this agreement.
  1. (b)
    If the Buyers are the Defaulting Party, the Deposit and all Deposit Interest (less any applicable withholding tax) must be paid to the Sellers;
  2. (c)
    If the Sellers are the Defaulting Party, the Deposit and all Deposit Interest (less any applicable withholding tax) must be paid to the Buyers.
  1. 6.
    Warranties
  1. (a)
    Each of the Sellers represent and warrant to the Buyers that, except as expressly provided in this agreement, each of the representations and warranties made in Schedule 1 is true and correct.
  2. (b)
    The Sellers acknowledge that the Buyers have entered this agreement in reliance on the representations and warranties in this clause.
  3. (c)
    The Sellers agree and acknowledge that all the representations and warranties given in Schedule 1 are (save as otherwise expressly indicated) given as at the Effective Date and as at the time immediately prior to Completion.

…

  1. 10.
    GST
  1. 10.1
    Interpretation

The parties agree that:

  1. (a)
    except where the context suggests otherwise, terms used in this clause 10 have the meanings given to those terms by the GST Act[8] (as amended from time to time);
  2. (b)
    any part of a supply that is treated as a separate supply for GST purposes (including attributing GST payable to tax periods) will be treated as a separate supply for the purposes of this clause 10; and
  3. (c)
    any consideration that is specified to be inclusive of GST must not be taken into account in calculating the GST payable in relation to a supply for the purpose of this clause 10.
  1. 10.2
    Reimbursements and similar payments

Any payment or reimbursement required to be made under this agreement that is calculated by reference to a cost, expense, or other amount paid or incurred will be limited to the total cost, expense or amount less the amount of any input tax credit to which an entity is entitled for the acquisition to which the cost, expense or amount relates.

  1. 10.3
    GST payable

In the event of the Seller (Supplier) being liable for GST or if for any reason the sale is not accepted by the Commissioner for Taxation as GST free as the supply of a going concern, the Buyer (Recipient) agrees to pay to the Supplier, within 14 days after the Supplier’s liability for GST on this sale is confirmed by correspondence or an assessment from the Commissioner for Taxation, the amount of the GST and the Supplier shall deliver to the Recipient as a precondition of such payment, a Tax Invoice in a form which complies with the GST Act.

  1. 10.4
    Variation to GST payable

If the GST payable in relation to a supply made under or in connection with this agreement varies from the additional amount paid by the Recipient under clause 10.3 then the Supplier will provide a corresponding refund or credit to, or will be entitled to receive the amount of that variation from, the Recipient. Any ruling, advice, document or other information received by the Recipient from the Australian Taxation Office in relation to any supply made under this agreement will be conclusive as to the GST payable in relation to that supply. Any payment, credit or refund under this clause is deemed to be a payment, credit or refund of the additional amount payable under clause 10.3.

  1. 10.5
    Going Concern

The Sellers and the Buyers agree:

  1. (a)
    The Purchase Price does not include any amount for GST; and
  2. (b)
    The supply under the Sale Agreements is the supply of a going concern for GST purposes.

…

  1. 12.
    Entire agreement

To the extent permitted by law, the Transaction Documents constitute the entire agreement between the parties in relation to their subject matter and supersede all previous agreements and understandings between the parties in relation to their subject matter.

…

  1. 13.8
    Severance

If any provision or part of a provision of this agreement is held or found to be void, invalid or otherwise unenforceable (whether in respect of a particular party or generally), it will be deemed to be severed to the extent that it is void or to the extent of voidability, invalidity or unenforceability, but the remainder of that provision will remain in full force and effect.

  1. 13.9
    Stamp duties

The Buyers must pay all stamp duties and other duties together with any related fees, penalties, fines, interest or statutory charges, and similar Tax in respect of this agreement, the performance of this agreement and each transaction effected or contemplated by or made under this agreement.”

  1. [14]
    As to clause 6, schedule 1 relevantly included a warranty by the Sellers that the Transaction Documents were valid and binding agreements on the Sellers, enforceable in accordance with their terms.[9]
  2. [15]
    By the Deed of Variation:
  1. (a)
    The definition of the Deposit was amended so that the term meant $715,000; and
  2. (b)
    The definition of Initial Purchase Price was amended so that the term meant $7,150,000.

The Business Contract

  1. [16]
    The Business Contract defined “the Business” as “the business conducted by [the first respondent] known as the Criterion Hotel (Warwick) at [the Hotel Land] and the DBS Business conducted by the [first respondent] at the DBS Properties [being Wood Street and Rose City]”. “DBS Business” meant the business of a bottle shop carried on by the first respondent at Wood Street and Rose City.
  1. [17]
    Clause 2 provided that subject to the satisfaction of the Business Conditions, the first respondent agreed to sell, and the second applicant agreed to purchase, the Business in accordance with the terms of the Business Contract. “Business Conditions” meant the conditions precedent set out in clauses 3.1, 4.1, 5.1, 6.1, 8.1, 8.7, 8.13 and any condition that arose under clause 7.3.2. The Business Conditions concerned matters such as due diligence, key staff meetings, the transfer of the liquor licence, approval of a gaming machine licence, execution of leases and deeds of assignment.
  1. [18]
    There are some other materially relevant definitions in the Business Contract:
  1. (a)
    “Deposit” meant the sum stated in Item l(b);
  2. (b)
    “Purchase Price” meant the sum stated in Item l(a);
  3. (c)
    “Balance Purchase Price” meant the Purchase Price, less the Deposit, as adjusted in accordance with the terms of the Business Contract;
  4. (d)
    “Stock Amount” meant “the amount calculated under clause 14 for the Accepted Stock”;
  5. (e)
    “Accepted Stock” had the meaning given to it in clause 14.2.3;
  1. (f)
    “Satisfaction Date” meant the date on which the Buyer notified the Seller in writing that the condition in clause 3.1 had been satisfied;
  2. (g)
    The Items Schedule materially provided:

“I (a) Purchase Price

See clause 34

I (b) Deposit

See clause 34

J.   DATE OF COMPLETION

Such date as determined in accordance with the Umbrella Agreement

K. PLACE OF COMPLETION

Such date as determined in accordance with the Umbrella Agreement”

  1. [19]
    Condition 3.1 was concerned with Due Diligence.
  1. [20]
    The following clauses of the Business Contract warrant setting out in full:
  1. “10
    DEPOSIT
  1. 10.1
    The Deposit payable under this Contract is the amount stated in Item 1(b).
  1. 10.2
    The Deposit must be paid by the Buyer to the Deposit Holder in accordance with the Umbrella Agreement.
  1. 10.3
    If the Buyer:
  1. 10.3.1
    fails to pay the Deposit as provided in clause 10.2;

…

then, the Buyer will be in substantial breach of this Contract and the Seller may:

  1. 10.3.4
    affirm this Contract and exercise the rights expressed in clause 21.2; or
  1. 10.3.5
    terminate this Contract and exercise the rights expressed in clause 21.3.
  1. 10.4
    The rights and powers conferred by clause 10.3 are in addition to any other rights the Seller may have at law or in equity.
  1. 10.5
    Subject to clause 11, the Deposit must be retained by the Deposit Holder in accordance with the Umbrella Agreement.

…

  1. 12
    PURCHASE PRICE AND STOCK AMOUNT
  1. 12.1
    The Buyer must pay the Balance Purchase Price plus the Stock Amount to the Seller on the Date of Completion in accordance with the Umbrella Agreement.
  1. 12.2
    The Balance Purchase Price and the Stock Amount must be paid by Bank Cheque or by immediately available funds as directed by the Seller in accordance with the Umbrella Agreement.
  1. 12.3
    On Completion, the Deposit belongs to the Seller and shall be dealt with in accordance with the Umbrella Agreement.
  1. 13
    ADJUSTMENTS
  1. 13.1
    Any monies paid or payable in respect of the outgoings of the Business for any period after the Date of Completion must be adjusted between the parties as at the Date of Completion and the Buyer agrees to allow to the Seller that amount at Completion to the extent it relates to the period after Completion.

…

  1. 14
    STOCK AMOUNT
  1. 14.1
    The saleability, value and quantity of the Stock Amount must be determined by a stocktake to be conducted in accordance with this clause 14.
  1. 14.2
    The Seller and the Buyer must meet at the close of business preceding Completion and attempt to reach agreement on the Stock Amount, which is to be calculated:
  1. 14.2.1
    by the Buyer determining (in its sole discretion) any the Stock the Buyer selects in its absolute discretion to be surplus to operational requirements (Excluded Stock); then
  1. 14.2.2
    by the Buyer determining the Stock which is not Excluded Stock and which is in saleable condition (Saleable Stock), as well as determining the Stock which is in unsaleable condition (Unsaleable Stock); and
  1. 14.2.3
    by determining the value of the Stock without the Excluded Stock and the Unsaleable Stock (Accepted Stock), which is equal to the landed invoice cost of the Accepted Stock to the Seller (excluding GST).

…

  1. 17
    COMPLETION AND POSSESSION
  1. 17.1
    The Buyer must pay the Balance Purchase Price and the Stock Amount on the Date of Completion …
  1. 18
    INTEREST ON LATE PAYMENTS
  1. 18.1
    If any part of the Purchase Price (including the Deposit) payable under this Contract is not paid when due this money is to bear interest from the due date for payment to the date of payment, both inclusive, at the rate stated in Item M per annum simple interest, which interest must be paid with the Balance Purchase Price.
  1. 18.2
    A judgment for money will likewise bear interest from the date of judgment to the date of payment, both inclusive.

…

  1. 24
    TIME, PLACE AND DATE FOR COMPLETION
  1. 24.1
    Subject to clause 24.2, Completion must be effected at the time set out in Item J and the place set out in Item K.
  1. 24.2
    Notwithstanding any other provision of this Contract, Completion must be contemporaneous with completion under the terms of [Hotel Land Contract], [the Commercial Property Contract], [the Wood Street Contract] and [the Vacant Land Contract].

…

  1. 34
    UMBRELLA AGREEMENT AND APPORTIONMENT
  1. 34.1
    The parties agree that this Contract is part of an overall arrangement between the Seller, the Buyer and other Related Entities of the Seller and the Buyer for the sale and purchase of the Business and the sale and purchase of [the Hotel Land], with such arrangement being set out in an umbrella agreement executed by the parties to it on the same day as the Contract Date (the Umbrella Agreement).
  1. 34.2
    The parties agree that notwithstanding any other provision of this Contract, the aggregate purchase price of all contracts referred to in clause 34.1 is the same as the Purchase Price as defined in the Umbrella Agreement.
  1. 34.3
    The parties agree that they will apportion the Purchase Price as defined in the Umbrella Agreement between the respective contracts referred to in clause 34.1 as each party determines and in accordance with each of the party's own accounting advice.
  1. 34.4
    The parties agree that they will apportion the Deposit as defined in the Umbrella Agreement so that the deposit for each respective contract referred to in clause 34.1 is 10% of the purchase prices apportioned in accordance with clause 34.3.
  1. 34.5
    The parties agree that in the event of any inconsistency between this Contract and the Umbrella Agreement, the Umbrella Agreement prevails to the extent of such inconsistency.

…

  1. 35.10
    If any provision or part of a provision of this Contract is held or found to be void, invalid or otherwise unenforceable (whether in respect of a particular party or generally), it will be deemed to be severed to the extent that it is void or to the extent of voidability, invalidity or unenforceability, but the remainder of that provision will remain in full force and effect.”
  1. [21]
    The Deed of Variation also constituted notice from the second applicant to the first respondent that the condition in clause 3.1 of the Business Contract had been satisfied.

The Hotel Land Contract

  1. [22]
    The Hotel Land Contract contained the following special conditions:
  1. “1.
    Contemporaneous settlement and termination
  1. (a)
    Notwithstanding anything else in this Contract, settlement of this Contract is subject to and conditional on the contemporaneous settlement with:
  1. [the Business Contract]; and
  2. [the Commercial Property Contract];
  3. [the Wood Street Contract]; and
  4. [the Vacant Land Contract].
  1. (b)
    If the Business Contract is rescinded or terminated for any reason, this Contract will automatically be rescinded or terminated (as the case may be) in accordance with the Umbrella Agreement …
  2. (c)
    The Buyer may waive the condition in Special Condition 1(a) in writing at its absolute discretion. If the Buyer waives that condition it will not be prevented from bring a claim against the Seller in respect of any breach of this Contract that caused the condition not to be satisfied.
  1. 2.
    Overall agreement and apportionment
  1. (a)
    The parties agree that this Contract and the Business Contract are part of an overall agreement between the Seller and the Buyer with such overall agreement being evidenced by an agreement executed on the same day as the Contract Date (Umbrella Agreement).
  2. (b)
    The parties agree that notwithstanding anything else in this Contract, the aggregate purchase price for all contracts referred to in Special Condition 2(a) is the same as the ‘Purchase Price’ as defined in the Umbrella Agreement and that the obligation to pay the Purchase Price under clause 2.4(1) of the Terms of Contract for Commercial Land and Buildings in this Contract (Standard Terms) can be satisfied by the Buyer paying the Purchase Price under the Umbrella Agreement.
  1. (c)
    The parties agree that they will apportion the Purchase Price and ‘Deposit’ as defined in the Umbrella Agreement between this Contract and the Business Contract in accordance with the terms of the Umbrella Agreement and as determined by each party including taking into account its own accounting advice.

…

  1. 4.
    Deposit

The parties agree that the provisions relating to the Deposit in the Umbrella Agreement apply in respect of this Contract and prevail to the extent of any inconsistency.

…

  1. 6.
    Inconsistency

In the event of an inconsistency between:

  1. (a)
    this Contract and the Umbrella Agreement, the terms of the Umbrella Agreement shall prevail to the extent of the inconsistency;
  2. (b)
    these Special Conditions and the Standard Terms, these Special Conditions shall prevail to the extent of the inconsistency.”
  1. [23]
    The Hotel Land Contract also contained general conditions which relevantly included the following:
  1. “1.1
    Definitions
  1. (1)(c)
    ‘Balance Purchase Price’ means the Purchase Price less the Deposit paid by the Buyer
  1. 2.1
    Deposit
  1. (1)
    The Buyer must pay the Deposit to the Deposit Holder at the times shown in the Reference Schedule. …

…

  1. 2.4
    Payment of Balance Purchase Price
  1. (1)
    On the Settlement Date, the Buyer must pay the Balance Purchase Price by Bank cheque as the Seller or the Seller’s Solicitor directs.
  1. 2.5
    Adjustments
  1. (1)
    Rent and Outgoings must be apportioned between the parties in accordance with this clause 2.5 and any adjustments paid and received on settlement so that:
    1. (a)
      the Seller is liable for Outgoings and is entitled to Rent up to and including the Settlement Date; and
  1. (b)
    the Buyer is liable for Outgoings and is entitled to Rent after the Settlement Date.

…

  1. 12.8
    Severance

If any term or part of a term of this contract is or becomes legally ineffective, invalid or unenforceable in any jurisdiction it will be severed and the effectiveness, validity or enforceability of the remainder will not be affected.”

The other contracts

  1. [24]
    The Commercial Property Contract, the Vacant Land Contract and the Wood Street Contract each contained special conditions which provided to the effect that settlement of each of those contracts was subject to and conditional on contemporaneous settlement with the other contracts, including the Business Contract and the Hotel Land Contract.[10] Each of those contracts also contained a special condition to the effect that if the Business Contract were rescinded or terminated for any reason, the relevant contract would automatically be rescinded or terminated in accordance with the Umbrella Agreement.[11]

The Issues in Dispute

  1. [25]
    The proceeding was commenced by originating application and proceeded to a final hearing without pleadings. The issues in dispute fell to be determined by reference to the submissions made by the parties. There were no factual issues in dispute. There was no extrinsic evidence adduced in relation to the interpretation of the various contracts.
  1. [26]
    The respondents’ fundamental contention is that the Business Contract and the Hotel Land Contract are illusory and void for uncertainty.[12] That contention is advanced on the basis that “no concluded agreements were entered in terms of [the Business Contract] and [the Hotel Land Contract], because the purchase price under each contract was not agreed and there is no objective contractual machinery agreed to determine the purchase price under each contract”.[13]
  2. [27]
    The respondents advanced several arguments to make good that fundamental contention.
  1. [28]
    The first argument concerned the discretion to apportion. The Business Contract and the Hotel Land Contract contemplated that the respective sellers and buyers might separately take their own accounting advice and apportion, as between the Business Contract and the Hotel Land Contract, the Purchase Price and Deposit, as those terms were defined by the Umbrella Agreement. The apportionments could occur without reference to the other party and could mean that the parties allocated different prices to the Business Contract and the Hotel Land Contract. According to the argument, this meant that there was no agreement as to essential terms, namely the separate purchase prices payable under the Business Contract and the Hotel Land Contract.
  1. [29]
    The second argument was to the effect that the absence of objectively ascertainable separate purchase prices for the Business Contract and the Hotel Land Contract gave rise to “uncertainty inherent in the structure of the transaction”.[14] The absence of these prices was said to render the particular agreements uncertain. For example, in the case of the Hotel Land Contract, in the event of non-performance by the respective buyer, the amounts of the deposit to be forfeited and of liquidated damages payable were said to be unclear. Further, the absence of a separate purchase price was said to make the calculation of the CGT withholding amounts, interest and liability for GST unworkable.
  1. [30]
    The third argument was to the effect that it was not objectively contemplated that the Business and the Hotel Land would necessarily be sold together. The respondents emphasised the language of clause 24.2 of the Business Contract and also submitted that the language of Special Condition 2(b) of the Hotel Land Contract had no equivalent provision in the Business Contract. In circumstances where it was said that it was not objectively contemplated that the Business and the Hotel Land would necessarily be sold together, the absence of objectively ascertainable separate purchase prices for the Business Contract and the Hotel Land Contract meant that those agreements failed for uncertainty.
  1. [31]
    These substantive arguments reflect the parameters of the real issues in dispute for the purpose of this proceeding.

Consideration

  1. [32]
    The issues in dispute raise for consideration the approach to construction of separate commercial agreements involving an overarching broader transaction, the approach to questions concerning uncertainty and the appropriate use of the court’s power to sever provisions from agreements.
  1. [33]
    As to the first matter, a settled principle of construction applies where parties have executed several agreements which are part of a more general, comprehensive arrangement or agreement. In Toohey v Gunther,[15] Isaacs J said:

“The true principle of construction in such cases is … as follows: ‘When the same parties execute contemporaneously several instruments relating to different parts of the same transaction, all must be considered together; all must be examined in order to understand each; apparent inconsistencies are to be reconciled; and where there are real inconsistencies, the governing intention of the parties is still to be collected from a consideration of the language of all the instruments and effect given to it’”.

  1. [34]
    As to questions of uncertainty, in Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd,[16]Brooking J observed:

“An agreement is not a binding contract unless the parties have agreed upon such terms as are in the circumstances legally necessary to constitute a contract: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540, at p 548, per Gleeson CJ. Otherwise the supposed contract is bad for uncertainty. It is convenient to distinguish between two varieties of uncertainty in this wide sense and to call the first uncertainty and the second incompleteness. A contract is uncertain if some essential term is so vague that no definite meaning can be assigned to it. A contract is incomplete if the parties have deliberately (and whether expressly or by implication) left some essential term to be settled by their future agreement … courts are reluctant to strike down an agreement on the ground of uncertainty or incompleteness.

Even if it is impossible to assign a definite meaning to a provision it may be possible for the provision to be severed, leaving the rest of the contract good.

If the court comes to the conclusion that parties intended to make a contract it will if possible give effect to their intention by overcoming difficulties said to result from uncertainty or incompleteness.”

  1. [35]
    Later in Ipex Software Services Pty Ltd v Hosking,[17] Eames AJA, with whom Batt JA agreed, relevantly said:

“As I have held … there was an intention to enter a binding agreement. Where there is such an intention between parties to an agreement the court will, if possible, give effect to that intention by overcoming difficulties said to arise from uncertainty or incompleteness. Where businesspeople have reached agreement between themselves the courts should be slow to conclude that the words they have used, ‘considered however broadly and untechnically [sic] and with due regard to all the just implications, fail to evince any definite meaning on which the court can safely act’. … The task of the court is to ascertain the intention of the parties and in so doing ‘no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements’.”

  1. [36]
    In Delaney v Delaney,[18] the Court of Appeal of the Supreme Court of Victoria described as “a presumption” the principle that “where the parties intend to enter a binding agreement, the Court will strive to give effect to that intention by ‘overcoming difficulties said to arise from uncertainty or … incompleteness’”.
  1. [37]
    As will be apparent, in the present case, the contractual terms are not said to be ambiguous or vague and nor is this a situation where the parties have expressly contemplated future agreement about an essential term.[19]Rather, the parties agreed upon a total purchase price and the deposit for the sale of the Business and the Hotel Land but left the apportionment of those amounts as between the Business Contract and the Hotel Land Contract to be determined separately by them having regard to their individual tax advice. The parties did not specify a need for future agreement about the apportionment but rather left the apportionment for their individual determinations. In my view, the present case gives rise to considerations more akin to incompleteness rather than ambiguity or uncertainty in the classical sense.[20] The present case gives rise to an issue as to whether the Business Contract and the Hotel Land Contracts are materially uncertain because they are incomplete in that they do not provide for a means of determining the purchase prices or deposits under each contract.[21]
  1. [38]
    In relation to severance, an inquiry as to whether a contract is uncertain may bring with it a related inquiry as to whether the problematical term or condition is severable from the rest of the provisions of the contract or whether the whole contract should fail. An agreement that contains uncertain terms or which is affected by uncertainty can be saved by the court severing the offending part or parts from the contract.[22] It is accepted that severance can be used in cases where the uncertainty stems from incompleteness as well as from ambiguity.[23]
  2. [39]
    In Whitlock v Brew,[24] the High Court affirmed the decision of the Full Court of the Supreme Court of Victoria in Brew v Whitlock (No 2) [1967] VR 803.[25] The learned authors of Cheshire & Fifoot Law of Contract describe the Full Court of the Supreme Court of Victoria’s decision in Brew v Whitlock (No 2) as “the most comprehensive statement of the test of severance for uncertainty”.[26] Relevantly, the Full Court of the Supreme Court of Victoria there said:[27]

“These authorities on severability in cases concerning uncertainty in a part of a contract point to the test as being the intention of the parties as to whether the operation of the contract apart from the impugned part was to be conditional on the efficacy of that part, or whether it was to take effect notwithstanding the failure of that part. That intention is to be ascertained from the construction of the contract as a whole. The process of construction will have regard to such considerations as the independence in form of the impugned part, any interdependence of that part in form or operation with the rest, the effect that severance would have on the operation or meaning of what is left, the nature of the subject-matter dealt with in the part and its relative importance in the setting of the whole bargain, whether the impugned part is one of several promises supported by different considerations or by a common consideration, or whether it is part of a single consideration supporting a promise or promises or whether it is one of several considerations, and, if so, whether it is a material or important part of the total consideration or merely subordinate.”

  1. [40]
    In the present case, it is objectively apparent that the parties executed the Business Contract and the Hotel Land Contract contemporaneously as part of a broader, overarching transaction. That much is made clear by the Umbrella Agreement,[28] the Business Contract[29] and the Hotel Land Contract.[30] Having made that finding, it is appropriate to approach the construction of the Umbrella Agreement, the Business Contract and the Hotel Land Contract “on the basis that those agreements should be considered together and, if there are inconsistencies, the governing intention of the parties is to be discovered from a consideration of the language of all of the instruments”.[31]
  2. [41]
    Some particular parts of the agreements are particularly noteworthy, namely:
  1. (a)
    The Business Contract[32] and the Hotel Land Contract[33] each contain a clause to the effect that, in the event of any inconsistency, the Umbrella Agreement prevailed;
  2. (b)
    Each of the Umbrella Agreement,[34] the Business Contract[35] and the Hotel Land Contract[36]contained what might be referred to as severance provisions. Relevantly those provisions provided to the effect that if any provision or part of a provision was found to be void, invalid or unenforceable, it would be deemed to be severed to that extent.
  3. (c)
    Schedule 1 to the Umbrella Agreement included a warranty by the Sellers that the Transaction Documents were valid and binding agreements on the Sellers.[37] Clause 6 of the Umbrella Agreement contained an acknowledgement by the Sellers that the Buyers had entered into the Umbrella Agreement in reliance upon that warranty.
  1. [42]
    On my consideration of the Umbrella Agreement, the Business Contract and the Hotel Land Contract, I find that the parties objectively intended to enter into a binding agreement concerning the sale and purchase of the Business and Hotel Land.
  1. [43]
    The Umbrella Agreement is the relevant starting point. The respondents submit that the Umbrella Agreement is not a source of substantive obligations, other than an obligation “to settle the contracts at the same time, if in fact, that happens”.[38] That submission is rejected. The Umbrella Agreement was objectively concerned to “set out the related arrangements to give effect to the transactions contemplated” by the Business Contract and the Hotel Land Contract.[39] In that regard, the Umbrella Agreement relevantly:
  1. (a)
    Defined the Business by reference to the meaning that term was given in the Business Contract;
  2. (b)
    Defined the Property (being the Hotel Land) by reference to the meaning given to that term in the Business Contract;
  3. (c)
    Identified “the Purchase Price”, being the consideration for the sale of the Business and the Hotel Land;
  4. (d)
    Identified “the Deposit” to be paid “on account of the total of all the deposits to be paid by [the second applicant] and [the first applicant]” under the Business Contract and the Hotel Land Contract;
  5. (e)
    Imposed an obligation on “the Buyers”, being the first and second applicants, to pay the amount of the Deposit;
  6. (f)
    Imposed an obligation on the Buyers to pay the Purchase Price;
  7. (g)
    Provided that payment by the Buyers in accordance with clause 4.3 of the Umbrella Agreement was to be “in full satisfaction of the Buyers’ obligations under the Sale Agreements”;
  8. (h)
    Imposed an obligation on the Buyers to pay all stamp duties and other duties together with any related fees, penalties, fines, interest or statutory charges, and similar Tax in respect of the Umbrella Agreement, the performance of the Umbrella Agreement “and each transaction effected or contemplated by or made under [the Umbrella Agreement]”;
  9. (i)
    Provided that any obligation assumed by the Buyers under the Umbrella Agreement, was a joint and several obligation;[40] and
  10. (j)
    Provided for a time and place for Completion.
  1. [44]
    The Umbrella Agreement relevantly identified the Business, the Hotel Land, the Purchase Price payable as the consideration for the sale by each seller of the Business and the Hotel Land owned by them to the relevant buyer (including the Deposit payable as part of the Purchase Price) and the parties with the relevant obligations to buy and sell the Business and the Hotel Land. Viewed as such, the Umbrella Agreement contained the essential elements for a binding contract.[41]
  2. [45]
    In their solicitor’s correspondence, the respondents contended that the Business Contract and the Hotel Land Contract had not “validly formed because an essential term, namely the purchase price was missing”.[42] In this respect, the respondents focused upon clause 4.1 of the Umbrella Agreement which in terms obliged the parties to buy and sell the Business and the Hotel Land “pursuant to the terms and conditions of the relevant Sale Agreements”.
  1. [46]
    The focus upon the language of clause 4.1 in isolation is misplaced. The Umbrella Agreement contained other clauses, particularly clauses 2(a) and 4.3 which dealt with the payment of the Deposit and Purchase Price by the Buyers (a joint and several obligation) as the consideration for the purchases of the Business and the Hotel Land. Further, the Business Contract and the Hotel Land Contract each contained provisions which acknowledged that the Umbrella Agreement was to prevail over the terms of the Business Contract and the Hotel Land Contract to the extent of any inconsistency. To the extent that the Umbrella Agreement specified the Purchase Price for the Business and the Hotel Land, and the Business Contract and the Hotel Land Contract did not, the Umbrella Agreement was to prevail. The proper way to interpret clause 4.1 of the Umbrella Agreement is that it required the Buyers and the Sellers on completion to relevantly buy and sell the Business and the Hotel Land pursuant to the terms and conditions of the relevant Sale Agreements but always subject to the terms of the Umbrella Agreement.

The first argument

  1. [47]
    The respondents’ submission that “the purchase price under each contract was not agreed”[43]is rejected. Relevantly, the Business Contract provided that the parties agreed that “the aggregate purchase price of all contracts referred to in clause 34.1 being a reference to the Business Contract and the Hotel Land Contract, “is the same as the Purchase Price as defined in the Umbrella Agreement”. Similarly, clause 2(b) of the Hotel Land Contract noted the parties’ agreement that “the aggregate purchase price for all contracts referred to in Special Condition 2(a)” being the Business Contract and the Hotel Land Contract, “is the same as the Purchase Price as defined in the Umbrella Agreement”.
  1. [48]
    It may be accepted that a purchase price for the Hotel Land alone of the Business was not specified. To the extent that the parties included provisions to the effect that they might take their own accounting advice and apportion, as between the Business Contract and the Hotel Land Contract, the Purchase Price and Deposit, the proper construction of the Umbrella Agreement, Business Contract and the Hotel Land Contract is that the apportionments did not have any effect on the obligations owed by the parties to each other in respect of the purchase of the Business and the Hotel Land pursuant to the Umbrella Agreement. As much was made clear by clause 4.3(c) of the Umbrella Agreement which provided in terms that payment by the Buyers “in accordance with [clause 4.3 of the Umbrella Agreement] shall be in full satisfaction of the Buyers’ obligations under the Sale Agreements and the Buyers shall not be concerned with the apportionment of the Purchase Price between the Sellers”. Hence, the prospect of separate apportionment by the applicants and the respondents according to their own taxation advice had no bearing upon what was required in terms of performance by payment of the Purchase Price as required by clause 4.3 of the Umbrella Agreement. The apportionments were not essential parts of any of the agreements[44] and the prospect of the apportionments occurring, was not inconsistent with the objective intention of the parties that they were already, and remained, bound to perform the agreements.[45]

The second argument

  1. [49]
    This argument proceeds on the basis that, without an agreed apportionment, there was inherent uncertainty in the structure of the transaction. The respondent sought to make good this contention by reference to five postulated circumstances.
  1. [50]
    First, the respondents focused upon the position under the Hotel Land Contract, viewed in isolation, where a buyer failed to attend at settlement and the seller thereby became entitled to terminate pursuant to clause 9.1 and forfeit the deposit pursuant to clause 9.4. In that situation, it was submitted that there was no way of knowing the amount of the deposit to be forfeited as the Hotel Land Contract did not identify the amount of the deposit. The argument fails to address the provisions of the Umbrella Agreement, particularly clauses 5.2, 5.5 and 5.6. Reading the agreements together, and having regard to those clauses, which prevail in the event of inconsistency, a failure by the buyer under the Hotel Land Contract to attend at settlement would lead to the forfeiture of the Deposit under the Umbrella Agreement.
  1. [51]
    Secondly, again focusing on the Hotel Land Contract in isolation, in the event of the buyer failing to settle, it was submitted that there was no way of calculating liquidated damages pursuant to clause 9.6, as the liquidated damages contemplated “any deficiency in price on a re-sale”. Without a discrete purchase price for the Hotel Land being specified, the deficiency was not objectively ascertainable. The applicants sought to counter this submission by submitting that each of the Business Contract[46] and the Hotel Land Contract[47] contained what were described as “mirrored provisions”[48] for liquidated damages. It was submitted that these conditions conferred mutual rights on the sellers under the Business Contract and the Hotel Land Contract which enabled them to re-sell and recover the collective difference in price by reference to the Purchase Price under the Umbrella Agreement. I do not accept that as being the evident object and purpose of the liquidated damages clauses in the separate agreements. In my view, the agreements properly construed contemplated deficiencies on the re-sale of the Business and the Hotel Land respectively. Given that the separate contracts did not specify discrete prices for the Business and Hotel Land, there is force in the respondents’ submission that the liquidated damages clauses are materially uncertain.
  1. [52]
    The conclusion that the liquidated damages clauses are uncertain gives rise to the further question whether they may be severed. I have reached the conclusion that the liquidated damages clauses are severable. In this regard, as I have noted, each of the Umbrella Agreement,[49] the Business Contract[50] and the Hotel Land Contract[51] contain severance provisions. The presence of those clauses is an objective indication that the parties intended for their agreements to take effect notwithstanding the failure of clauses. The subject matter of the liquidated damages clauses is separate and distinct and of subordinate importance having regard to the totality of the transaction. I am also mindful that, in other contexts, liquidated damages clauses have been held not to be enforceable without consequences for the validity and enforceability of the agreements in which they are contained.[52]
  1. [53]
    Thirdly, the respondents submitted that sub clauses 2.4(3) and (4) of the Hotel Land Contract provide for “the CGT Withholding Amount … to be calculated by reference to the purchase price under [the Hotel Land Contract]”.[53] To explain that submission, the Hotel Land Contract contained a definition of “CGT Withholding Amount” which was defined to mean the amount determined under s. 14-200(3) of Schedule 1 to the Taxation Administration Act 1953 (Cth) or a lesser amount specified in a variation notice under s. 14-235. Section 14-200(3) relevantly requires reference to an asset’s cost base or a varied amount applying under s. 14-235. Section 14-215(1) relevantly excludes a transaction if the CGT asset has a market value of less than $750,000. Sub-clauses 2.4(3) and 2.4(4) of the Hotel Land Contract direct attention to whether the sale was an excluded transaction under s 14-215 which in turn directs attention to the market value of the CGT asset. For that purpose, clause 2.4(4) provides that “the market value of the CGT asset” is taken to be the purchase price. To the extent that the Hotel Land Contract did not specify a discrete purchase price for the CGT asset, being the Hotel Land, the provision is properly regarded as uncertain.
  1. [54]
    My conclusion gives rise to the further question whether sub-clause 2.4(4) may be severed. I have reached the conclusion that the sub-clause is severable. I again note that each of the Umbrella Agreement,[54] the Business Contract[55] and the Hotel Land Contract [56] contain severance provisions which are an objective indication that the parties intended for their agreements to take effect notwithstanding the failure of clauses. Sub-clause 2.4(4) is again a separate and distinct clause of subordinate importance having regard to the totality of the transaction. The purpose of the clause appears to be concerned with providing a mechanism for ascertaining market value for the purpose of s. 14-215 (1)(a). The failure of that clause does not mean that market value, an inherently objective concept, is not otherwise able to be ascertained. There is no reason to suppose that the parties intended for the agreement to become unenforceable if clause 2.4(4) failed.
  1. [55]
    Fourthly, the respondents submitted that interest on late payments under the Hotel Land Contract[57] and the Business Contract[58] fell to be calculated by reference to amounts not paid at settlement in respect of the separate contracts. It may be accepted that interest is not able to be calculated under the separate contracts because of the failure to specify discrete purchase prices. I have reached the conclusion that the interest provision is severable. I again note the presence of the severance provisions which are an objective indication that the parties intended for their agreements to take effect notwithstanding the failure of clauses. The subject matter of the interest clauses is separate and distinct and of subordinate importance having regard to the totality of the transaction. I am also mindful that, in other contexts, interest clauses have been held not to be enforceable without consequences for the validity and enforceability of the agreements in which they are contained.[59]
  1. [56]
    Finally, the respondents argued that there were GST implications which meant that the Business Contract and the Hotel Land Contract were uncertain. The point was argued where under the Umbrella Agreement, the parties agreed that “the supply under the Sale Agreements is the supply of a going concern for GST purposes.”[60] Separately under the Hotel Land Contract,[61] the parties had agreed that the supply of the Hotel Land was the supply of a going concern and under the Business Contract,[62] the parties had agreed that the supply of the Business was the supply of a going concern. A supply of a going concern is not a taxable supply attracting GST under the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (“the GST Act”).
  1. [57]
    The respondent’s submissions were addressed to the Hotel Land Contract and the Business Contract, but not the Umbrella Agreement. Pursuant to clause 11.7(3) of the Hotel Land Contract, the seller warranted that it would do certain things to ensure that the supply remained a supply of a going concern at completion. In the event those warranties were breached, the buyer was entitled to either terminate or otherwise agreed to pay the amount of GST payable on the supply. Clause 33.5 of the Business Contract provided that, to the extent that any supply was a taxable supply under the GST Act, the Buyer would pay to the seller an additional amount equal to the amount of GST imposed on the taxable supply. The respondents’ argument was for these provisions to operate, a discrete purchase price was required to be specified for each contract.
  1. [58]
    The respondent’s argument failed to address the materially operative provisions in relation to GST which were contained in clauses 10.3 and 10.4 of the Umbrella Agreement. If the Commissioner for Taxation assesses any supply made under the Umbrella Agreement (which incorporates each Supply Agreement) as being a taxable supply, each Buyer (as a recipient) agreed to pay “the Supplier’s liability for GST on the sale” subject to two conditions. First, upon the Commissioner confirming “by correspondence or assessment” the respective supplier’s liability for GST. Second, “within 14 days after the Seller’s liability for GST” being confirmed by the Commissioner, upon the respective Seller(s) delivering a tax invoice to the Buyer(s) for the GST amount. The “correspondence or assessment” from the Commissioner is a reference to “[a]ny ruling, advice, document or other information received by the Recipient from the [ATO] in relation to the supply made under [the Umbrella Agreement]”, which correspondence or assessment the parties agreed “[would] be conclusive as to the GST payable in relation to that supply”. There is no relevant uncertainty or incompleteness in relation to GST.

The third argument

  1. [59]
    The respondents submitted that it was not contemplated that the Business and the Hotel Land would necessarily be sold together. The respondents sought to establish this proposition by focusing upon the language of the Business Contract (particularly clause 24.2) and the Hotel Land Contract (particularly Special Condition 2(b)). As to clause 24.2 of the Business Contract, the contractual language was that “…Completion must be contemporaneous with completion under the terms of [the Hotel Land Contract]”. That language was said to only contemplate that the Business Contract may not settle in the event the Hotel Land Contract did not settle. This submission did not have regard to clauses 5.3(b) and (c) of the Umbrella Agreement which make it plain that, in the event of any Completion Obligation not being performed, “Completion will not occur under any of the Sale Agreements” and “Completion under one Sale Agreement may not occur independently of Completion under of the other Sale Agreements”.
  1. [60]
    As to Special Condition 2(b) of the Hotel Land Contract, the respondents submitted that the reference to the obligation to pay the purchase price under the terms of the Hotel Land Contract being satisfied by paying the Purchase Price under the Umbrella Agreement “provided a mechanism for settling the transactions despite the uncertainty but did not resolve the uncertainty.”[63] This submission is rejected. There is no relevant uncertainty in respect of the Purchase Price which payable by reason of clause 4.3(c) of the Umbrella Agreement.

Orders

  1. [61]
    The respondents resisted an order for specific performance relying upon the arguments I have outlined. That is, apart from issues concerning certainty and incompleteness, no other basis for resisting specific performance was advanced. The respondents are currently in breach as completion was meant to occur on 11 April 2023. There is no real dispute that, in the present case, damages would not be an adequate remedy given that sales of land are involved and the Umbrella Agreement contemplates specific performance as an available remedy.[64] There is no dispute that the applicants are ready and willing to perform their obligations under the agreements.[65]
  2. [62]
    In the circumstances, the orders I make are as follows:
    1. (a)
      It is declared that the following contracts are valid and enforceable:
      1. The Business Contract;
      2. The Hotel Land Contract;
      3. The Commercial Property Contract;
      4. The Vacant Land Contract;
      5. The Wood Street Contract; and
      6. The Umbrella Agreement, as amended by the Deed of Variation.
    2. (b)
      It is ordered that the Umbrella Agreement as amended by the Deed of Variation, the Business Contract, the Hotel Land Contract, the Commercial Property Contract, the Vacant Land Contract and the Wood Street Contract be specifically performed.
    3. (c)
      I will hear the parties as to any necessary orders and directions required for the implementation of the specific performance order.
    4. (d)
      I will hear the parties as to costs.

Footnotes

[1]Described as Lot 2 on BUP 102967.

[2]Described as Lot 1 on BUP 102967.

[3]Respondents’ Outline [24].

[4]Ibid [37].

[5]Ibid [42].

[6]Exhibit 1 page 7.

[7]Clause 1.4(a) of the Umbrella Agreement.

[8]Defined to mean A New Tax System (Goods and Services Tax) Act 1999 (Cth).

[9]Schedule 1 to the Umbrella Agreement, clause (dd).

[10]Special Condition 1(a) of the Commercial Property Contract, the Vacant Land Contract and the Wood Street Contract.

[11]Special Condition 1(b) of the Commercial Property Contract, the Vacant Land Contract and the Wood Street Contract.

[12]Respondents’ Outline [24].

[13]Ibid [37].

[14]Ibid [28].

[15](1928) 41 CLR 181 at 196.

[16][1994] 2 VR 106 at 130.

[17]Ipex Software Services Pty Ltd v Hosking [2000] VSCA 239 at [56].

[18][2022] VSCA 48 at [52].

[19]Cf Thorby v Goldberg (1964) 112 CLR 597 at 603.

[20]Refer to Herzfeld and Prince, Interpretation, Second Edition, 2020 at [19.120]

[21]Refer by analogy to Whitlock v Brew (1968) 118 CLR 445 at 460.8 to 461.1 per Taylor, Menzies and Owen JJ.

[22]Fitzgerald v Masters (1956) 96 CLR 420; Trustees Executors & Agency Company Ltd v Peters (1960) 102 CLR 537.

[23]David Jones Ltd v Lunn (1969) 91 WN NSW 468 at 473; Seddon and Bigwood, Cheshire & Fifoot Law of Contract, 12th Australian edition at [6.17].

[24](1968) 118 CLR 445.

[25][1967] VR 803.

[26]Seddon and Bigwood, Cheshire & Fifoot Law of Contract, 12th Australian edition at [6.17].

[27]Brew v Whitlock (No 2) [1967] VR 803 at 807-8.

[28]Recital B.

[29]Clause 34.1 of the Business Contract.

[30]Special Condition 2(a).

[31]Toohey v Gunther (1928) 41 CLR 181 at 196.

[32]Clause 34.5 of the Business Contract.

[33]Special Condition 6(a) of the Hotel Land Contract.

[34]Clause 13.8 of the Umbrella Agreement.

[35]Clause 35.10 of the Business Contract.

[36]Clause 12.8 of the Hotel Land Contract.

[37]Schedule 1 to the Umbrella Agreement, clause (d).

[38]T 1-24 35.

[39]Recital B.

[40]Clause 1.4(a) of the Umbrella Agreement.

[41]Hall v Busst (1960) 104 CLR 206 at 222.

[42]Exhibit 1, page 240.

[43]Respondents’ Outline [37].

[44]Axelsen v O’Brien (1949) 80 CLR 219 at 226 per Dixon J.

[45]Delaney v Delaney [2022] VSCA 48 at [77].

[46]Clause 21.3.

[47]Clause 9.6.

[48]Applicant’s Oral Address Note [10].

[49]Clause 13.8 of the Umbrella Agreement.

[50]Clause 35.10 of the Business Contract.

[51]Clause 12.8 of the Hotel Land Contract.

[52]Refer by example to Thompson v Riggall [2010] QCA 144 at [35].

[53]Respondents’ Outline [28(c)].

[54]Clause 13.8 of the Umbrella Agreement.

[55]Clause 35.10 of the Business Contract.

[56]Clause 12.8 of the Hotel Land Contract.

[57]Clause 9.9.

[58]Clause 18.1.

[59]Refer by example to Capital Securitisation Limited v Jammal [2007] NSWSC 1073 at [99].

[60]Clause 10.5(b).

[61]Clause 11.7(2).

[62]Clause 33.1.

[63]Respondent’s Outline [36].

[64]Umbrella Agreeement, clause 5.6

[65]The evidence was in any event suggestive of the fact that the applicants are ready and willing to perform: Ex 1 pp 267 and 281

Close

Editorial Notes

  • Published Case Name:

    Waymark Hotels Properties No 20 Pty Limited & Anor v Prentice Properties Pty Ltd & Ors

  • Shortened Case Name:

    Waymark Hotels Properties No 20 Pty Ltd v Prentice Properties Pty Ltd

  • MNC:

    [2023] QSC 117

  • Court:

    QSC

  • Judge(s):

    Kelly J

  • Date:

    29 May 2023

  • White Star Case:

    Yes

Appeal Status

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

Cases Cited

Case NameFull CitationFrequency
Australian Broadcasting Commission v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
1 citation
Jump To
Cite 1 - (1988) 18 NSWLR 540
Axelsen v O'Brien (1949) 80 CLR 219
2 citations
Jump To
Cite 1 - (1949) 80 CLR 219
Cite 2 - (1949) 80 CLR 219
Brew v Whitlock (No. 2) (1967) VR 803
4 citations
Jump To
Cite 1 - (1967) VR 803
Cite 2 - (1967) VR 803
Cite 3 - (1967) VR 803
Cite 4 - (1967) VR 803
Capital Securitisation Limited v Jammal [2007] NSWSC 1073
2 citations
Jump To
Cite 1 - [2007] NSWSC 1073
Cite 2 - [2007] NSWSC 1073
David Jones Ltd v Lunn (1969) 91 W.N. (N.S.W.) 468
1 citation
Jump To
Cite 1 - (1969) 91 W.N. (N.S.W.) 468
Delaney v Delaney [2022] VSCA 48
3 citations
Jump To
Cite 1 - [2022] VSCA 48
Cite 2 - [2022] VSCA 48
Cite 3 - [2022] VSCA 48
Fitzgerald v Masters (1956) 96 CLR 420
1 citation
Jump To
Cite 1 - (1956) 96 CLR 420
Hall v Busst (1960) 104 CLR 206
2 citations
Jump To
Cite 1 - (1960) 104 CLR 206
Cite 2 - (1960) 104 CLR 206
Ipex Software Services Pty Ltd v Hosking [2000] VSCA 239
2 citations
Jump To
Cite 1 - [2000] VSCA 239
Cite 2 - [2000] VSCA 239
Riggall v Thompson [2010] QCA 144
2 citations
Jump To
Cite 1 - [2010] QCA 144
Cite 2 - [2010] QCA 144
Thorby v Goldberg (1964) 112 CLR 597
2 citations
Jump To
Cite 1 - (1964) 112 CLR 597
Cite 2 - (1964) 112 CLR 597
Toohey v Gunther (1928) 41 CLR 181
3 citations
Jump To
Cite 1 - (1928) 41 CLR 181
Cite 2 - (1928) 41 CLR 181
Cite 3 - (1928) 41 CLR 181
Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106
2 citations
Jump To
Cite 1 - [1994] 2 VR 106
Cite 2 - [1994] 2 VR 106
Trustees Executors and Agency Co Ltd v Peters (1960) 102 CLR 537
2 citations
Jump To
Cite 1 - (1960) 102 CLR 537
Cite 2 - (1960) 102 CLR 537
Whitlock v Brew (1968) 118 C.L.R., 445
2 citations
Jump To
Cite 1 - (1968) 118 C.L.R., 445
Cite 2 - (1968) 118 C.L.R., 445

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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