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OF Beenleigh Pty Ltd v Khalaf Management Pty Ltd[2024] QSC 96

OF Beenleigh Pty Ltd v Khalaf Management Pty Ltd[2024] QSC 96

SUPREME COURT OF QUEENSLAND

CITATION:

OF Beenleigh Pty Ltd v Khalaf Management Pty Ltd & Anor [2024] QSC 96

PARTIES:

OF BEENLEIGH PTY LTD

ACN 668 388 341

(plaintiff)

v

KHALAF MANAGEMENT PTY LTD

ACN 609 395 557

(first defendant)

AND

MOHAMED ALY ISMAIL KHALAF

(second defendant)

FILE NO:

9915 of 2023

DIVISION:

Trial Division

PROCEEDING:

Claim

ORIGINATING COURT:

Supreme Court of Queensland at Brisbane

DELIVERED ON:

21 May 2024

DELIVERED AT:

Brisbane

HEARING DATE:

24 and 26 April 2024

JUDGE:

Applegarth J

ORDER:

  1. 1.
    Declare that the plaintiff lawfully terminated the Contract on 12 July 2023 and is entitled to the return of the Deposit.
  1. 2.
    Order the defendants pay to the plaintiff the sum of $275,000, together with interest (from a date to be fixed) pursuant to s 58 of the Civil Proceedings Act 2011 (Qld).
  1. 3.
    Declare that the plaintiff holds an equitable lien over the land for the Deposit.

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – where the defendants own land that is a potential development site – where a contract was formed between the defendants and the plaintiff in relation to the sale of the land – where security deposits that were paid under a Put and Call Option Deed to the defendants became the deemed deposit under the Contract – where the Contract contained a provision that if a proposal to locate Transport Infrastructure on the land had not been disclosed in the Contract, the plaintiff could terminate the Contract – where the plaintiff advised the defendants of a proposed resumption of part of the land for a road project that was not disclosed in the Contract – where the plaintiff purported to terminate the contract – where the plaintiff argues that the deemed deposit should be refunded – whether the deposit is only liable to be refunded if the Contract comes to an end as a result of breach by the defendants

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES – WAIVER – ELECTION – whether the plaintiff waived its right to rely upon the right to terminate the Contract or engaged in an election so that it could not rely upon the right to terminate the Contract by entering the Contract with knowledge of the proposal to locate Transport Infrastructure on the land or by taking steps under the Contract in relation to its development application

EQUITY – GENERAL PRINCIPLES – EQUITABLE CHARGES AND LIENS – where the plaintiff lodged caveats over the land – whether the plaintiff holds an equitable lien over the land not only for the deposit but also interest and costs of these proceedings

Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57, cited

Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 (2022) 406 ALR 632, cited

Chalik v Wales [2005] NSWSC 877, cited

Combe v Lord Swaythling [1947] Ch 625, cited

Commonwealth v Verwayen (1990) 170 CLR 394, cited

Davies v Littlejohn (1923) 34 CLR 174, cited

Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640, cited

Golden Mile Property Investments Pty Ltd (in liq) v Cudgegong Australia Pty Ltd (2015) 89 NSWLR 237, cited

Hewett v Court (1983) 149 CLR 639, cited

Hua Chiao Commercial Bank Ltd v Chiaphua Industries Ltd [1987] AC 99, cited

Immer (no 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26, cited

Mardorf Peach & Co Ltd v Attica Sea Carriers Corporation of Liberia [1977] AC 850, cited

Middleton v Magnay (1864) 2 Hem&M 233 [71 ER 452], cited

Mt Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104, 131, cited

Rose v Watson (1864) 10 HLC 672; 11 ER 1187, cited

State of Queensland v Morecroft [2024] QCA 11, cited

Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (2019) 100 NSWLR 432; [2019] NSWCA 135, cited

COUNSEL:

D O'Brien KC for the plaintiff

P A Hastie KC for the defendants

SOLICITORS:

Hopgood Gamin Lawyers for the plaintiff

Rose Litigation Lawyers for the defendants

  1. [1]
    The defendants (collectively Khalaf) own three lots at Beenleigh that are a potential development site.  On 11 April 2022, Khalaf entered into a Put and Call Option Deed in relation to the sale of the land with OneFin Property Pty Ltd (OneFin).
  2. [2]
    The Deed had a due diligence period of 30 days after the date of the Deed.  If by the Due Diligence Date OneFin gave notice that the due diligence condition had either been satisfied or waived, then the Call Option period of 12 months started.
  3. [3]
    An initial Security Deposit of $2000 was payable prior to the date of the Deed.  A second Security Deposit of $273,000 was payable on the date on which OneFin notified Khalaf of the satisfaction or waiver of the due diligence condition (clause 3.1).                    
  4. [4]
    The Deed provided that if the Call Option was exercised by the Call Option End Date, then a contract in the form in Schedule 1 to the Deed was deemed to be formed and take effect between Khalaf and OneFin or OneFin’s nominee.  The Security Deposit of $275,000 paid under the Deed became the deemed deposit under the Contract.
  5. [5]
    The form of contract contained a standard provision that if at the Contract Date the land was affected by a proposal to locate Transport Infrastructure on the land, and that proposal had not been disclosed in the Contract, “the Buyer may terminate this contract by notice to the Seller given on or before settlement”.
  6. [6]
    OneFin gave the required Call Option Exercise Notice and nominated the plaintiff (OF Beenleigh) on 31 May 2023.  But before doing so, and on 29 May 2023, OneFin (by its solicitors) wrote to Khalaf (by their solicitors) and advised them of a proposed resumption of part of the land for a road project, that the proposed resumption was not disclosed in the form of contract annexed to the Deed, that as a result any contract (once formed) could be terminated under clause 21.1(b) and that if the contract (once formed) was terminated under clause 21.1(b) the Security Deposit (which would become the Deposit under the contract, once formed) would be refundable.
  7. [7]
    The letter dated 31 May 2023 by which the Call Option was exercised expressly reserved all OF Beenleigh’s rights under the terms of the Contract and at law and stated that no time or other indulgence would be deemed to be a waiver of those rights.
  8. [8]
    After the exercise of the Call Option, OneFin and/or OF Beenleigh continued to liaise with external consultants and local authorities about the progress of the development application on the land and in respect of the proposed resumption.
  9. [9]
    On 23 June 2023, OF Beenleigh (by its solicitors) wrote to Khalaf (by their solicitors) and reiterated the points made in the 29 May 2023 letter about the non-disclosure in the Contract of the proposed resumption, and that if the Contract was terminated under clause 21.1(b), the deposit would be refundable under clause 3, and that it reserved its rights to terminate the Contract under clause 21.1.
  10. [10]
    On 7 July 2023, by written notice to Khalaf, OF Beenleigh advised that it was terminating the Contract with effect from 12 July 2023 (unless the parties negotiated a variation to the Contract prior to that date, which did not occur) pursuant to clause 21.1(b) and demanded the return of the Deposit pursuant to clause 3.5. A further written notice to the same effect was sent on 31 July 2023.
  11. [11]
    Khalaf refused to repay the deposit.
  12. [12]
    On 2 August 2023, OF Beenleigh caused caveats to be lodged over the land. The interest claimed was an “equitable interest in the form of a purchaser’s lien over the estate in fee simple”.
  13. [13]
    Khalaf contends that OF Beenleigh is not entitled to the return of the deposit.  It relies on points about construction of the contractual arrangements and also arguments about election or waiver.

The relief

  1. [14]
    OF Beenleigh seeks:  (a) a declaration it lawfully terminated the Contract for the purchase of the land and is entitled to the return of $275,000, being the deposit paid under the Contract; (b) an order that Khalaf pay OF Beenleigh $275,000 plus interest and costs; and (c) a declaration that OF Beenleigh holds an equitable lien over the land for that deposit, interest and the costs of these proceedings.

The issues

  1. [15]
    The parties formulated the following issues to be determined:
    1. On a proper construction of the Contract, is the deposit under the Contract only liable to be refunded if the Contract comes to an end as a result of a breach by Khalaf?
    2. By entering into the Contract with knowledge of the Department of Transport and Main Roads (DTMR’s) proposed resumption, did OF Beenleigh:
      1. (i)
        waive its right to rely upon the right to terminate the Contract under cl 21 as a result of DTMR’s proposed resumption?
      1. (ii)
        act in a way which meant that it engaged in an election so that it could thereafter not rely upon the right to terminate the Contract under cl 21 as a result of DTMR’s proposed resumption?
    3. By taking steps under the Contract and in relation to its development application after the entry into the Contract did OF Beenleigh:
      1. (i)
        waive its right to rely upon the right to terminate the Contract under cl 21 as a result of DTMR’s proposed resumption?
      1. (ii)
        act in a way which meant that it engaged in an election so that it could thereafter not rely upon the right to terminate the Contract under cl 21 as a result of DTMR’s proposed resumption?
    4. Is OF Beenleigh otherwise entitled to repayment of the deposit under the Contract?
    5. Does OF Beenleigh hold an equitable lien over the land for not only the deposit but also interest and the costs of these proceedings?

Is the Deposit only to be refunded if the Contract comes to an end as the result of a breach by Khalaf?

  1. [16]
    This issue turns on the proper construction of the Contract and, in particular, whether clauses 3.5 and 21.1 of the Contract entitled OF Beenleigh to a refund of the Deposit following termination under clause 21.1.
  2. [17]
    OF Beenleigh submits that they plainly do.  It submits that there is no dispute that the preconditions for termination under clause 21.1 (that the land was affected by a resumption proposal) are met and were activated by a notice of termination by OF Beenleigh.  Clause 3.5 expressly refers to termination under clause 21.1 as being a circumstance where the Buyer is entitled to return of the deposit paid under the Contract.
  3. [18]
    It also submits that the suggested constructions put forward by Khalaf to deny that entitlement are inconsistent with the express words of the Contract, find no support in the terms of the Contract and are uncommercial.
  4. [19]
    Khalaf submits that the text of clause 40.1 of the Contract makes it clear that the Deposit was only repayable in the event that the Contract came to an end as a result of a breach by Khalaf.  According to Khalaf, the specific provision in special condition 40.1(b) is inconsistent with, and therefore prevails over, the reference in clause 3.5 to clause 21.1. 
  5. [20]
    Khalaf relies on the contractual context that deemed the Security Deposit paid under the Deed to be the Deposit paid under the Contract.  This is said to emphasise that the Deposit was only to be returned in the event of a breach by Khalaf.  It also argues that in circumstances in which OneFin had an opportunity to satisfy itself as to the property under the due diligence clause in the Deed, it makes business sense for the deposit to be only refundable if the Contract comes to an end as a result of a breach by Khalaf.

The relevant provisions of the Deed

  1. [21]
    Clause 2 relevantly provided:

2.  Security Deposit

2.1  Payment

  1. (a)
    The Buyer must pay the Security Deposit to the Deposit Holder as follows:
  1. (1)
    the amount of $2,000.00 (Initial Security Deposit) on or prior to the date of this deed (receipt of which is acknowledged); and
  1. (2)
    the amount of $273,000.00 (Second Security Deposit) within 2 Business Days of the date on which the Buyer notifies the Seller in writing of the satisfaction or waiver of the condition in clause 3.1.

 

2.2  Entitlement to Security Deposit

The Security Deposit once paid may be released to the Seller and is non-refundable, unless this deed is terminated due to the Seller’s breach, in which case the Security Deposit (or so much of it that has been paid) must be immediately refunded to the Buyer.

2.3 Purpose of Security Deposit

  1. (a)
    The Deposit Holder holds the Security Deposit as security for the Buyer’s performance of its Obligations under this deed.
  1. (b)
    If an Option is exercised, the Security Deposit will be credited to and will form the Deposit.”
  1. [22]
    Clause 3 provided:

“3.  Due Diligence

3.1  Due Diligence Condition

This deed is subject to the Buyer being satisfied, in its absolute discretion, in respect of its due diligence investigation of the Property, its proposed purchase and development of the Property, and any other matter or thing considered relevant by the Buyer for enquiry in connection with the Property (Due Diligence) by the Due Diligence Date.

3.2  Seller's Assistance

For the purpose of the Due Diligence, the Seller:

  1. (a)
    must allow the Buyer and the Buyer’s Associates to enter on any part of the Property during the Due Diligence Period for the purpose of carrying out its Due Diligence enquiries and investigations;
  1. (b)
    authorises the Buyer and the Buyer's Associates to inspect all records relating to the Property which are held by any Government Body; and
  1. (c)
    must, on receipt of a written request from the Buyer, provide to the Buyer promptly:
  1. (1)
    copies of all plans, drawings, reports, documents and other information relating to the Property which the Seller has in its possession or control; and
  1. (2)
    written authorities addressed to the Seller’s consultants to make available to the Buyer any plans, drawings, reports, documents and other information relating to the Property which they have in their possession or control.

3.3 Buyer’s rights

Despite any other provision of this deed:

  1. (a)
    the Buyer is not obliged to undertake Due Diligence in relation to the Property;
  1. (b)
    if the Buyer does undertake Due Diligence in relation to the Property, the Buyer:
  1. (1)
    does so at its own Cost and risk;
  1. (2)
    is not obliged to undertake Due Diligence to any particular standard; and
  1. (3)
    may discontinue its Due Diligence at any time for any reason; and
  1. (c)
    the condition in clause 3.1 is for the benefit of the Buyer only and may be waived at any time by the Buyer.

3.4  Buyer’s notice

The Buyer must give written notice to the Seller that:

  1. (a)
    the condition in clause 3.1 has not been satisfied and the Buyer terminates this deed; or
  1. (b)
    the condition in clause 3.1 has been either satisfied or waived by the Buyer.

3.5 Seller may terminate

  1. (a)
    The Seller may terminate this deed by written notice to the Buyer if notice is not given under clause 3.4 by 5pm on the Due Diligence Date.
  1. (b)
    The Seller’s right under subclause 3.5(a) is subject to the Buyer’s continuing right to give written notice to the Seller of satisfaction, termination or waiver under clause 3.4.”
  1. [23]
    Clause 4 provided that the Buyer could make a development application over the land and the Seller was obliged to assist.
  2. [24]
    Clause 5 provided:

5. Call Option

5.1 Grant and Call Option Fee

In consideration of the Call Option Fee paid by the Buyer when the Buyer signs this deed (the receipt of which payment the Seller acknowledges), the Seller grants to the Buyer and the Buyer's Nominee an option to purchase the Property for the Purchase Price and on the provisions of the Contract.

5.2 Irrevocable offer

The Call Option is an irrevocable offer by the Seller to sell the Property to the Buyer or the Buyer’s Nominee under the Contract which may be accepted in accordance with clause 5.3. The Option is binding on the Seller and, in the event of the death of any person comprising the Seller, then his or her estate.

5.3 Exercise

The Buyer may exercise the Call Option by delivering the following to the Seller at the Seller’s Address during the Call Option Exercise Period:

  1. (a)
    a completed Call Option Exercise Notice signed by the Buyer; and
  1. (b)
    two completed copies of the Contract signed by the Buyer or the Buyer’s Nominee.

5.4 Effect of Exercise

  1. (a)
    If the Call Option is exercised under clause 5.3:
  1. (1)
    the Contract is deemed to be formed and take effect between the Seller and the Buyer or the Buyer’s Nominee on the Option Exercise Date and the provisions of the Contract will, for all purposes, be treated as applying from the Option Exercise Date even if the Seller does not sign the Contract and give it to the Buyer or the Buyer’s Nominee as required under subclause 5.4(a)(3);
  1. (2)
    the date of the Contract is the Option Exercise Date; and
  1. (3)
    the Seller must give the Buyer or the Buyer’s Nominee (as the case may require) one copy of the Contract signed by the Seller within five Business Days after the Option Exercise Date.

…”

  1. [25]
    Clause 6 relevantly states:

6. Buyer’s Nominee

6.1  Nomination

  1. (a)
    Subject to clause 6.2, the Buyer may nominate a buyer (Buyer’s Nominee) for the purposes of the Contract that will be formed on the exercise of the Call Option.

6.2 Notice of nomination

If the Buyer wishes to exercise the right of nomination under clause 6.1, it may only do so by giving notice of the nomination in the Call Option Exercise Notice.

…”

  1. [26]
    Clause 7 provided for a Put Option in favour of the Seller on similar terms to clause 5.  The Put Option Start Date was the date that immediately followed the Call Option End Date.  The Put Option End Date was seven days later.  In other words, the Put Option was able to be exercised for a period of 7 days from the end of the 12 months that was the Call Option period.
  2. [27]
    Clause 9 provided:

9. Seller’s warranties and obligations

9.3  Ongoing disclosure

The Seller must keep the Buyer informed in relation to:

  1. (a)
    any notice or order received in respect of the Property; and
  1. (b)
    any other matter of which the Seller is aware,

which the Seller reasonably believes may adversely impact on the Buyer’s rights and interests under this deed or the Contract, but only to the extent that the Seller considers (acting reasonably) that such matters would not already be known to the Buyer.

…”

  1. [28]
    Clause 12 contained miscellaneous provisions including the following:

“12.3 Termination

 If:

  1. (a)
    a party fails to comply with or perform any of its Obligations under this deed; or
  1. (b)
    a party suffers or is affected by an Insolvency Event,

the non-defaulting party may, without affecting that party’s other rights, terminate this deed by notice in writing to the other party, and the Security Deposit will be dealt with in accordance with clause 2.”

Events following the Deed

  1. [29]
    As noted, the Deed was entered on 11 April 2022.  OneFin paid the Initial Security Deposit, being $2,000, to the “Deposit Holder” under the Deed, namely Real Commercial Qld.
  2. [30]
    On or about 25 April 2022, OneFin by its solicitors authorised by email the release of the Initial Security Deposit to Khalaf Management and Khalaf, and the Deposit Holder released the Initial Security Deposit to Khalaf.
  3. [31]
    There was a short extension of the due diligence period.
  4. [32]
    On 31 May 2022, OneFin provided written notice to Khalaf that the due diligence condition in clause 3.1 of the Deed was satisfied. As a consequence, the Second Security Deposit became payable and the Call Option End Date under the Deed became 31 May 2023.
  5. [33]
    In or about early June 2022, OneFin paid the Second Security Deposit, being $273,000, under the Deed.
  6. [34]
    On or about 1 June 2022, OneFin authorised the Deposit Holder to release the Second Security Deposit to Khalaf, and the Deposit Holder released the Second Security Deposit to Khalaf.
  7. [35]
    As the Deed contemplated, OneFin lodged a Development Application and had dealings with its Town Planner who engaged with the relevant authorities.  One issue to emerge was a potential road widening of a state-controlled road, City Road.
  8. [36]
    On 3 May 2023, Mr Codianni on behalf of Khalaf sent an email to Mr Weier, on behalf of OneFin, attaching two letters from DTMR both dated 24 April 2023.  The 24 April Letters advised that DTMR intended to protect land required for the Beenleigh Connection Road project and that the project would affect the land.  The parties refer to this as “the Proposed Resumption”, and I shall do the same.
  9. [37]
    On 23 May 2023, in the course of a development application over the land, OneFin received a referral agency response from the State Assessment and Referral Agency (SARA) which included further details about the Proposed Resumption as follows:

“Current planning for Beenleigh Connection Road is to provide safety and road improvements to networks supporting the Pacific Motorway and the principal centre of Beenleigh. This planning is currently focused on the development and finalisation of the Business Case and necessary consultation with landowners. The Department of Transport and Main Roads notes a formal written advice has been given to the landowner, subject of this application.

Land requirements associated with the planned upgrade of Beenleigh Connection Road planning is depicted on the enclosed TP Sketches. The decision to proceed with the next stage of the Beenleigh Connection Road, and the timing of project, will then be at the discretion of the Queensland and the Australian Governments.”

  1. [38]
    The sketches attached to the response showed that 580m2 of the land was required on the land’s frontage to City Road and Logan Road.
  2. [39]
    If the Proposed Resumption was to be on such a scale, it would be a significant loss of the land over which OneFin was seeking Development Approval and have a significant effect on its plans to build a child care centre and the project’s viability.
  3. [40]
    On 29 May 2023, knowing those matters, and prior to exercising the Call Option, OneFin’s solicitors wrote to Khalaf’s solicitors.  They advised them of the Proposed Resumption, that the Proposed Resumption was not disclosed in the form of contract annexed to the Deed, that as a result any contract (once formed) could be terminated under clause 21.1(b) and that if the contract (once formed) was terminated under clause 21.1(b) the Security Deposit (which would become the Deposit under the contract, once formed) would be refundable.
  4. [41]
    OF Beenleigh was incorporated on 31 May 2023.  It is a wholly owned entity of OneFin and has the same directors.
  5. [42]
    On 31 May 2023 OneFin exercised the Call Option by delivering the required notice and nominating OF Beenleigh as its nominee.
  6. [43]
    The letter dated 31 May 2023 under which the Call Option was exercised expressly reserved all OF Beenleigh’s rights under the terms of the Contract and at law and stated that no time or other indulgence would be deemed to be a waiver of those rights.
  7. [44]
    Because the Call Option was exercised, a contract between Khalaf and OF Beenleigh was deemed to have been formed and to take effect on the Option Exercise Date (31 May 2013).  A written contract was signed and sent by OF Beenleigh.  It was subsequently executed by the Khalaf parties.

Relevant terms of the Contract

  1. [45]
    The Contract adopted the standard form of contract approved by the QLS and the REIQ for the sale of Commercial Land and Buildings, supplemented by Special Conditions in Annexure A.
  2. [46]
    Under the Contract, the Purchase Price was $2,750,000 and the Deposit was $275,000. 
  3. [47]
    The Reference Schedule on the first few pages of the standard form included “Item O Deposit”.  It stated that the deposit was “$275,000” and included the standard words “Initial deposit payable on the day the Buyer signed this contract unless another time is specified below”.  Inserted below in Item O was “See clause 40 in Annexure A Special Conditions”.
  4. [48]
    Clause 3 of the Contract stated:

3.  DEPOSIT

3.5 If this Contract is terminated pursuant to the provisions of clauses 7.6, 9.3(a), 19, 20.1, 21.1, 31.2(a), 32.2, 32.3(b) or 35.4, the Deposit and other moneys paid under this Contract shall be refunded to the Buyer by the Seller or the Deposit Holder as the case may be but without interest, costs or damages and the same shall be accepted by the Buyer in full and final satisfaction of all claims.”

  1. [49]
    Clause 21 provided:

21. PROPERTY ADVERSELY AFFECTED

21.1 If at the Contract Date: 

  1. (a)
    the Present Use is not lawful under the relevant town planning scheme;
  1. (b)
    the Land is affected by a proposal of any competent authority to alter the dimensions of any Transport Infrastructure or locate Transport Infrastructure on the Land;
  1. (c)
    access or any service to the Land passes unlawfully through other land;
  1. (d)
    any competent authority has issued a current notice to treat, or notice of intention to resume, regarding any part of the Land;
  1. (e)
    there is an outstanding condition of a development approval attaching to the Land under section 73 of the Planning Act 2016 or section 96 of the Economic Development Queensland Act 2012 which, if complied with, would constitute a material mistake or error as to the Seller’s title to the Property;
  1. (f)
    the Property is affected by the Queensland Heritage Act 1992 or is included in the World Heritage List;
  1. (g)
    the Property is declared acquisition land under the Queensland Reconstruction Authority Act 2011;
  1. (h)
    there is a charge against the Land under s 104 of the Foreign Acquisitions and Takeovers Act 1975,

and that has not been disclosed in this contract, the Buyer may terminate this contract by notice to the Seller given on or before settlement.” (emphasis added)

  1. [50]
    Special Condition 40 of the Contract provided:

“40.1 Deposit

  1. (a)
    The parties acknowledge and agree that pursuant to the terms of the Option Deed, the Deposit has been fully paid as required by this contract, on or before the Contract Date.
  1. (b)
    If this contract comes to an end as a result of the Seller’s breach, then the Deposit (or so much of it that has been paid) must be promptly refunded to the Buyer.”

Matters not in dispute

  1. [51]
    There is no dispute that:
    1. as at the date of the Contract, 31 May 2023, the land was, and is, “affected by a proposal of a competent authority to alter the dimensions of Transport Infrastructure or locate Transport Infrastructure” (refer clause 21.1(b)) on the land, namely the Proposed Resumption; and
    2. the Proposed Resumption was not disclosed in the Contract.
  2. [52]
    Therefore, unless Khalaf prevails in its argument that the entitlement to terminate was excluded as a matter of construction of the Contract, or because of its argument about election or waiver, OF Beenleigh was entitled to terminate the Contract prior to settlement under clause 21.1(b) and have the Deposit paid to it on such termination pursuant to clause 3.5 of the Contract.

The issue of the proper construction of the Contract

  1. [53]
    The first issue is whether, on a proper construction of the Contract, the Deposit under the Contract is only liable to be refunded if the Contract comes to an end as a result of a breach by Khalaf.  That issue is decided by reference to the text of the Contract, viewed in its commercial context. 
  2. [54]
    The principles governing contractual interpretation are not in dispute.  The dispute concerns their application.  The principles may be shortly stated by adopting parts of the parties’ submissions.
  3. [55]
    The proper construction of a contract requires consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption that the parties intended to produce a commercial result.  A commercial contract is to be construed so as to avoid it making commercial nonsense or working commercial inconvenience.[1]
  4. [56]
    A commercial contract should be construed by reference to the surrounding circumstances known to the parties and the commercial purpose or objects to be secured by the contract in order to avoid a result that could not have been intended.[2]
  5. [57]
    In essence, a contractual provision is determined objectively by reference to its text, context, and purpose.[3]
  6. [58]
    The parties’ submissions on the point of construction, which I have briefly previewed, may be usefully addressed by reference to contentions about text, context and purpose before arriving at a preferred construction.
  7. [59]
    Before turning to those topics, it is important to emphasise that the point of construction turns on the availability of clause 3.5 in conjunction with clause 21.1(b) in respect of a matter that was not disclosed in the Contract.
  8. [60]
    The issue of what OneFin and then OF Beenleigh knew about the Proposed Resumption will arise in the context of issues about election and waiver if OF Beenleigh succeeds on the issue of construction, namely that it was entitled to terminate under clause 21.1(b) and to a refund of the Deposit under clause 3.5.
  9. [61]
    Also, while the Deed is relevant to the proper construction of the Contract because it provides the context in which the Contract came into existence, no issue arises about a right under the Deed to return the “security deposit”.  The “security deposit” under the Deed effectively disappeared once the Option was exercised on 31 May 2023.  The moneys paid as a security deposit under the Deed became a deemed deposit under the Contract, removing the need to pay a fresh deposit under the Contract.
  10. [62]
    The solicitors for OneFin assented on 29 May 2023 and reiterated in subsequent correspondence, that non-disclosure in the Contract of the Proposed Resumption gave the Buyer a right to terminate the Contract under clause 21.1 and, if it exercised that right, an entitlement to a refund of the Deposit under clause 3.5 existed.
  11. [63]
    The issue is whether that was a correct interpretation of the Contract.

The text of the Contract

  1. [64]
    Khalaf’s submissions about the text of the Contract place particular reliance on clause 40.  It argues that, properly construed, clause 40 means that the parties intended that clause 3.5, which provides for the Deposit to be refunded in certain circumstances, did not apply.  It interprets clause 40.1(b) not as reading, according to its terms, that the Deposit would be refunded if the Contract ended “as a result of the Seller’s breach”, but that it would only be refunded in that event.  On this interpretation, it would not be refunded in accordance with clause 3.5 in the event of a non-disclosure that gave a right to terminate under clause 21.1.
  2. [65]
    According to Khalaf, clause 40.1(b) is inconsistent with the earlier standard conditions about when the Deposit must be refunded, and must be taken to have amended them.  Otherwise, it is said, clause 40 would have no work to do.
  3. [66]
    Khalaf invokes the accepted approach that where there is an inconsistency between standard terms and conditions specifically inserted into a contract, the inserted conditions will prevail. 
  4. [67]
    These textual arguments are not persuasive.
  5. [68]
    This is not a case of inconsistency.  Each clause concerns a different matter.  Clause 3.5, in conjunction with clause 21.1, concerns the refund of the Deposit in the event of non-disclosure.  Clause 40.1(b) concerns the Seller’s breach.  There is no inconsistency between providing for a refund in the event of non-disclosure and also providing for a refund in the event of the Seller’s breach.  Each provision has separate work to do. 
  6. [69]
    Next, if the parties had intended clause 40.1(b) to be the sole basis for a refund of the Deposit, the parties might reasonably have been expected to have said so in terms that excluded the Buyer’s right to a refund under clause 3.5.
  7. [70]
    Clause 40 addresses two matters.  Clause 40.1(a) was necessary because, otherwise, the standard terms required the Buyer to pay a deposit on the day it signed the Contract, unless another date was specified in Item O.  But the deemed Deposit was paid.  This is why the entry in Item O directed attention to special condition 40 in which the parties agreed that under the Option Deed, the Deposit had been fully paid, as required by the Contract, on or before the Contract Date. 
  8. [71]
    Additionally, clause 40.1(b) stated that the Deposit was to be refunded if the Contract “comes to an end as a result of the Seller’s breach”.  Khalaf notes that this simply confirms what the position would be under the general law if the Seller failed to deliver title, resulting in a total failure of consideration, whereupon the Buyer would be entitled to recover its Deposit as moneys had and received.
  9. [72]
    This, however, does not mean that clause 40.1(b) has no work to do.  First, the clause is not confined to a breach in delivering title.  It applied to any breach by the Seller that resulted in the Contract coming to an end.  Second, the Buyer might seek the certainty of a clause like condition 40.1(b) to avoid arguments about whether there had been total failure of consideration, such as an argument that the deemed Deposit was something for which the Buyer obtained benefits in terms of pursuing a development application over a prolonged period.  Third, even if clause 40.1(b) might be thought to simply mirror the position under the general law, a party might wish to have that position stated in black and white.  After all, many clauses in contracts, including Standard Land Contracts, contain clauses that reflect the position under the general law. 
  10. [73]
    Khalaf also developed an argument that a number of the clauses that are referred to in clause 3.5 did not apply, had little practical content, were irrelevant, or were unlikely to have any practical relevance.  This does not, however, meet the point that clause 21.1, which is referred to in clause 3.5, does have a real and very practical relevance.  A Buyer would not wish to lightly forego its entitlement to terminate the Contract and obtain a refund of its Deposit in the event of the nondisclosure in the Contract of a matter of substance.  The parties would reasonably be taken to have not excluded the Buyer’s right to the refund of its deposit and to have conferred a corresponding financial advantage on the Seller, in the absence of words in the Contract that excluded the operation of clause 3.5.  For example, clause 40 might simply have stated that clause 3.5 was excluded.  The parties might have specifically provided that clause 3.5 was to be read as if it deleted reference to clause 21.1 or other provisions.  The parties might have stated in clause 40.1(b) that a breach by the Seller was the only circumstance in which the Deposit was refundable.
  11. [74]
    In summary, the text of the Contract expressly provides for a refund of the Deposit if the Contract is terminated pursuant to clause 21.1.  Clause 40.1(b) is not inconsistent with a refund in the event of non-disclosure of one of the matters in clause 21.1.  Clause 40.1(b) is about the specific topic of the Seller’s breach, not the fact of nondisclosure of a matter in the Contract.
  12. [75]
    Clause 39.2(d) stated that the Standard Terms “do not apply to this contract to the extent that they are excluded or amended by these special conditions”.  But clause 40.1(b), in addressing a refund in the event of the Seller’s breach, did not amend or exclude the right to a refund in the different circumstance of a non-disclosure that was not a breach and which gave, upon termination of the Contract, a right to a refund of the Deposit.

Context

  1. [76]
    The fact that the Deed provided for the “Security Deposit” to be refunded only in the event it was terminated due to the Seller’s breach does not shed much light on the proper construction of the Contract.  The Contract conferred different rights and imposed different obligations.  It was a different charter, including the provisions I have discussed about termination for matters that were not disclosed in the Contract (a copy of which was annexed to the Deed).
  2. [77]
    Viewing the Deed and the Contract together, OneFin might be content to not negotiate for additional rights to a refund under the Deed, knowing that the Contract provided the mechanism for a refund in the event of the circumstances stated in clause 3.5 of the Contract. 

Purpose

  1. [78]
    Khalaf contends that its construction of the Deed and the Contract is consistent with the commercial purpose of the Contract. 
  2. [79]
    First, it notes that the Deed allowed for a period of due diligence and for OneFin to make a development application.  It submits that the parties must be taken to have regarded issues relevant to boundaries, the Environmental Protection Act, statutory consents, the requirements of authorities and other matters “as likely to be sorted out within the time frame allowed for due diligence or the development application”.  It says that OneFin had an opportunity to satisfy itself as to the property, its proposed purchase and the development of the property under the due diligence clause.
  3. [80]
    I do not consider that this is a sound basis to construe the Contract in the way Khalaf would wish.  The due diligence period was only 30 days.  Matters not disclosed in the Contract might not be discovered by OneFin in that period.  More significantly, such a matter may arise later and have a significant effect upon the proposed development and trigger a right to terminate under clause 21.1 of the Contract, or one of the other clauses picked up by clause 3.5.
  4. [81]
    It is not suggested in the evidence that any development application lodged by OneFin would be lodged, progressed, the subject of meetings and communications with relevant authorities and well-advanced, let alone resolved, in the 30-day due diligence period.
  5. [82]
    Only an initial security deposit of $2000 was payable upon entry into the Deed.  The second security deposit of $273,000 was only payable within two business days of the date on which the Buyer notified the Seller in writing of the satisfaction or waiver of the due diligence condition (clause 3.1).
  6. [83]
    The due diligence provisions gave the Buyer a short period to investigate a proposed purchase and development of the land.  If its preliminary investigations inclined it to proceed further, it then was required to pay $273,000 and the 12-month Call Option Period began.  This was the period during which the Buyer’s development application might progress and the Buyer might ascertain or confirm that certain matters falling within clause 21.1 had not been disclosed in the draft Contract.  During this period the Buyer would have an opportunity to consider those matters, their effect on its development application, and the commercial viability and wisdom of purchasing the land pursuant to the Contract in those circumstances.
  7. [84]
    An objective bystander and a reasonable businessperson would interpret the Contract as providing a basis for the Buyer to terminate under a provision like clause 21.1, and to obtain a refund of its deposit in the event an adverse matter emerged well into the Call Option Period.  The matter might be one that adversely and seriously affected the viability or profitability of the development project.  In that regard, clause 21.1 gave the Buyer a discretion to terminate, depending on its assessment of the matter that had not been disclosed in the Contract.
  8. [85]
    The second matter relied upon by Khalaf in its submissions about commercial purpose is that the right under the Deed conferred upon OneFin was purchased for the price of $1.  One might add that Khalaf also purchased its rights under the Put Option for the same price and, had the Call Option not been exercised, it might have exercised the Put Option so as to bring a contract that it perceived to be of commercial advantage to it into existence.
  9. [86]
    In any case, Khalaf’s argument is that, having received only $1 for executing the Deed, it makes business sense for it to be able to keep the $275,000 deposit, unless the Contract comes to an end as a result of its breach.
  10. [87]
    A competing view of the parties’ bargain is that OneFin (or its nominee) would only complete the Contract if it could make its planned development work commercially in the light of matters covered by clause 21.1 that were not disclosed in the Contract.  In that event, and having either obtained development approval or taking the chance that it would, it promised to pay Khalaf $2,750,000 for land that would be worth far less than that in other circumstances.  Khalaf therefore had a significant financial benefit in allowing OneFin to progress its plans, seek development approval and attend to other matters.  The parties negotiated the terms of the Deed and the draft Contract on the understanding that there would be costs and opportunities for each of them in allowing OneFin to incur costs during that 12-month period, and before it decided whether to exercise the Call Option and thereafter complete or terminate the Contract.
  11. [88]
    One should not assume that the land was worth $2,750,000 at the time the Deed was entered into.  The Contract Price was a figure negotiated by the parties, taking into account costs and opportunities, together with contingencies.  Those costs included Khalaf not being in a position to commit to sell to another party lest OneFin, or its nominee, proceed to complete the Contract.  OneFin bore the cost of not having use of the $275,000, the cost of pursuing town planning and other investigations, and progressing a development application.  It took the risk that the development might not prove viable and that its costs would not be recovered.  The parties should be assumed to have taken into account the various costs, opportunities, risks and rewards that the transaction presented.
  12. [89]
    Therefore, one should not assume that the parties agreed that Khalaf should keep the $275,000 on account of any inconvenience that it encountered in not knowing whether a contract would proceed to completion.
  13. [90]
    The Deposit under the Contract, viewed from a business-like perspective, was like any other deposit that was paid under a contract for the sale of land.  If the Buyer was entitled to terminate the Contract because of the non-disclosure of a matter or for any other valid reason, the Deposit was refundable.  This was the commercial context of this transaction.

Conclusion on the issue of construction

  1. [91]
    I have had regard to the text, context and purpose of the Contract.  Taken together, those matters do not support the construction for which Khalaf contends. 
  2. [92]
    I conclude that, on a proper construction of the Contract, the Deposit under the Contract was not only liable to be refunded if the Contract came to an end as a result of a breach by Khalaf.  The Deposit was liable to be refunded pursuant to clause 3.5 if the Contract came to an end because the Buyer exercised its right to terminate under clause 21.1.   

Election and waiver

  1. [93]
    Election and waiver are different doctrines.  Khalaf defends OF Beenleigh’s claim for the deposit to be refunded on both grounds.  Certain acts are said by Khalaf to constitute either:
    1. an election of the right to terminate the Contract under clause 21.1 as a result of the Proposed Resumption not being disclosed in the Contract; or
    2. a waiver of that right.
  2. [94]
    First, Khalaf relies on OF Beenleigh’s entry into the Contract with knowledge of the Proposed Resumption.  Second, there is OF Beenleigh’s conduct in continuing to explore its development application and the project’s viability in June 2023.  Third, there is the lodgement of a caveat on 23 June 2023 based upon its rights as a purchaser.
  3. [95]
    These acts are said to preclude OF Beenleigh from terminating the Contract under clause 21 and claiming a refund of the deposit.

The defence of election

  1. [96]
    Both parties cite the authoritative decision of the High Court in Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788,[4] in which Kiefel CJ, Edelman, Steward and Gleeson JJ observed:

Election by affirmation

38 In the law of contract, a party can act in a manner that affirms the existence of a contractual right or rights, by exercising what is commonly described as an election between inconsistent sets of rights.  The usual reference to the sets of rights includes all claim rights, privileges, powers, and immunities.

39 Although many of the older cases of election by affirmation (including in this Court) described the principle as one of ‘waiver’, and although it might be possible to express modern cases involving affirmation of a contract in terms of irrevocable waiver of a power to terminate the contract, the language of ‘waiver’ can distract in this area. As three members of this Court observed in Agricultural and Rural Finance Pty Ltd v Gardiner, the ‘[c]ircumstances in which there is an election between inconsistent rights are radically different from some others in which there is said to be a waiver of rights’. In the law of contract, the better description of this doctrine is election by affirmation.” (footnotes omitted)

  1. [97]
    Khalaf also cites Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW), in which Deane, Toohey, Gaudron and McHugh JJ stated that the true nature of an election is where the “party electing shall be ‘confronted’ with two mutually exclusive courses of action between which he must, in fairness to the other party, make his choice”.[5]  In Immer, Brennan J also stated:[6]

“An act amounting to an election must be unequivocal … The right to terminate is not necessarily lost by … any act consistent with the continuance of the contract. If the act is also consistent with the reservation of a right to terminate in certain events, the right to terminate is not lost by the doing of the act.”

  1. [98]
    Although the doctrine of election may arise in the context of non-contractual rights, in this case it concerns contractual rights.  Therefore, Khalaf must establish that OF Beenleigh made an election between inconsistent rights under the Contract.

OF Beenleigh’s response to Khalaf’s defences of election and waiver

Election

  1. [99]
    OF Beenleigh submits that Khalaf fails to identify the “inconsistent rights” that are said to give rise to an election.
  2. [100]
    Its first point is that while the exercise of the Call Option in the Put and Call Option Deed was how the Contract came about, the Option Deed was entered into by OneFin, whereas the Contract was entered into by OF Beenleigh.  OneFin had one set of rights under the Option Deed.  OF Beenleigh had another set of rights under the Contract.  OF Beenleigh submits that there can be no inconsistency of contractual rights giving rise to an election where there are two different contracts between different parties. 
  3. [101]
    The second, and more fundamental point, is that there can be no inconsistent rights because at the time the Option was exercised under the Deed there were no rights in existence under the Contract.  The rights under the Contract only came into existence once the option rights under the Deed had been exercised.
  4. [102]
    Next, OF Beenleigh submits that, in any event, there is no inconsistency between the Deed’s terms and the exercise of the option with the knowledge that a resumption affected the land, and then terminating under clause 21.1 of the Contract.  By exercising the option in the Option Deed, a new set of rights came into existence by way of the Contract.  Those rights included the right under clause 21.1 to terminate the Contract if a resumption affecting the land was not disclosed in the Contract.  The exercise of that right is not inconsistent with the exercise of any contractual rights under the Option Deed to cause the Contract to be entered into.
  5. [103]
    Finally, the right to terminate under clause 21.1 was exercisable at any time prior to settlement.  OF Beenleigh submits there was nothing inconsistent with that right or any election between inconsistent rights by taking steps under the Contract by way of progressing the development application, inquiring as to the Proposed Resumption, and considering during June 2023 whether the commercial position was such that it should exercise its right to terminate under clause 21.1:  a right which it had expressly reserved.

Waiver

  1. [104]
    In the different legal context of waiver, OF Beenleigh relies upon similar arguments. 
  2. [105]
    Waiver is “an intentional act done with knowledge whereby a person abandons a right by acting in a manner inconsistent with that right”.[7]  It amounts to a unilateral release or abandonment of a right that is operative even in the absence of any reliance by the other party.  Waiver must be clear and unequivocal.
  3. [106]
    OF Beenleigh submits that it cannot be said that there was an unequivocal abandoning of a right by OF Beenleigh by acting in a manner inconsistent with that right.  On the contrary, from the moment the right of OF Beenleigh to terminate under clause 21.1 came into existence on the creation of the Contract, indeed even before that moment, OF Beenleigh made it clear that it was not giving up its right to terminate the Contract and no act that it engaged in after the entry into the Contract amounted to action that was inconsistent with that right or amounted to an abandonment of that right.
  4. [107]
    It submits that far from there being an unequivocal act of waiver on its part, at all times it preserved, and acted consistently with preserving, its right to terminate under clause 21.1 of the Contract.
  5. [108]
    In the alternative, it submits that a waiver of a right is rarely irrevocable and, even if an act of waiver had been made out, the waiver was revoked when it gave notice on 23 June 2023 asserting its right to terminate under clause 21.1.

OF Beenleigh’s knowledge of the Proposed Resumption

  1. [109]
    There is no dispute that from its incorporation on 31 May 2023, OF Beenleigh knew of the Proposed Resumption.  This arises because OneFin and OF Beenleigh had the same directors, Mr Griffin and Mr Jones, and the parties agree that knowledge of OneFin’s Acquisition Manager, Mr Weier, is taken to be the knowledge of both OneFin and of OF Beenleigh.
  2. [110]
    Because OF Beenleigh knew of the Proposed Resumption from the time of its incorporation and prior to its entry into the Contract, it is unnecessary to set out in great detail the state of Mr Weier’s knowledge prior to 31 May 2023.  Also, because it was not pleaded as an issue, it is unnecessary to consider what OneFin may have known about the Proposed Resumption before it entered into the Option Deed.  That is a non-issue.  I should mention, however, because it is raised in a submission, that the inclusion of a due diligence condition in the Option Deed and a specific clause in the Deed dealing with resumptions does not prove that OneFin was aware of the Proposed Resumption when it entered into the Option Deed.  The clause dealing with resumptions was quite different to clause 21.1 of the Contract.  Clause 9 of the Option Deed prohibited Khalaf from taking any action during the term of the Deed that would result in a resumption.  It also made provision if there was a resumption during the term of the Deed.  If “the Seller and the Buyer agreed to that matter occurring”, then they would promptly enter into a new deed as a replacement to take account of the impact of the Proposed Resumption.
  3. [111]
    Turning to the state of OF Beenleigh’s knowledge prior to its entry into the Contract, Mr Weier’s evidence and the documentary exhibits show what he knew about the Proposed Resumption.  The possibility of an upgrade of City Road was a subject that OneFin’s town planner, Mr Nicholls, raised with Mr Weier on 1 July 2022 (exhibit 7).  The matter was touched upon at a pre-lodgement meeting with representatives of the Logan City Council on 2 August 2022.  On 31 January 2023 Mr Nicholls informed Mr Weier of the fact that the State Assessment and Referral Agency (SARA) had issued a non-statutory “road requirement plan” for OneFin’s information, and advised that DTMR would like to meet with OneFin to discuss the proposed road-widening on a “without prejudice” basis (exhibit 4).
  4. [112]
    On 3 May 2023 Mr Weier received letters and plans that DTMR had sent to Khalaf about the upgrade of City Road and Logan Street.  Mr Weier informed Mr Griffin and others of this development on the same day, noting the need to ascertain how detrimental the resumption would be.
  5. [113]
    On 23 May 2023, in the course of a development application over the land, OneFin received a referral agency response from SARA which included further details about the Proposed Resumption.  It showed that 580 square metres of the land was required on the land’s frontage to the relevant roads.

Reservation of rights when entering the Contract and investigating the implications of the Proposed Resumption

  1. [114]
    As noted, on 31 May 2023 the Call Option was exercised, OF Beenleigh was nominated as the Buyer and, as a result, the Contract came into existence.  The letter dated 31 May 2023 under which the Call option was exercised expressly reserved all Beenleigh’s rights under the terms of the Contract and at law and stated that no time or other indulgence would be deemed to be a waiver of those rights.
  2. [115]
    OF Beenleigh executed a copy of the Contract and on 12 June and 23 June 2023 it requested Khalaf to return signed copies of the Contract.  These requests are unremarkable because it was the Contract that was the only agreement to which OF Beenleigh was a party, and it was the Contract that conferred it with a right to terminate under clause 21.1.  Its acts in executing the Contract and requesting Khalaf to sign it are consistent with a reservation of rights to terminate.  These were the rights that were expressly reserved on 31 May 2023. 
  3. [116]
    In June 2023 representatives of OF Beenleigh and OneFin continued to liaise with external consultants, and Mr Nicholls in particular, and with the authorities in relation to the progress of the development application and about the Proposed Resumption.  On 16 June 2023, Mr Nicholls communicated with Mr Weier and Mr Griffin about whether they should “stop the clock” running on the development application which would result in draft conditions being issued and an opportunity to review them and negotiate matters with council.  This occurred.
  4. [117]
    As previously noted, on 23 June 2023, OF Beenleigh (by its solicitors) wrote to Khalaf (by their solicitors) and reiterated the points made in the 29 May 2023 letter about the non-disclosure in the Contract of the proposed resumption, and that if the Contract was terminated under clause 21.1(b), the deposit would be refundable under clause 3, and that it reserved its rights to terminate the Contract under clause 21.1.
  5. [118]
    As noted on 7 July 2023, OF Beenleigh advised Khalaf that it was terminating the Contract with effect from 12 July 2023.  A further written notice to the same effect was sent on 31 July 2023.

By entering into the Contract did OF Beenleigh act in a way that was inconsistent with the right to terminate under clause 21 of the Contract?

  1. [119]
    The answer to this question is self-evident.  Until it entered into the Contract, OF Beenleigh had no rights under the Contract.  It only acquired the right to terminate under clause 21 and other rights under the Contract by entering into it.
  2. [120]
    OF Beenleigh is correct that there was not an election between inconsistent rights because at the time the Option was exercised there were no rights in existence under the Contract. 
  3. [121]
    The fact that OF Beenleigh knew of the Proposed Resumption when it entered into the Contract is not to the point.  In entering into the Contract, it was not electing between inconsistent rights.  The rights under the Contract only came into existence after that point.  Thereafter, OF Beenleigh had a right under clause 21.1 to terminate because the Proposed Resumption was not disclosed in the Contract.
  4. [122]
    The relevant inquiry is into OF Beenleigh’s rights under the Contract, not OneFin’s rights under the Option Deed.  In any event, OneFin’s exercise of the Call Option was not inconsistent with the exercise of any contractual rights that OF Beenleigh obtained when it entered into the Contract.  Even disregarding the fact that one agreement was entered into by OneFin and another agreement was entered into by OF Beenleigh, OneFin’s exercise of the Call Option so as to bring a contract into existence between OF Beenleigh and Khalaf was the means by which its nominee, OF Beenleigh, was to acquire rights under the Contract, including the right to terminate it pursuant to clause 21.1.
  5. [123]
    Therefore, I conclude that by entering into the Contract, knowing of the Proposed Resumption, OF Beenleigh did not make an election between inconsistent rights under the Contract.  It did not elect to not rely on a right to terminate under clause 21 of the Contract.

By taking steps under the Contract in relation to the development application, did OF Beenleigh make an election to not rely on the right to terminate under clause 21?

  1. [124]
    Having reserved all of its rights under the Contract on 31 May 2023, including the right to terminate under clause 21.1 because of the Proposed Resumption, OF Beenleigh, with the assistance of its external consultants, took steps in June 2023 to consider how the Proposed Resumption affected its development plans and to ascertain what conditions were likely to be placed upon its development.  These were steps undertaken by it to enable it to make an informed decision whether or not to exercise its contractual right of termination under clause 21.
  2. [125]
    Its conduct did not involve an election between a right to terminate the Contract and an affirmation that it would proceed to completion notwithstanding a right to terminate.
  3. [126]
    OF Beenleigh’s conduct in considering its position was not an unequivocal act that amounted to an election, resulting in the loss of its right to terminate.  Its conduct was consistent with its reservation of a right to terminate.  It also may be said to be consistent with a continuation of the Contract. 
  4. [127]
    In circumstances in which OF Beenleigh had expressly reserved the right to terminate, its conduct in considering the implications of the Proposed Resumption and communicating with the authorities, in order to decide whether or not to continue with the Contract or terminate it, is consistent with a reservation of its right to terminate.  Its exploration of these matters was not inconsistent with its right to terminate.
  5. [128]
    I conclude that Khalaf has not shown that by taking steps in relation to its development application after entering into the Contract, OF Beenleigh acted in a way that constituted an election so that it could not thereafter rely on the right to terminate under the Contract.  Its conduct was consistent with maintaining such a right. 

Did the act of lodging a caveat amount to an election to not rely on the right to terminate under clause 21?

  1. [129]
    The same conclusion applies to OF Beenleigh’s conduct in lodging a caveat on 23 June 2023.  Its act in lodging a caveat was consistent with protection of its rights as a purchaser, including its contractual rights to either complete the Contract or terminate it by exercising a right under the Contract to terminate.  Having entered into the Contract, OF Beenleigh as purchaser had an interest in the land that was capable of protection by a caveat.  Its interest as purchaser comprised four separate rights or “equities”.[8]    
  2. [130]
    The fourth right or equity is one by which the buyer has an equitable lien for repayment of the purchase price in the event of non-conveyance by the seller.  This is one of the rights that was protected by the caveat.
  1. [131]
    Lodging the caveat was not inconsistent with reservation of OF Beenleigh’s right to terminate the Contract under clause 21.1 and to recover its deposit.  Lodging the caveat was consistent with that right so as to secure its position to obtain a refund of the Deposit.
  2. [132]
    Therefore, I conclude that Khalaf has not established its defence of election. 

The doctrine of waiver

  1. [133]
    As earlier noted, waiver is “an intentional act done with knowledge whereby a person abandons a right by acting in a manner inconsistent with that right”.  It amounts to a unilateral release or abandonment of a right that is operative even in the absence of any reliance by the other party.  Waiver must be clear and unequivocal.
  2. [134]
    In Wollongong Coal Ltd v Gujarat NRE India Pty Ltd,[9] Leeming JA (with whom Bathurst CJ and McCallum JA agreed) stated:

“[91]  Of course, waiver is a notoriously imprecise concept in law. That was Dr Ewart’s thesis in his work Waiver Distributed published a century ago. In Verwayen at 406, Mason CJ said that ‘waiver’ was ‘an imprecise term capable of describing different legal concepts, notably election and estoppel’. Lord Wilberforce observed in Mardorf Peach & Co Ltd v Attica Sea Carriers Corporation of Liberia [1977] AC 850 at 871 that:

‘… the word ‘waiver’, like ‘estoppel’, covers a variety of situations different in their legal nature, and tends to be indiscriminately used by the courts as a means of relieving parties from bargains or the consequences of bargains which are thought to be harsh or deserving of relief.’

[92]  One natural and well-established meaning of waiver is the immediately effective unilateral renunciation of a right. This is the ‘unilateral waiver’ to which reference was made in Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57. Waiver in this sense is familiar in a range of contexts. One is waiver of a right to personal service of originating process. Another is waiver of a claim to privilege. This is the sense used by Toohey J in Verwayen at 474. It is also the sense used by Brennan J in the same decision at 423:

‘… Lord Hailsham of St Marylebone L.C. pointed out that ‘waiver’ is derived from the same root as the word ‘waif’– a    thing, or person, abandoned. Lord Hailsham … continued:

‘In my view, the primary meaning of the word ‘waiver’ in legal parlance is the abandonment of a right in such a way that the other party is entitled to plead the abandonment by way of confession and avoidance if the right is thereafter asserted’.” (Footnote omitted)

  1. [135]
    The High Court in Allianz stated that waiver of a right is rarely irrevocable.  The joint judgment stated:[10]

“By itself, a waiver of a right is rarely irrevocable. For that reason, it has sometimes been said that the general rule concerning a waiver of a right, ‘in the sense of an intimation of an intention not to enforce it’, is that the mere act of representing that a right has been waived is ‘of itself inoperative’. Similarly, it has been said that ‘the mere statement of an intention not to insist on a right is not effectual unless made for consideration … A mere waiver signifies nothing more than an expression of intention not to insist upon the right’. Perhaps more accurately, the legal position is that although a waiver does have legal effect in that ‘the waiver is binding on the waiving party, unless the waiver is effectively retracted’, the waiver can generally be revoked at any time with reasonable notice.”

Did OF Beenleigh waive its right to rely on its right to terminate the Contract under clause 21?

  1. [136]
    Although the doctrine of waiver differs from election, the matters that led to the conclusion that there had been no election lead me to conclude that there was no clear and unequivocal act of OF Beenleigh by which it unilaterally renounced, released, or abandoned its right to terminate under clause 21.1.
  2. [137]
    Before its entry into the Contract, its solicitors had made clear that the right to terminate under clause 21.1 was being reserved.  That right was reserved on 31 May 2023.  Its conduct in relation to the development application and in lodging the caveat were not inconsistent with that right.  OF Beenleigh did not thereby abandon that right.  Its conduct was consistent with maintaining that right until a decision was made whether to exercise it or not.  The reservation of rights was confirmed on 23 June 2023.
  3. [138]
    On 7 July 2023 and again on 31 July 2023, OF Beenleigh advised that it was terminating the Contract.
  4. [139]
    Because the conduct pointed to by Khalaf prior to 23 July 2023 did not constitute a waiver, it is unnecessary to consider the alternative submission that any waiver was revoked.  Had it been necessary, I would have found that any waiver was effectively retracted on 23 June 2023 or on 7 July 2023.
  5. [140]
    I conclude that Khalaf has not established a defence of waiver. 

Is OF Beenleigh entitled to a refund of the deposit under the Contract?

  1. [141]
    Because Khalaf has not succeeded on the point of construction, and has not established its defences of election and waiver, OF Beenleigh is entitled to a declaration that it lawfully terminated the Contract pursuant to clause 21.1(b) and is entitled to be paid the Deposit.  It also is entitled to an order that the defendants (Khalaf) pay to it the sum of $275,000, being the Deposit under the Contract. 

Does OF Beenleigh hold an equitable lien over the land not only for the Deposit, but also for interest and the costs of these proceedings?

  1. [142]
    There is no doubt that OF Beenleigh has an equitable lien over the land to the extent of the Deposit paid.  This is because the Deposit was part of the purchase price and the agreement was terminated through no fault on its part.  The issue is whether the lien extends to interest and costs. 
  1. [143]
    OF Beenleigh relies upon some authorities that appear to support that proposition.  Khalaf submits that, upon analysis, they do not and there is no basis in principle for extending the lien beyond the purchase money that was paid in the form of the Deposit.

The authorities

  1. [144]
    The High Court in Hewett v Court[11] explained that the principles that justified a lien over property to the extent of any deposit paid is that the purchaser is treated as a secured creditor, and the lien is the security for the money which is justly due. 
  2. [145]
    Gibbs CJ explained that an equitable lien arises by operation of law, under a doctrine of equity “as part of a scheme of equitable adjustment of mutual rights and obligations”.[12]  A vendor may have a lien for unpaid purchase money.  Gibbs CJ observed:[13]

“The lien of a purchaser for the purchase money that is paid to the vendor on a sale that has gone off through no fault of the purchaser may perhaps rest on the converse principle that he who has agreed to convey property in return for a purchase price will not be allowed to keep the price if he fails to make the conveyance.”

  1. [146]
    The rule was said to be founded on “solid and substantial justice”.[14]  In the case of either a vendor’s lien or a purchaser’s lien, the vendor or the purchaser, as the case may be, “is treated as a secured creditor … – the lien is the security for the money which is justly due”.
  2. [147]
    Wilson and Dawson JJ likewise identified the underlying principle as being that “the purchaser is regarded by equity as a secured creditor, the security being a lien over the property purchased”.[15]
  3. [148]
    Deane J agreed that an equitable lien “arises by implication of some equitable doctrine applicable to the circumstances”, with the implication able to be precluded or qualified by express or implied agreement.  Deane J wrote:[16]

“If the property has not passed to the purchaser and the purchaser has paid the whole or part of the purchase price, the purchaser will, in the absence of express or implied agreement to the contrary, enjoy the benefit of an equitable lien over the subject land to secure the repayment to him of any part of the purchase price which may become repayable to him upon default by the vendor in the performance of the contract.”

  1. [149]
    Hewett v Court did not address whether the lien secured any more than the part of the purchase price that was repayable. 
  2. [150]
    OF Beenleigh relies on Middleton v Magnay[17] as supporting the proposition that a lien extends to costs.  The plaintiff, Middleton, entered into an agreement with the defendant, Magnay, to lease certain land within three months.  The agreement provided that should Magnay within that period fail to grant a valid lease, then he would repay the sum of £122 and moneys that had been laid out on improving the premises.  Middleton paid the £122 and sought a decree of specific performance.  However, Magnay was unable to grant a lease for want of title.  At that time, damages could not be given in lieu of specific performance.  Vice-Chancellor Sir Paige Wood ruled, however, that Middleton “has a clear right to a lien upon the vendor’s interest for the money expended by him on the property”.  This rested on what was said to be an implied contract in every case between vendor and purchaser, that “the purchaser shall have a lien on the property to the extent of the purchasemoney he has paid, and here there is an express stipulation that the money expended shall be repaid”.
  3. [151]
    In circumstances in which specific performance of the contract to grant the lease could not be granted because of the impossibility of performance, the only decree that could be granted was a declaration of Middleton’s lien and consequential relief.  Magnay having admitted that no title could be made, the Vice-Chancellor is reported as having ordered “declare Plaintiff entitled to a lien on such estate or interest as the Defendant has in any of the property and effects mentioned in the agreement, to secure the repayment of all moneys paid by him on the faith of and pursuant to the agreement, together with his costs”.
  4. [152]
    The inclusion of the words “, together with his costs” is cryptic.  One reading is that the plaintiff simply was entitled to his costs.  Another reading is that the lien extended to his costs of the proceeding.  The basis for extending the lien to costs was not explained.  If this is what the declaration meant, presumably the costs of pursuing an action for specific performance was thought, in the circumstances of that case, to be founded on “solid and substantial justice”, a term used a month earlier by Lord Westbury in Rose v Watson.[18]
  5. [153]
    Combe v Lord Swaythling[19] was a case in which a deposit was paid to the vendor’s solicitors “as stakeholders”.  The contract went off otherwise than through the purchaser’s default.  The vendor commenced an action against the purchaser for specific performance.  It was dismissed.  Because the deposit was held by the stakeholders, the purchaser could not have brought a proceeding against the vendor to obtain payment by the vendor of the deposit.  The vendor was, however, ordered to pay the purchaser two-thirds of the purchaser’s costs of the action.  The issue raised was whether the purchaser had a lien on the property for his costs of the unsuccessful action by the vendor for specific performance.
  6. [154]
    Wynn-Parry J noted that certain authorities appeared to support the proposition that the purchaser’s right, where the sale goes off otherwise than through his default, has been extended to cover, in such cases, his costs of suit and the costs of investigating title.  These cases rested on the underlying principle “that the right of a purchaser to a lien in such circumstances is tested on the basis that he is to be regarded as a secured creditor”.  However, the purchaser in Combe did not have any right to a lien.  Because it could not be postulated that he was a secured creditor, the purchaser could not, on his counterclaim, have sued for return of the deposit and for a declaration of a lien in respect of it.  Therefore, he was not entitled to a lien for his costs of the vendor’s action for specific performance.
  7. [155]
    Hewett v Court cited Combe v Lord Swaythling for the proposition that the lien of a purchaser for the purchase money that has been paid to the vendor on a sale that has gone off through no fault of the purchaser, rests on the basis that the purchaser is “treated as a secured creditor”.  The High Court in Hewett v Court did not address the issue of whether the lien extended to costs.
  8. [156]
    The final authority upon which OF Beenleigh relies is Chalik v Wales.[20]  In that case no purchaser’s lien arose.  Therefore, the observations of Barrett J are obiter.  A party, Brainenberg, contended that if an order for costs was made in her favour against the vendors, she having been successful in her claim for an order for specific performance against them, those costs were secured by a lien in her favour over the property, or more precisely, over the proceeds of sale received upon completion of the sale made pursuant to the court’s order.  Barrett J referred to the relevant principles governing a lien over property to secure repayment of money.  He quoted Halsbury’s Laws of Australia [355 - 4795] for the proposition that “the purchaser is a secured creditor to the extent of any such lien [for any deposit paid] and for interest on the deposit if the contract so provides or a court so orders”.  Halsbury cited Combe v Lord Swaythling in support of the last proposition.  Barrett J also referred to a sentence from Halsbury’s Laws of Australia that:

“A purchaser’s lien may be extended to costs for an action for specific performance or costs for investigating title where a good title is not shown by the vendor.”

Middleton v Magnay was cited by the authors as authority for the first part of that proposition. 

  1. [157]
    A lien for costs was not available.  Barrett J stated:[21]

“This analysis breaks down at the first stage. A lien for costs has never been seen as arising in isolation. The cases in which costs have been held to be secured are cases in which a lien has arisen independently as security for the return of moneys paid and the costs have formed an additional element of the secured moneys. The ancillary nature of the costs element in such cases was emphasised in Combe v Lord Swaythling [1947] Ch 625.”

  1. [158]
    Barrett J explained that the rationale for the decision in Combe v Lord Swaythling, as later identified by the Privy Council in Hua Chiao Commercial Bank Ltd v Chiaphua Industries Ltd,[22] was that “the obligation of the vendors under any costs order in favour of Brainenberg, viewed alone and having no connection or relationship with part payment for the land, would not ‘touch and concern’ the land so as to be secured upon it …”[23]   

Application of relevant principles

  1. [159]
    The lien of a purchaser for the purchase money that has been paid to the vendor on a sale that has gone off through no fault of the purchaser rests on a doctrine of equity that treats the purchaser as a secured creditor for the purchase money that has been paid.  The lien is the security for the purchase money that must be repaid. 
  2. [160]
    The equitable basis upon which the lien might extend to costs is not apparent from the brief conclusionary remarks in Middleton v Magnay.  However, in obiter the court in Combe interpreted Middleton as extending to the purchaser’s lien to its costs in an unsuccessful suit for specific performance. 
  3. [161]
    The proposition that a purchaser who is entitled to be repaid a deposit or other purchase money should be treated as a secured creditor is undoubted.  The issue, however, is a secured creditor as to what?
  4. [162]
    The basis upon which the purchaser’s lien may be said to extend to interest is equally unclear in the authorities, at least where the Contract does not expressly provide for interest on the deposit.  A strong case in equity for extending the lien to interest would be if the contract provided for the repayment of the deposit or other purchase moneys, together with interest.
  5. [163]
    Relevantly, in this case the Contract does not so provide.  In fact, clause 3.5 expressly provides that if the Contract is terminated pursuant to the provisions of the stated clauses:

“… the Deposit and other moneys paid under this Contract shall be refunded to the Buyer by the Seller or the Deposit Holder, as the case may be, but without interest, costs or damages, and the same shall be accepted by the Buyer in full and final satisfaction of all claims.” (emphasis added)

  1. [164]
    The express contractual provision, in my view, provides a sound reason to not extend the lien to interest for the period between when the deposit was paid and when it should have been refunded.  The case for extending the lien to interest that might be awarded as a matter of the Court’s discretion is no stronger.
  2. [165]
    The position is different to the provision of a mortgage which typically secures payment of the sum advanced, together with interest and certain defined costs, including costs of proceedings to recover the secured amount.
  1. [166]
    The costs to which OF Beenleigh seeks to extend the lien are not the costs of pursuing an action for specific performance or defending an action for specific performance.  The costs are associated with a dispute over refunding a deposit where the buyer exercised a right to terminate and the seller did not seek specific performance. The buyer’s interest in the deposit was protected by an equitable lien. Why the lien should extend to its legal costs is not obvious.  It is not supported by the terms of clause 3.5 which relates simply to a refund of the deposit.
  2. [167]
    In all the circumstances, I am not persuaded that the equitable principle that entitles OF Beenleigh to a lien for the purchase money that was paid to Khalaf on a sale contract that was terminated, should extend to a discretionary award of interest or OF Beenleigh’s costs of the proceeding.       

Disposition and orders

  1. [168]
    OF Beenleigh is entitled to a declaration that it lawfully terminated the Contract on 12 July 2023 (being the termination date nominated in its letter of 7 July 2023) and is entitled to the return of the Deposit.
  2. [169]
    There also will be an order for the payment to it of $275,000, together with interest (from a date to be fixed) pursuant to s 58 of the Civil Proceedings Act 2011 (Qld).
  3. [170]
    I will declare that it holds an equitable lien over the land for the Deposit.
  4. [171]
    I will hear the parties about further orders, including the awarding of interest and orders as to costs.

Footnotes

[1] Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35]  cited with approval in Mt Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [51].

[2] Mt Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104, 131 [110] and see [50]-[52].

[3] Mt Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [46]-[47].

[4]  (2022) 406 ALR 632.

[5]  (1993) 182 CLR 26 at 41 (“Immer”).

[6] Immer at 30.

[7] Commonwealth v Verwayen (1990) 170 CLR 394 at 406 (“Verwayen”).

[8] Golden Mile Property Investments Pty Ltd (in liq) v Cudgegong Australia Pty Ltd (2015) 89 NSWLR 237 at 262 [104] citing Meagher, Gummow & Lehane’s Equity: Doctrines & Remedies at [6-055]; State of Queensland v Morecroft [2024] QCA 11 at [24].

[9]  (2019) 100 NSWLR 432; [2019] NSWCA 135 at [91]-[92].

[10] Allianz at [29].

[11]  (1983) 149 CLR 639.

[12]  At 645 citing Davies v Littlejohn (1923) 34 CLR 174 at 185.

[13]  At 645.

[14]  At 645 citing Rose v Watson (1864) 10 HLC 672 at 684 [11 ER 1187 at 1192].

[15] Hewett v Court at 654.

[16]  At 664.

[17]  (1864) 2 Hem&M 233 [71 ER 452].

[18]  (1864) 10 HLC 672 at 684 [11 ER 1187 at 1192].

[19]  [1947] Ch 625.

[20]  [2005] NSWSC 877 (“Chalik”).

[21]  At [34].

[22]  [1987] AC 99.

[23] Chalik at [35].

Close

Editorial Notes

  • Published Case Name:

    OF Beenleigh Pty Ltd v Khalaf Management Pty Ltd & Anor

  • Shortened Case Name:

    OF Beenleigh Pty Ltd v Khalaf Management Pty Ltd

  • MNC:

    [2024] QSC 96

  • Court:

    QSC

  • Judge(s):

    Applegarth J

  • Date:

    21 May 2024

  • Selected for Reporting:

    Editor's Note

Appeal Status

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

Cases Cited

Case NameFull CitationFrequency
Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570
2 citations
Agricultural & Rural Finance Pty Ltd v Gardiner [2008] HCA 57
2 citations
Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788 (2022) 406 ALR 632
2 citations
Chalik v Wales [2005] NSWSC 877
2 citations
Combe v Swaythling (1947) Ch 625
3 citations
Commonwealth v Verwayen (1990) 170 CLR 394
2 citations
Davies v Littlejohn (1923) 34 CLR 174
2 citations
Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd and Ors (2014) 251 CLR 640
2 citations
Golden Mile Property Investments Pty Ltd (in Liq) v Cudgegong Australia Pty Ltd (2015) 89 NSWLR 237
2 citations
Hewett v Court (1983) 149 CLR 639
2 citations
Hua Chiao Commercial Bank Ltd v Chiaphua Industries Ltd [1987] AC 99
2 citations
Mardorf Peach & Company Ltd v Attica Sea Carriers Corporation of Liberia (Laconia) (1977) AC 850
2 citations
Middleton v Magnay (1864) 2 Hem&M 233
2 citations
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37
2 citations
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104
4 citations
Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26
2 citations
Queensland v Morecroft [2024] QCA 11
2 citations
Rose v Watson (1864) 10 HLC 672
3 citations
Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (2019) 100 NSWLR 432
2 citations
Wollongong Coal Ltd v Gujarat NRE India Pty Ltd [2019] NSWCA 135
2 citations

Cases Citing

Case NameFull CitationFrequency
Pastrami on Rye Pty Ltd (in liquidation) v P&MV Constructions Pty Ltd [2024] QCAT 4392 citations
1

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