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  4. Evangelista Pty Limited v Eleven 17 Ocean Street Pty Ltd - [2023] QSC 30

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Evangelista Pty Limited v Eleven 17 Ocean Street Pty Ltd[2023] QSC 30

Evangelista Pty Limited v Eleven 17 Ocean Street Pty Ltd[2023] QSC 30

SUPREME COURT OF QUEENSLAND

CITATION:

Evangelista Pty Limited v Eleven 17 Ocean Street Pty Ltd [2023] QSC 30

PARTIES:

EVANGELISTA PTY LIMITED (ACN 008 516 292)

(applicant)

v

ELEVEN 17 OCEAN STREET PTY LTD (ACN 646 297 216)

(respondent)

AND

TWM (QLD) PTY LTD (ACN 605 969 024)

(applicant)

v

ELEVEN 17 OCEAN STREET PTY LTD (ACN 646 297 216)

(respondent)

FILE NO/S:

BS 12166 of 2022 & BS 12167 of 2022

DIVISION:

Trial

PROCEEDING:

Trial

ORIGINATING COURT:

Supreme Court

DELIVERED ON:

24 February 2023

DELIVERED AT:

Brisbane

HEARING DATE:

15 February 2023

JUDGE:

Freeburn J

ORDERS:

  1. 1.It is declared that the applicants’ termination of their respective contracts with the respondent were valid terminations and, in each case, the deposits are declared to have been forfeited.
  2. 2.The parties be heard on the form of the orders and the issue of costs.

CATCHWORDS:

REAL PROPERTY – CONTRACT – SALE OF COMMERCIAL PROPERTY – TERMINATION – where the contract for the sale of commercial property was terminated by the buyer under a special condition – where the buyer argues that they were prevented from complying with the special condition because of the failure of the seller to prepare the deed contemplated by the special condition – whether the special condition terminated under was an essential term – whether the buyer was prevented from complying with the special condition – whether the buyer’s termination of the contract was valid – whether the seller’s termination of the contract was valid

COUNSEL:

GJ Barr for the applicant

D De Jersey for the respondent

SOLICITORS:

AVA Solicitors and FC Lawyers for the applicant

Clayton Utz Lawyers for the respondent

REASONS

Background

  1. [1]
    Two applications are before the court.  One is an originating application by Evangelista Pty Ltd against Eleven 17 Ocean Street Pty Ltd (BS12166 of 2022).  The second is an application by TWM (Qld) Pty Ltd against the same respondent, Eleven 17 Ocean Street Pty Ltd (BS 12167 of 2022).
  2. [2]
    For convenience I will refer to the parties as Evangelista, TWM and Eleven 17.
  3. [3]
    Evangelista owns the property at 11-13 Ocean Street, Maroochydore (the Evangelista Property).  That property comprises a two-storey building on Ocean Street.  The Evangelista property has a carpark at the rear of the building but there is no means of access to that carpark from Ocean Street.  Access to that carpark can be gained by the use of another carpark on an adjoining piece of land owned by the Sunshine Coast Regional Council (the Council).  Access to that Council carpark is via Duporth Avenue in Maroochydore.[1]
  4. [4]
    TWM owns the property adjoining the Evangelista Property at 15-17 Ocean Street Maroochydore (the TWM Property).  The TWM Property comprises a similar building on Ocean Street, but it does have a laneway from Ocean Street that enables access to the carpark behind the TWM Property.  There is, however, a wall between the Evangelista Property and the TWM Property that means that there is no access between the carparks at the rear of those two properties.
  5. [5]
    Ocean Street is a one-way street with limited carparking and on some occasions Ocean Street is closed to vehicular traffic.
  6. [6]
    It is necessary to explain something of the history of the Evangelista Property. The previous owners of the Evangelista property were a Mr John Lunn and Ms Jeanette Smith (Lunn & Smith). On 28 November 1991, Lunn & Smith entered into a licence with the Council (the Licence). The effect of the Licence was that Lunn & Smith granted to the Council, and to the owners and occupiers of the Council carpark as well as their tenants, servants, workmen, licensees and other authorised persons, “full right and liberty to pass and repass over such area as shall be notified” of an area not less than three metres wide for the purpose of accessing that notified area on foot. The purpose was to enable persons lawfully at the Council carpark to gain pedestrian access to Ocean Street through the Evangelista Property. The Licence also granted to Lunn & Smith reciprocal rights, and their owners, occupiers (etc), similar access to and over the notified area of the Council carpark. That reciprocal licence was a little broader than its counterpart in that access was granted to the Council carpark for both pedestrian and vehicular traffic.
  7. [7]
    Clause 3 of the licence is important for present purposes. In the event that either the Council or Lunn & Smith sold their property, clause 3 obliged both the Council and Lunn & Smith to obtain a covenant from their purchaser,[2] in favour of the other party,[3] to this effect:
    1. (a)
      the purchaser will recognise and be bound by the terms of the licence to the same extent as if the purchaser had originally been named as a party to the licence; and
    2. (b)
      in the event of that purchaser selling, then that purchaser would obtain the same covenant from that subsequent purchaser.
  8. [8]
    As it happens, Lunn & Smith did sell the Evangelista Property. They sold it to Evangelista. In effecting that sale Lunn & Smith complied with the Licence and secured from Evangelista a covenant in favour of the Council. The covenant is dated 24 December 1991 and contains the two undertakings referred to in paragraph [7] above.   

The Contracts

  1. [9]
    In 2022, Evangelista decided to sell. Whilst there were prior put and call options, the relevant contract for present purposes is a sale contract dated 21 June 2022 (the Evangelista Contract).  By the Evangelista Contract, Evangelista agreed to sell the Evangelista Property to Eleven 17 for $9.25m, with a deposit of $462,500 (a sum which had already been paid pursuant to the options).
  2. [10]
    The Evangelista Contract was in the REIQ form for commercial land and buildings but included special conditions, a council approval of a development (for both the Evangelista and TWM Properties), and a copy of the Licence and the December xxx covenant. TWM had jointly made that application for development approval.
  3. [11]
    Clause 4 of the special conditions of the Evangelista contract made that contract interdependent with a contract that Eleven 17 had entered into at the same time to purchase the TWM Property. The TWM contract is dated 17 June 2022.  By that contract TWM agreed to sell the TWM Property to Eleven 17 for $9.25m with a deposit of $462,500.
  4. [12]
    The special conditions of the TWM contract contained a condition that mirrored the equivalent provision in the Evangelista Contract so that the settlement of the TWM contract was interdependent upon settlement of the Evangelista contract.
  5. [13]
    The controversy in this case turns on the terms of special condition 5 in the Evangelista Contract.  That clause requires that Eleven 17 enter into a deed of covenant with the Council on or before settlement. It will be necessary to return to the terms of special condition 5.
  6. [14]
    Of course, as is usual in contracts of this type, general condition 26 provided that time was of the essence of the contract.

Clause 10

  1. [15]
    Because of the submissions of the parties, it is necessary to mention Clause 10.1 of the general conditions which provides:

Subject to compliance by the Buyer with the Buyer’s obligations under or by virtue of this Contract and subject to clause 10.2, the Seller shall as required do all acts and execute all documents necessary for the purpose of completing the sale and ensuring that the Buyer obtains a good and valid title to the Property.

  1. [16]
    That clause requires the seller, Evangelista, to co-operate so that the buyer, Eleven 17, can receive what it has bargained for under the contract, namely freehold title.  Similarly, clause 4.1 envisages that at settlement the buyer will pay the balance of the purchase price in exchange for possession, a properly executed transfer and other documents required so as to give the buyer good title.
  2. [17]
    Thus, clause 10.1 is designed to ensure that Evangelista takes all reasonable steps to give Eleven 17 good title. That clause is not particularly helpful when interpreting special condition 5 which required Eleven 17 not Evangelista, to enter into a deed of covenant with a third party (the Council). 

The Events

  1. [18]
    Against that background, it is necessary to explain the events that occurred after the execution of both contracts.
  2. [19]
    The date for settlement for both contracts was 15 July 2022.  However, it is common ground that the date for settlement of both contracts was extended to 29 July 2022.
  3. [20]
    Oddly, until the eve of settlement, neither party mentioned the requirements of special condition 5 that a covenant to be given by the buyer, Eleven 17, to the Council.  At 6.06pm on 28 July 2022 the solicitors for Eleven 17 emailed the solicitors for Evangelista, the seller, saying:

“I am preparing my checklist for settlement.

What is happening with the deed of covenant as per special condition 5 of the contract?

The deed of covenant is of fundamental importance and is the only way to secure my client’s access to the property through and over the council’s land.

What measures are being taken to comply with the contract?”

  1. [21]
    It was a good question.
  2. [22]
    At 11.14am the next day, the day of settlement, the solicitors for the seller, Evangelista, responded as follows:

“Thank you for your email.  It appears that we all overlooked this provision and I apologies [sic] for the fact that I had missed it.

Attached is the Deed of Covenant.  Can you please have it executed by Eleven 17 Ocean Street Pty Ltd and return the original executed Deed of Covenant in duplicate to me, and we undertake to promptly send the same to Sunshine Coast Regional Council to obtain their execution of the Deed of Covenant.

You will note that under the terms of the Licence, no consent of Council is required, and it is a procedural matter that an incoming owner must enter into the Deed of Covenant with Council covenanting to be bound by the terms of the Licence as the new owner.

I am preparing a letter ready to send to Council with the Deed of Covenant as soon as we receive it from you duly executed by your client.

Again my apologies, however I submit that this is a procedural matter only and there is no reason to delay settlement.

I look forward to hearing from you shortly.”

  1. [23]
    At 2.09pm that day the solicitors for the buyer, Eleven 17 emailed a lengthy letter to Evangelista’s solicitors.  They explained that there were some practical difficulties in getting the deed properly executed by the buyer.  They said:

“…

We note that:

  1. (a)
    Mr Bow sent a deed of covenant of the kind contemplated by Special Condition 5 of the contract attached to an email dated 29 July 2022 sent at 11:14am);
  2. (b)
    the deed of covenant appears to be drafted on the basis that it requires the signature of a sole director whilst in fact (and in law) it requires execution by either two directors or a director and the secretary of the Buyer.

For the record, those parties live in different locations and whilst we used best endeavours to have the deed of covenant executed as quickly as possible, we were presented with some practical difficulties in doing so by your client’s very belated production of the document.

For the record, our client cannot simply execute the deed of covenant and return it to you without the consent of Mr Greg Clark (the permanent managing director of the ultimate holding company) under and by virtue of a governance instrument that requires Mr Clark to consent to significant transactions.

Mr Clark lives in California and we are endeavouring to contact him urgently.

Under special condition 5, the Buyer is required to enter into the deed of covenant with the Sunshine Coast Regional Council ‘on or before Settlement’ and, whilst Special Condition 5 spells out that the deed of covenant must be prepared by your firm, it does not then deal with how the Sunshine Coast Regional Council will be procured to ‘enter into’ that deed of covenant.

It is almost inevitably the case that the responsibility for procuring the Sunshine Coast Council to enter into this deed of covenant lies with your client because your client is the only party that the Sunshine Coast Regional Council will deal with in relation to the licence agreement and the deed of covenant.

The Buyer has absolutely no ability or control the process (and specifically to procure the Sunshine Coast Regional Council to ‘enter into’ the deed of covenant).

Given the position your client has placed our client in by the extraordinary belated delivery of the deed of covenant, if your client is unable to procure execution of it by the Sunshine Coast Regional Council then that is an issue for your client.

For the record, the contract requires that the deed of covenant be entered into ‘on or before’ Settlement and accordingly our client requires your client to procure execution of the deed of covenant by the Sunshine Coast Regional Council before Settlement in terms of Special Condition 5.”

  1. [24]
    Eleven 17’s solicitors then attached a “duly executed deed of covenant”. The precise status of that executed document is unclear given the requirement for Mr Clark’s consent.
  2. [25]
    As will be seen, it was inaccurate for Eleven 17’s solicitors to assert that it was Evangelista’s obligation to secure the deed of covenant from the Council. And so, at 3.14pm that day the solicitors for the seller, Evangelista, responded by email saying:

“We refer to your letter of today’s date.  We take issue with some of the matters raised in your letter.

  • All parties including your office overlooked the provisions of Special Condition 5 in relation to your client entering into the Deed of Covenant.
  • If you or your client wished to insist that the Deed of Covenant needed to be executed by Sunshine Coast Regional Council prior to settlement, you should have raised this issue a reasonable time previously, not overnight on the day before settlement.
  • Special Condition 5 states that ‘On or before Settlement the Buyer must enter into a Deed of Covenant with Sunshine Coast Regional Council …’  The obligation under Special Condition 5 is on the Buyer and not on any other party.  Your client has executed the Deed of Covenant today, and accordingly your client has ‘entered into a Deed of Covenant’ in accordance with the provisions of Special Condition 5.  Special Condition 5 does not state that the Deed of Covenant must be fully executed by both the Buyer and Council.
  • We disagree with your view that Special Condition 5 is not just a procedural matter.  The Contract is not subject to the Deed of Covenant being executed by Sunshine Coast Regional Council and the Contract does not in any way stipulate that Special Condition 5 is a fundamental term of the Contract. Special Condition 5 imposes an obligation on the Buyer to enter into the Deed of Covenant, and the Buyer has now done so.”

and Evangelista’s solicitors continued, somewhat upping the stakes:

“In our view the Buyer has no right to refuse to settle or to delay settlement on the grounds that the Sunshine Coast Regional Council has not, executed the Deed of Covenant.  The Seller’s position is that if the Buyer fails to settle the Contract today, the due date for settlement, then the Buyer will be in default under the Contract and the Seller reserves its rights to take all action available to it as a consequence of such default.”

  1. [26]
    At 4.37pm on 29 July 2022 the solicitors for the buyer, Eleven 17, sent a letter terminating the contract:

We are instructed to give notice that our client terminates the contract of sale as a consequence of the seller’s failure to comply with Special Condition 5 of the contract.

  1. [27]
    On any view it was a bold gambit. Special condition 5 was principally directed to the buyer, not the seller. The principal focus of the condition was to require Eleven 17 to enter into a deed of covenant with the Council. And so, Eleven 17’s termination was based on a clause which, principally at least, imposed an obligation on Eleven 17.
  2. [28]
    At 4.43pm on 29 July 2022 the solicitors for Evangelista sent a letter by email to the respondent’s solicitors that rejected the right asserted by the respondent to terminate and reserved all of Evangelista’s rights to take such action as it shall be advised as a consequence of the respondent’s default. The letter also said:

We note that your firm failed to sign off in the PEXA workspace today. All other parties including ourselves, FC Lawyers and your client’s bank were ready to settle. As a consequence of your failure to sign off in the PEXA workspace settlement did not occur today. Today was the agreed Settlement Date with time being of the essence.

  1. [29]
    On 30 July 2022, Evangelista’s solicitors wrote to Eleven 17’s solicitors challenging the termination. They stated that special condition 5 placed an obligation on the buyer (Eleven 17) to enter into a deed of covenant with the Council and that there was no obligation on the seller (Evangelista) to do anything other than to prepare the deed of covenant. They said that, in particular, there was no obligation on the seller (Evangelista) to arrange or facilitate the execution of the deed of covenant by either the buyer (Eleven 17) or the Council. That obligation, it was stated, rested solely on the buyer. Evangelista’s solicitors demanded to know what steps had been taken by the buyer to discharge its obligation to enter into the deed with the Council. They also required particulars of the seller’s alleged failure to comply with special condition 5.
  2. [30]
    On 1 August 2022, Evangelista’s solicitors further argued their case.
  3. [31]
    Evangelista’s solicitors must have passed on the deed of covenant to the Council because on 5 August 2022 the Council returned the deed of covenant to Evangelista’s solicitors, duly executed by the Council. 
  4. [32]
    On 8 August 2022, perhaps recognising that the settlement of the transaction was not going to proceed, Evangelista’s solicitors wrote to Eleven 17’s solicitors advising that their client elected to terminate the contract and declared the deposits to be forfeited.
  5. [33]
    By these proceedings, commenced on 6 October 2022, Evangelista seeks a declaration that Eleven 17’s purported termination was invalid and of no effect and Evangelista seeks a declaration that the deposits have been forfeited.  TWM seeks equivalent declarations in its proceeding against Eleven 17.

Special Condition 5

  1. [34]
    As mentioned, this case turns on the proper interpretation of special condition 5 of the Evangelista contract. Special condition 5 is as follows:

On or before settlement the Buyer must enter into a Deed of Covenant with Sunshine Coast Regional Council in the terms of the Licence Deed dated 28 November 1991 that the Buyer will recognise and be bound by the terms of the Licence and other covenants therein to the same extent as if the Buyer had originally been named therein as the ‘Ocean Street Proprietor’, and that in the event that the Buyer sells or otherwise disposes of its interest in the Property, then such Buyer shall obtain from such subsequent buyer or transferee a covenant agreeing to be bound by the provisions of the Licence.  The Deed of Covenant will be prepared by the Seller’s solicitors and each party shall bear their own costs in respect of such Deed of Covenant.

  1. [35]
    It can be seen that there are in fact two separate limbs to special condition 5. The first is an obligation imposed on the ‘Buyer’ – that is Eleven 17 – to enter into a deed of covenant with the Council on or before settlement. The second is an agreement that the deed of covenant was to be prepared by the Seller’s solicitors – that is Evangelista’s solicitors. No date or time is specified for the preparation of the deed of covenant by Evangelista’s solicitors, although the contract, plainly enough, contemplated that Evangelista’s solicitors would prepare the draft deed of covenant in good time before settlement so that Eleven 17 could then enter into the deed of covenant on or before settlement.

A Positive Obligation?

  1. [36]
    The first contest between the parties is how to characterise special condition 5.  Evangelista contends that special condition 5 imposes on the buyer, Eleven 17, a positive obligation to enter into a deed of covenant with the council.  That is the point of the opening words of special condition 5: “On or before settlement the Buyer [Eleven 17] must enter into a Deed of Covenant with Sunshine Coast Regional Council …”
  2. [37]
    I think that is correct. The first limb of special condition 5 does impose a positive obligation on Eleven 17 to “enter into” a deed of covenant with the Council. The obligation is to enter into the deed of covenant with the Council and to do that on or before settlement.  
  3. [38]
    Eleven 17 submits that general condition 4.1 specified the concurrent obligations of the parties at settlement, namely Eleven 17’s obligation to pay the balance of the purchase price in exchange for, to summarise, all of the relevant instruments of title in the possession or control of Evangelista.
  4. [39]
    However, in my view that is a distraction.  Clause 4.1 deals with what is to happen at settlement.  At settlement, in broad terms, Eleven 17 was obliged to pay the balance of the purchase price in exchange for the instruments of title (etc) in the possession or control of Evangelista.  But special condition 5 is entirely different.  That condition required that, on or before settlement, Eleven 17 “must enter into a Deed of Covenant with Sunshine Coast Regional Council”.
  5. [40]
    The deed of covenant was not one of the instruments contemplated in clause 4.1 as being exchanged for the balance of the purchase price.  First, the obligation was to enter into the deed of covenant and to do so “On or before settlement”.  That is in contradistinction to the interdependent obligations of clause 4.1 which required an exchange at settlement. And so, Eleven 17 may have complied with special condition 5 by entering into the deed of covenant with the Council a day or even a week before settlement. Second, it was Eleven 17’s obligation to enter into the deed of covenant with the Council.  The clauses relied on by Eleven 17 [Clauses 4.1(g), (h) and (k)] are clauses which require the seller, Evangelista, to give over good title and relevant instruments such as leases etc.  That is why those clauses refer to instruments in the possession or control of the seller, Evangelista. Even once the deed of covenant was entered into, the deed would not be in the possession or control of Evangelista.[4]  Third, the focus of special condition 5 is an obligation by Eleven 17 to enter into a deed of covenant with the Council.  The entry into such a deed is a commitment made by Eleven 17 to the Council.  It is not, to use the language of clause 4.1, an instrument which evidences the estates or interests affecting the property [see clauses 4.1(g) and (h)] and it is not a document which Eleven 17 could reasonably require to enable Eleven 17 to manage the property [see clause 4.1(k)].
  6. [41]
    In short, special condition 5 requires that Eleven 17 enter into an undertaking by means of a deed of covenant with a third party.  Such an undertaking is not what is contemplated by clause 4.1 as being exchanged for the balance of the purchase price.

Was the Draft Deed Compliant?

  1. [42]
    Eleven 17 contends that the deed that Evangelista prepared and sent at 11.14am on 29 July 2022 did not comply with special condition 5.
  2. [43]
    Special condition 5 is not especially demanding.  All it requires is that the deed of covenant be prepared by Evangelista’s solicitors.  The deed of covenant so prepared need not be in a particular form.  All that was required was it be in terms of the Licence of 28 November 1991 that:
    1. (a)
      Eleven 17 will be bound by Licence as if it was the original owner; and
    2. (b)
      in the event that Eleven 17 sells or disposes of the Evangelista Property, it will require the new buyer to be similarly bound.
  3. [44]
    Both those requirements are met by the draft deed.
  4. [45]
    Eleven 17 points out that the draft deed did not contain reciprocal licences. The point being made by Eleven 17 is that the original Licence was a grant by the Evangelista’s predecessors[5] to the Council of a right of access over the Evangelista Property and an equivalent right of access granted by the Council to Evangelista’s predecessor over the Council’s carpark.[6]
  5. [46]
    However, the Draft Deed was unequivocal.  The recitals were as follows:
    1. (a)
      The Ocean Street Proprietor is the purchaser from Evangelista Pty Ltd ACN 008 516 292 (‘the Current Proprietor’) of property described as Lots 6 and 7 on RP 27740, Title Reference 18056078 and 18056079 (‘the Ocean Street Property’).
    2. (b)
      The Duporth Avenue Proprietor is the registered owner of the land described as Lot 9 on RP 138425, Title Reference 16144112 (‘the Duporth Avenue Property’).
    3. (c)
      The predecessors in title to the Current Proprietor entered into a Licence with the Duporth Avenue Proprietor dated 28 November 1991 (‘the Licence’) which granted reciprocal rights of access between the Ocean Street Property and the Duporth Avenue Property on the terms and covenants contained in the Licence.
  6. [47]
    The operative provisions, under the heading “NOW THIS DEED WITNESSES AS FOLLOWS” involved two simple clauses:
  1. 1.The Ocean Street Proprietor [Eleven 17] covenants and agrees with the Duporth Avenue Proprietor [the Council] to be bound by the covenants and conditions contained in the Licence and all other terms of the Licence as if the Ocean Street Proprietor had been named as the original Ocean Street Proprietor in the Licence.
  2. 2.The Ocean Street Proprietor covenants and agrees that in the event of sale or other disposition of its interest in the Ocean Street Property then it will obtain from such purchaser or transferee a covenant in favour of the Duporth Avenue Proprietor that such other party will recognise and be bound by the terms of the Licence and other covenants therein contained to the same extent as if the purchaser or transferee had originally been named therein as the Ocean Street Proprietor and that in the event of such purchaser or transferee selling or otherwise disposing of its interest in the Ocean Street Property to any person, persons or corporation then such purchaser or transferee shall obtain from such subsequent purchaser or transferee a covenant agreeing to be bound by the provisions of the Licence.
  1. [48]
    Thus, under the draft deed, Eleven 17 committed to being bound by the covenants and conditions contained in the Licence.  The Licence contained the reciprocal grants of access to the Ocean Street Proprietor and the Duporth Avenue Proprietor, and to their occupiers, tenants, servants, workmen, licensees and other authorised persons.
  2. [49]
    It follows that the draft deed met the description in special condition 5.  Even if it had not precisely met the description, it is to be noted that the obligation of Evangelista’s solicitors was to “prepare” the deed of covenant.  Identifying errors or omissions in the draft does not mean that the draft loses its character as the deed of covenant.
  3. [50]
    It is also worth noting that, in their letter at 2.09pm on 29 July 2022, Eleven 17’s solicitors noted that the deed of covenant was “of the kind contemplated by the contract”. That suggests that, at least at that point, the solicitors for Eleven 17 recognised that the deed prepared by Evangelista’s solicitors was in accordance with the contract.

Prepared Too Late?

  1. [51]
    Eleven 17 submits that, even if the draft deed complied with special condition 5, the draft deed was prepared too late, and that Evangelista was therefore in breach of the Evangelista Contract. On this point, Eleven 17 is on firmer ground. The contract did not stipulate a time by which Evangelista’s solicitors were required to prepare the draft deed. Thus, the law implies that the draft should be prepared within a reasonable time.[7]
  2. [52]
    What is a reasonable time will depend on the circumstances. Here, though, the contract clearly contemplated that Evangelista’s solicitors would prepare the draft deed in sufficient time so that Eleven 17 could enter into a deed of covenant with the Council at or before settlement. Preparation of the draft deed, and its submission to Eleven 17’s solicitors at 11.14am on the day fixed for settlement was plainly too late. Indeed, the apologetic tone to the letter transmitting the draft deed at 11.14am, and the offer to expedite the Council’s role, rather recognises that the draft deed was provided very late.
  3. [53]
    It follows that Evangelista was in breach of the second limb to special condition 5. Evangelista was obliged to prepare the draft within a reasonable time. It did not do so. Thus, Evangelista was in breach of the special condition.

Consequences of the Breach

  1. [54]
    What, then, are the consequences of that breach?
  2. [55]
    Eleven 17 contended that the breach entitled it to terminate. For that consequence to flow it would be necessary to conclude that the term requiring Evangelista’s solicitors to prepare the draft was a breach of an essential term.
  3. [56]
    As has been mentioned, general condition 26 provided that time was of the essence of the contract. Does that mean that Evangelista’s failure to prepare the draft deed within a reasonable time constituted a breach of the ‘time of the essence’ provision? In my view the answer is ‘No’. Surprisingly, there is very little authority on the issue. One helpful judgment is that of Cooper J of the Supreme Court of New Zealand in Blaauw v Watkins. There, His Honour said:

In my opinion the clause which purports to make time of the essence of the contract can have no application to those provisions of the agreement which relate to the payment of the purchase-money and to the time for giving and taking possession. No definite date is fixed for either event. [8]

  1. [57]
    That case is consistent with DTR Nominees Pty Ltd v Mona Homes Pty Ltd[9] where the requirement was to register a plan “with all due dispatch”. The High Court held that the use of that language meant that the requirement could not be construed as an essential term having regard to the language used and the nature of the obligation which was imposed.[10]
  2. [58]
    Even in the absence of that authority, it would be incongruous to regard the parties to have intended that time was of the essence for an obligation where they have not bothered to specify a time for compliance.
  3. [59]
    The argument to the contrary is that the second limb of special condition 5 is plainly intended as a precursor to Eleven 17’s obligation, under the first limb, to enter into a deed of covenant with the Council. That first limb obligation must be a provision to which general condition 26 applies so as to make time of the essence. And so, it can be argued that there is an incongruity in interpreting Eleven 17’s obligation as an essential obligation and yet interpreting the precursor obligation as non-essential.
  4. [60]
    That argument has some force. There is certainly a tension between the two separate obligations in special condition 5. Those who drafted special condition 5 may well not have thought through the legal consequences of a breach of either or both of the obligations in the special condition. However, there are several reasons why the interpretation adopted above is to be preferred.
  5. [61]
    First, even in the absence of the ‘time of the essence’ provision in general condition 26, the nature of the obligation in the first limb of special condition 5 suggests that the intention was that the obligation was essential.[11] The objective, after all, was for Evangelista to comply with its own contractual obligations and for the covenant to, in effect, run with the land.   
  6. [62]
    Second, the substantive nature of the obligation to enter into a deed of covenant with the Council contrasts with the character of the second limb of special condition 5. That second limb is concerned with the machinery as to how the deed of covenant is to be prepared. Thus, the provision requires preparation of the document by the solicitors for Evangelista. Eleven 17 and the Council were free to enter into their own deed of covenant or to alter a draft supplied by Evangelista. The obligation was merely that the deed possess the character described in special condition 5.
  7. [63]
    Third, the absence of any specification as to the time for Evangelista’s solicitors to produce the deed makes it highly likely that the provision in the second limb as to the preparation of the deed was really a machinery provision and that the parties did not intend that any breach of that term would entitle the opposite party to terminate.
  8. [64]
    For those reasons, I conclude that for the first limb, time was of the essence, and for the second limb, time was not of the essence.

Separate Admissibility Issue

  1. [65]
    Incidentally, counsel for Eleven 17 sought to tender as a part of its evidence, an affidavit by Mr Timothy George. That affidavit explains that in November 2022, Eleven 17’s solicitors made a request for access to documents held by the council pursuant to the Right to Information Act 2009 (Qld). The request was largely unproductive – principally because the council claimed legal professional privilege.
  2. [66]
    Objection was taken to the tender of that affidavit by counsel for Evangelista. It was said that the affidavit was outside the timetable prescribed for exchange of evidence, it was irrelevant, and that paragraphs 10 and 11 of Mr George’s affidavit comprise hearsay.
  3. [67]
    There are reasons why the document was provided late. The Council sought to refine the request. Then they refused access because of the claim of privilege. Paragraphs 10 and 11 of Mr George’s affidavit are merely intended to explain the Council’s attitude to the request and would not therefore be hearsay.
  4. [68]
    The affidavit is really only marginally relevant. It merely demonstrates that the Council maintains a claim of privilege. The affidavit does not demonstrate that the Council had any particular procedures to deal with deeds of covenant or that there is any in-built delay. On that basis the affidavit will be admitted into evidence. However, for reasons explained above, it is concluded that, in the circumstances, the draft deed was provided too late, or unreasonably late.

Prevention?    

  1. [69]
    Eleven 17 relies on a passage from the High Court’s judgment in Park v Brothers (2005) 80 ALJR 317 at [43]:

If the conduct of the party in breach of contract prevents the performance by the other party of the condition, then it has been said to be ‘evident from common sense’ that it is ‘equal to performance’ of the condition.  The result has been explained sometimes in terms of waiver, and sometimes in terms of estoppel.  Lord Mansfield said that ‘reason’ dictated that if one party stops the other offering performance by showing an intention not to perform ‘it is not necessary for the first to go farther, and do a nugatory act’.

  1. [70]
    The problem is that there is no evidence that either party took any steps to comply with their obligations under special condition 5 before 6.06pm on to eve of settlement.  It was Eleven 17’s obligation to enter into the deed and it was the obligation of Evangelista’s solicitor to prepare the deed. Neither party attended to those obligations until the eve of settlement.
  2. [71]
    The difficulty for Eleven 17, though, is that it contends that the drafting of a relatively simple deed has prevented its own performance of its obligation to enter into the deed – and yet it produces no evidence that it was Evangelista’s conduct in failing to prepare the deed that prevented Eleven 17 from entering into the deed either on or before 29 July 2022.
  3. [72]
    It is important to keep in mind that Eleven 17’s obligation was to ‘enter into’ a deed of covenant with the Council. That, presumably, involved some contact with the Council, some ascertainment of the Council’s requirements,[12] the preparation of the deed (by Evangelista), and some arrangements for the execution of the deed by both the Council and Eleven 17.[13] There is no evidence that any of those steps were undertaken prior to 6.06pm on the eve of settlement. Indeed, there is no evidence that Eleven 17 had made any contact at all with the Council before the day of settlement.[14]
  4. [73]
    What is required, if Eleven 17 is to sustain this ‘prevention’ argument, is some evidence that it was prevented from performing its obligation to enter into the deed.  The evidence does not establish that. It cannot be the case that Eleven 17 was entitled to take no steps at all to enter into the deed with the Council, and to then say, in effect, ‘well I have taken no steps to enter into the deed with the Council and that is entirely because you failed to prepare a draft of the deed.’ At the least Eleven 17 was required to adduce some evidence that Evangelista’s failure to prepare the deed has prevented Eleven 17 from entering into a deed with the Council. 
  5. [74]
    An analogous line of cases are those cases starting with Meehan v Jones.[15] There the contract for the sale of land including an oil refinery was subject to two special conditions. One was that the buyer was to enter into a satisfactory agreement with Ampol for the supply of fuel. The other was that the buyer receive an approval for finance on satisfactory terms. The principal arguments concerned whether the agreements were void for uncertainty. The High Court upheld the bargain. However, in the course of their reasons Mason and Wilson JJ held that it was implied that the buyer had an obligation to do all that was necessary on his part to obtain finance. Gibbs CJ and Murphy J considered that it was not necessary to give business efficacy to the contract that it should be implied that the buyer will make reasonable attempts to obtain finance.
  6. [75]
    The views of Mason and Wilson JJ in Meehan v Jones have prevailed,[16] and the implication that a buyer is obliged to take reasonable steps has been extended to other special conditions which require the buyer to make an application for the consent or approval of a third party.[17] The requirement to take reasonable steps has also been implied into other special conditions such as the condition that the buyer sell their property before settlement,[18] or that the consent of the Treasurer be obtained before settlement.[19] 
  7. [76]
    In this case, there is no difficulty in implying that special condition 5 required Eleven 17 to take reasonable steps to enter into the deed of covenant with the Council. As discussed above, on its proper interpretation, the first limb to special condition 5 imposed a positive obligation on Eleven 17 to enter into a deed of covenant with the Council, and to do so before or at settlement. Some violence would be inflicted on that positive obligation if Eleven 17 were permitted to sit on its hands until the day of settlement and to then say that it has been unable to, or it now has insufficient time to, enter into a deed with the Council.
  8. [77]
    Whilst in some cases it may be true to say that the failure of solicitors to prepare a draft deed could prevent the opposite party for proceeding, that has not been demonstrated by evidence here. On the one hand there is no evidence that in fact the failure to prepare the draft deed caused Eleven 17 to be unable to fulfil its obligations. And, on the other hand, there is no evidence that suggests that Eleven 17 took any steps at all to comply with the positive obligation it owed to enter into the deed of covenant with the Council.
  9. [78]
    It is worth noting that the deed of covenant was a simple one-page document.  Its terms were prescribed and followed an earlier deed of covenant entered into by Evangelista.  And the deed was a commitment to the Council – a third party.  This was not a case where the task of preparing the deed required Evangelista to commit to a variety of terms.  The terms of the transaction were, as I say, prescribed.
  10. [79]
    It follows that the evidence does not establish that Eleven 17 was prevented from complying with its obligation under special condition 5.

A Right to Terminate

  1. [80]
    That means that, at the time it purported to terminate, Eleven 17 was in breach of the contract. Eleven 17 did not have a right to terminate.  Its purported termination was a wrongful repudiation of the contract. Evangelista accepted that wrongful repudiation and elected to terminate on 8 August 2022.
  2. [81]
    It follows that the court should declare the Evangelista contract to have been validly terminated by Evangelista on 8 August 2022 and that the deposits have been forfeited. Equivalent declarations in favour of TWM should be made in its proceeding against Eleven 17.

Footnotes

[1] Duporth Avenue runs roughly perpendicular to Ocean Street, but at an acute angle. Useful satellite and Google street-view images are ex JP-1 and JP-2 to Mr Porter’s affidavit. 

[2] For present purposes, these reasons refer to a potential purchaser. However, the drafting of the deed is wider in the sense that it applies where there is a sale or other disposition.

[3] That is, if the Council sold the carpark, then the Council was required to obtain a covenant from the purchaser of the carpark in favour of Lunn & Smith. If Lunn & Smith sold the Evangelista Property then Lunn & Smith were obliged to obtain a covenant from the purchaser in favour of the Council.

[4] Plain, the deed of covenant, once executed, would be in the power or possession of either the Council or Eleven 17.

[5] Lunn & Smith.

[6] See the description above at paragraph [6].

[7] Aberfoyle Plantations Ltd v Cheng [1960] AC 115. The High Court accepted Aberfoyle as undoubtably correct on this point (although doubted on another point): Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at 543.

[8] (1914) 33 NZLR 1375 at 1379. This case is referred to by the authors of CCH’s Queensland Conveyancing Law and Practice at [8-165].             

[9] (1978) 138 CLR 423.

[10] (1978) 138 CLR 423: “in the absence of such a provision we fail to see how a stipulation calling for action to be taken expeditiously can of itself constitute an essential term.”

[11] Of course, whether a term of a contract is essential or not is a question of interpretation of the contract which must be determined having regard to the general nature of the contract considered as a whole and having regard to the particular term. The main question is whether the promise is of such importance that the promisee would not have entered into the contract unless assured of strict performance: see CCH’s Queensland Conveyancing Law and Practice at [8-810] based on the High Court’s decision in DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423.

[12] The Council may have required, for example, an application or a fee or a particular form.

[13] The execution was a matter of some complication for Eleven 17 – a matter known only to Eleven 17.

[14] On the day of settlement Eleven 17 sought to make the entry into the deed Evangelista’s responsibility.

[15] (1982) 149 CLR 571.

[16] See, for example, Smith v Pisani (2001) 78 SASR 548; Christensen, Dixon, Duncan & Jones, Land Contracts in Queensland, 4th ed at 414.

[17] Plumor Pty Ltd v Handley (1996) 41 NSWLR 30 where McLelland CJ in equity said that the proposition that special condition 28 imposed on the defendant an implied obligation to take all reasonable steps available to him to obtain that FIRB consent within the stipulated fourteen-day period was a proposition that is “undoubtedly correct”, quoting Butts v O'Dwyer (1952) 87 CLR 267 at 279; Christensen (etc) at 414.

[18] Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; Christensen (etc) at 414-415.

[19] Plumor Pty Ltd v Handley (1996) 41 NSWLR 30; Christensen (etc) at 414-415.

Close

Editorial Notes

  • Published Case Name:

    Evangelista Pty Limited v Eleven 17 Ocean Street Pty Ltd

  • Shortened Case Name:

    Evangelista Pty Limited v Eleven 17 Ocean Street Pty Ltd

  • MNC:

    [2023] QSC 30

  • Court:

    QSC

  • Judge(s):

    Freeburn J

  • Date:

    24 Feb 2023

  • Selected for Reporting:

    Editor's Note

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2023] QSC 3024 Feb 2023-
Notice of Appeal FiledFile Number: CA3598/2322 Mar 2023Notice of appeal filed.
Notice of Appeal FiledFile Number: CA3599/2322 Mar 2023Notice of appeal filed.

Appeal Status

Appeal Pending

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