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SUPREME COURT OF QUEENSLAND
CITATION: Bellmere Park P/L as trustee for the Bellmere Park Development Trust v Cameron Samuel Benson (as personal representative of the estate of Eric Gordon Benson [2007] QCA 102
PARTIES: BELLMERE PARK PTY LTD ACN 121 087 447 (as trustee for the BELLMERE PARK DEVELOPMENT TRUST) (applicant/respondent) v CAMERON SAMUEL BENSON (as personal representative of the estate of ERIC GORDON BENSON deceased) (respondent/appellant)
FILE NO/S: Appeal No 949 of 2007 Appeal No 951 of 2007 SC No 542 of 2007
DIVISION: Court of Appeal
PROCEEDING: General Civil Appeal
ORIGINATING COURT:
Supreme Court at Brisbane
DELIVERED ON: 30 March 2007
DELIVERED AT: Brisbane
HEARING DATE: 13 March 2007
JUDGES: Williams JA, Muir and Philip McMurdo JJ Separate reasons for judgment of each member of the Court, each concurring with the order made
ORDER: That an order for costs on the standard basis be substituted for the indemnity costs order made on 2 February 2007 and otherwise that the appeal be dismissed with costs.
CATCHWORDS: CONTRACTS − GENERAL CONTRACTUAL PRINCIPLES − CONSTRUCTION AND INTERPRETATION OF CONTRACTS− OTHER MATTERS − where contract entered into between appellant vendor and respondent purchaser for sale and purchase of land − where contract included a due diligence special condition − where respondent purchaser sought specific performance − whether the special condition of the contract was uncertain − whether the condition could be satisfied as a matter of subjective or objective fact − whether contract was illusory in nature − whether condition was for the benefit of both parties and thus capable of being waived by the
respondent − whether costs on an indemnity basis should have been awarded Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21 NSWLR 502, approved Charles Lodge Pty Ltd v Mehahen , [1966] VR 161, distinguished Gange v Sullivan (1966) 116 CLR 418, applied Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2004] 1 AC 715, cited Mallet v Mallet (1984) 156 CLR 605, cited Meehan v Jones (1981-1982) 149 CLR 571, distinguished Re Wickham Developments (Australia) Pty Ltd v Feros & Ors , Unreported, Supreme Court of Queensland, QS No 232 of 1994, Thomas J, 6 April 1994, compared Sandra Investments Pty ltd v Booth (1983) 153 CLR 153, cited Suttor v Gundowda Pty Ltd (1950) 81 CLR 418, distinguished The Queensland Electricity Generating Board v New Hope Collieries Pty Ltd [1989] 1 LL Rep 205, cited Toll (FBCT) Pty Limited v Alphapharm Pty Ltd (2004) 219 CLR 165, cited Upper Hunter County District Council v Australia Chilling and Freezing Co Ltd (1968) 118 CLR 429, cited York Air Conditioning and Refrigeration (Australasia) Pty Ltd v The Commonwealth (1949) 80 CLR 11, approved
COUNSEL:
F L Harrison SC, with D P O’Brien, for the respondent/appellant A M Daubney SC, with D J Morgan, for the applicant/respondent
SOLICITORS:
W T Purcell Chadwick & Skelly for the respondent/appellant Crilly Lawyers for the applicant/respondent
[1] WILLIAMS JA: I have had the advantage of reading the reasons for judgment of Muir J and I agree with all that is said therein. I agree with the order he has proposed.
[2] MUIR J:
Introduction
The critical issue in this appeal from a decision of a judge of the Trial Division in a specific performance action is whether special condition 1 of the subject contract is void for uncertainty.
[3] The contract, dated 7 August 2006, was entered into between the appellant as vendor and the respondent as purchaser for the sale and purchase of 178.1 ha of vacant land for a price of $3,750,000. The contract specified 5 February 2007 as the date for completion. It included these special conditions: “1. A due diligence period of 120 days from the date of Contract to enable us to investigate with the State Government and the Caboolture Shire Council to ascertain the liability of the proposed
[9] The principles relevant to the determination of whether a clause having a number of possible meanings is uncertain are explored in the following passage from the reasons of Barwick CJ in Upper Hunter County District Council v Australia Chilling and Freezing Co Ltd :^1 “But a contract of which there can be more than one possible meaning or which when construed can produce in its application more than one result is not therefore void for uncertainty. As long as it is capable of a meaning, it will ultimately bear that meaning which the courts, or in an appropriate case, an arbitrator, decides is its proper construction : and the court or arbitrator will decide its application. The question becomes one of construction, of ascertaining the intention of the parties, and of applying it. Lord Tomlin's words in this connexion in Hillas & Co. Ltd. v. Arcos Ltd. (1932) 147 LT 503, at p 512 ought to be kept in mind. So long as the language employed by the parties, to use Lord Wright's words in Scammell (G.) & Nephew Ltd. v. Ouston (1941) AC 251 is not ‘so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contractual intention’, the contract cannot be held to be void or uncertain or meaningless. In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements. Thus will uncertainty of meaning, as distinct from absence of meaning or of intention, be resolved.”
[10] Another, and consistent, expression of principle is to be found in the reasons of Williams J in York Air Conditioning and Refrigeration (Australasia) Pty Ltd v The Commonwealth : 2 “If the court comes to the conclusion that parties intended to make a contract, it will if possible give effect to their intention no matter what difficulties of construction arise. In Scammell and Nephew Ltd. v. Ouston (1941) AC, at pp 268, 269, Lord Wright said ‘the object of the court is to do justice between the parties, and the court will do its best, if satisfied that there was an ascertainable and determinate intention to contract, to give effect to that intention, looking at substance and not mere form. It will not be deterred by mere difficulties of interpretation … it is a necessary requirement that an agreement in order to be binding must be sufficiently definite to enable the court to give it a practical meaning. Its terms must be so definite, or capable of being made definite without further agreement of the parties, that the promises and performances to be rendered by each party are reasonably certain.”
[11] On appeal, Rich J expressed agreement with Williams J’s reasons and said that he could not usefully add to them.
[12] Relevant also to the problem under consideration is the principle that courts should be astute to uphold commercial bargains.^3 For example, in Banque Brussels Lambert SA v Australian National Industries Ltd ,^4 Rogers CJ Comm D remarked:
(^1) (1967-1968) 118 CLR 429 at 436-7. See also Meehan v Jones (1982) 149 CLR 571. (^2) (1949) 80 CLR 11 at 26. (^3) Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503 at 513.
“The whole thrust of the law today is to attempt to give proper effect to commercial transactions. It is for this reason that uncertainty, a concept so much loved by lawyers, has fallen into disfavour as a tool for striking down commercial bargains. If the statements are appropriately promissory in character, courts should enforce them when they are uttered in the course of business and there is no clear indication that they are not intended to be legally enforceable.”
[13] Such sentiments are not applicable only to commercial transactions. Referring to subject to finance clauses in contracts of sale and purchase, Mason J remarked in Meehan v Jones :^5 “To say that clauses of this kind are void for uncertainty is to ignore the traditional doctrine that courts should be astute to adopt a construction which will preserve the validity of the contract.”
[14] Sir Robin Cooke gave expression to the contemporary approach to uncertainty arguments in the following passage from the reasons in The Queensland Electricity Generating Board v New Hope Collieries Pty Ltd as: “Arguments invoking alleged uncertainty, or alleged inadequacy in the machinery available to the courts for making contractual rights effective, exert minimal attraction. Sudbrook is now the leading English case in the field. The same tendency has been apparent elsewhere in the Commonwealth, as illustrated by Calvan Consolidated Oil and Gas Co Ltd v Manning, [1959] SCR 253; Attorney-General v Barker Bros Ltd [1976] 2 NZLR 495; and Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd , [1982] 56 ALJR 825.” 6
[15] It is apparent from this review of authority that the appellant’s uncertainty argument faces formidable obstacles.
Is the Condition uncertain?
[16] The Condition does not expressly confer a right of termination in the event that the viability of the proposed use of the site is not ascertained within the 120 day period. However, it is reasonable to infer from the statement that the contract becomes unconditional at the end of the period that, until then, the respondent purchaser has a right to notify its intention not to proceed with the contract should the requirements of the Condition not be satisfied.
[17] The appellant’s contention is that “viability” is something which must be objectively determined. It is submitted that the word is “vague and obscure” and means “feasible or practicable, esp. from an economic standpoint.” It is argued that without any indication of the proposed use or some precise proposal it is impossible to determine what constitutes viability.
[18] There is nothing vague or obscure about the word “viability” once regard is had to the context in which it appears. The dictionary definition referred to by the appellant provides a meaning which is substantially appropriate. It may be inferred from the
(^4) (1989) 21 NSWLR 502 at 523. (^5) (1981-1982) 149 CLR 571 at 589. (^6) [1989] 1 LL Rep 205 at 210.
by reference to objective standards. Viability of land use in the present context is something difficult, if not impossible, to determine without reference to the circumstances and objectives of the purchaser. Relevant to such a determination, for example, may be: the purchaser’s financial position – whether it can borrow, how much it may need to borrow and at what interest rates; the availability of other more financially attractive developments; whether the subject land may be used or developed in conjunction with other land available to the purchaser; and, importantly, the purchaser’s own appreciation of the land’s potential for profitable development. The development of real property is essentially an entrepreneurial activity which almost invariably involves subjective assessments of marketability and profitability.
[25] Also, to adopt the appellant’s objective test would introduce an unwarranted element of uncertainty and prospective delay into the exercise of rights under the Condition. A determination of whether a party has acted honestly in relation to the exercise of rights under such a provision is a much simpler and more limited exercise than the objective determination contemplated by the appellant’s argument.
[26] For these reasons, I conclude that the test required by the Condition is subjective. It was for the respondent, acting honestly, to consider whether the proposed use of the land was viable.
The lack of criteria or standards by which viability is to be judged
[27] The appellant argues that, except where the condition is to be fulfilled to the satisfaction of one of the parties, it must provide sufficient criteria for a court to be able to determine whether the test prescribed by the parties has been met. The test, as explained above, is not objective. It is for the respondent to decide the question of viability. Its determination, if honestly made, cannot be challenged by the appellant. Accordingly, this argument does not advance the appellant’s case.
The absence of evidence of “proposed use”
[28] The appellant argues that there is no evidence of the “proposed use” and “the inference is that the parties have simply assumed that there was a proposed use for the site when in fact there was none.” This is said to result in a failure by the parties to agree on a fundamental aspect of their bargain and to cause the Condition to be uncertain.
[29] The “proposed use”, applying the line of reasoning used earlier and having regard to the evidence that no “proposed use” was communicated by the respondent to the appellant, is the use proposed by the respondent. The respondent’s relevant state of mind is a question of fact capable of being proved by extrinsic evidence.^10 The fact that there was no evidence of any proposed use does not give rise, in the circumstances of this case, to the inference that there was no proposed use. The more obvious conclusion is that the respondent did not consider it necessary to adduce evidence on the point. The focus of the appellant’s uncertainty argument prior to the trial was on the construction of the Condition, not on whether there was in fact any proposed use. If the appellant wanted to rely on the non-existence of a proposed use, it was up to him to prove it. The respondent’s case did not depend on establishing that it had given notice under the Condition: it could and did rely on the contract becoming unconditional on the expiration of the 120 day period.
(^10) See Meehan v Jones (supra) at 578-579.
[30] The appellant points to the entering into by the respondent of a contract to resell the land at a substantial profit to Bellmere Land Holdings Pty Ltd as evidencing the non- existence of a “proposed use.” It is difficult however to attribute much, if any, weight in this regard to the resale without knowing the circumstances surrounding it. On the other hand, the fact that the respondent had the Condition inserted in the contract provides some evidence that the respondent had in mind a proposed use of the land. One can only speculate as to what may have been revealed if the question of the existence of a proposed use had been specifically addressed by evidence on the trial. Consequently the appellant’s argument cannot be accepted and it is unnecessary to determine what the result would have been had there been no “proposed use” as the appellant contends.
[31] Even if, on the correct construction of the Condition, the proposed use is one which must exist at the date of the contract and the respondent had no proposed use in mind, I doubt that the contract would thereby have been rendered uncertain. The more obvious consequence would be that the respondent could not take advantage of the Condition. The Condition was no doubt devised by the respondent for its benefit to enable it to conduct due diligence enquiries to ascertain whether it considered the use of the land proposed by it to be viable. In the event that at the date of the contract it had no particular use in mind, it follows that it would have no requirement for the Condition. It would therefore be impossible to regard the Condition as “fundamental to the parties” as the appellant contends. The Condition was certainly not “fundamental” to the appellant: it was to its disadvantage. Nor, as discussed earlier, was it impossible for a court to attribute a meaning to it.
The illusory contract argument
[32] It is argued that if the respondent can determine different proposed uses from time to time “depending on whether it wanted to complete or terminate the contract. This would give it a discretion or option whether it will carry out its promise so the contract is void on that account.”
[33] Assuming the existence of a factual foundation for the point, it lacks merit for the reasons given in Meehan v Jones , by Gibbs CJ^11 and by Mason J.^12 At the latter reference Mason J said: “The limitation that the purchaser must act honestly, or honestly and reasonably, takes the case out of the principle that: ‘… where words which by themselves constitute a promise are accompanied by words which show that the promisor is to have a discretion or option as to whether he will carry out that which purports to be the promise, the result is that there is no contract on which an action can be brought.’ See Thorby v Goldberg , citing Loftus v Roberts, Placer Development Ltd v The Commonwealth , cited by Gibbs J in Godecke v Kirwan. The judgment of the purchaser as to what constitutes finance on satisfactory terms is not an unfettered discretion - it must be reached honestly, or honestly and reasonably.”
(^11) at 580-582. (^12) at 589, 590.
the respondent to take advantage of the Condition. If the respondent does wish to rely on it, it must do so within the 120 day period. In that event, there may be a question as to whether the respondent has acted honestly. If the respondent fails to give notice of termination in reliance on the Condition within the 120 day period, the contract continues on foot. That furthers the objective of the appellant which is to have the sale completed. There can be no question in these circumstances of the respondent “taking advantage of his own wrong.”
[39] The same conclusion can be arrived at by a more direct, and in my view preferable, route without reference to decisions in respect of differently worded clauses. The aim of the court in construing contractual provisions is to “ascertain and give effect to the intention of the contracting parties.”^15 The intention is to be ascertained objectively.^16
[40] There is no reason to suppose that it was the contractual intention that if the Condition was not satisfied within the 120 day period either party could give notice of termination at some subsequent time. That conclusion is contrary to the clear meaning of the words of the Condition. To use the language of Gibbs CJ in Sandra Investments Pty Ltd v Booth ,^17 the Condition “itself provides for the consequences that flow from a failure to fulfil the condition.” It is difficult to see what interest the appellant vendor would have in terminating the contract if the respondent wished to proceed. It is difficult also to understand why, if the respondent wanted to proceed irrespective of the outcome of its due diligence enquiries it should not be permitted to do so.
Waiver
[41] Because of the view I take of the operation of the Condition, it is unnecessary to determine whether the Condition was capable of being waived by the respondent. In deference, however, to counsels’ detailed and skilful submissions, I will state my views on the point. It was argued that the Condition was not solely for the benefit of both parties and thus not susceptible to waiver by the respondent. The reasons advanced in support of the argument were that: (a) The right of termination was not given only to the purchaser;
(b) The information obtained by the respondent in the course of the enquiries could have been obtained by the appellant from the authorities of whom enquiries had been made. That information could benefit the appellant;
(c) Satisfaction of the Condition ended the uncertainty as to whether the contract would proceed. In this regard reliance was placed on Charles Lodge Pty Ltd v Mehahen^18 and Meehan v Jones.
[42] Unlike the result produced by the clauses under consideration in Meehan v Jones and Charles Lodge Pty Ltd v Menahen , the contract became unconditional at the expiration of the period allowed by the clause for the carrying out of investigations and no notice of termination in reliance on the clause could then be given. The appellant vendor was thus not left in any uncertainty as to the continuation of the contract on the expiration of the due diligence period. Nor was this a case in which the vendor had an interest in
(^15) Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2004] 1 AC 715 at 737. (^16) Toll (FBCT) Pty Limited v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179. (^17) (1983) 153 CLR 153 at 157. (^18) [1966] VR 161, 165.
the fulfilment of the Condition because the exercise of rights under it could affect the completion date or because the Condition was “inextricably mixed up with other parts of the transaction from which it cannot be severed.” 19
[43] Only the respondent had the right to carry out the subject investigations. They were for its purposes and the appellant had no right to any of the information obtained by the respondent. The fact that the appellant was free to make its own enquiries unrelated to any provision of the contract can hardly bear on the appellant’s rights under the Condition.
[44] The right of termination was not given expressly to the respondent or only to the respondent but it is difficult to see how the appellant could exercise the right of termination. It was for the respondent to determine viability on a subjective basis. An argument was advanced by reference to a hypothetical factual situation in which the authorities to which enquiries were directed, stated clearly near the beginning of the 120 day period that subdivision was impossible. In such a case, it was submitted, the appellant should not have to wait until the conclusion of the period: he should be able to give notice of termination so as to be free of contractual restraints. There may be something in that argument if the test was objective. As it is subjective, there is no reason why the respondent could not attempt, by various means, to procure more favourable decisions or even decide to hold the land for a substantial period in the hope that the attitudes of the authorities might change. The latter approach would not be incompatible with an opinion that the proposed use was viable.
[45] Another difficulty with the appellant’s construction is that it is incompatible with the respondent’s rights under the Condition. The respondent had a right but no obligation to give notice under the Condition in the circumstances contemplated by it. The right existed for 120 days. The formation of an opinion by the respondent during the 120 day period that the proposed use of the site was not viable had no contractual consequence. The respondent was entitled under the clause to wait until immediately prior to the expiration of the period to see if its views on viability might change. And, of course, it could decide, whatever its views on viability, not to exercise its rights.
[46] As a general proposition the right on the part of one party to a contract to waive a condition depends on whether the condition was for the sole benefit^20 or, perhaps, the primary benefit^21 of that party. The foregoing considerations strongly suggest that the Condition was for the respondent’s sole benefit and was thus capable of being waived by the respondent.
Costs
[47] The appellant appeals against an order of the primary judge on 2 February 2007 decreeing specific performance of the contract and ordering that the respondent pay the applicant’s costs of the application that day on an indemnity basis. At the hearing on 30 January 2007 the respondent’s counsel intimated to her Honour that the respondent
(^19) Cf Re Wickham Developments (Australia) Pty Ltd v Feros & Ors , Unreported, Supreme Court of
20 Queensland, QS No 232 of 1994, Thomas J, 6 April 1994. Gange v Sullivan (1966) 116 CLR 418 at 430 and Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153 at 159. (^21) Gange v Sullivan at 443.
[53] Her Honour ordered indemnity costs, it would seem, on the basis that there had been an unnecessary hearing through the fault of the appellant.
[54] It seems to me that on the 30 January hearing there was a misunderstanding between Senior Counsel: the appellant’s counsel having in mind the background established by correspondence; Counsel for the respondent either overlooking that background or considering it no longer relevant. For my part, having the luxury of a more leisurely opportunity to consider the matter than that afforded the primary judge and having had the benefit of a careful analysis of the underlying facts, also denied her Honour, I would be inclined to regard the misunderstanding as one of the vicissitudes of litigation.
[55] It is relevant to note also that when the appellant made application and obtained a hearing date for its stay application, it was aware that the respondent would take the matter back before the primary judge on 2 February. In my view, if the appellant was at fault in any material aspect, its conduct was not such as to attract an award of costs on an indemnity basis. In arriving at this conclusion I am conscious of the primary judge’s discretion as to costs and the limited circumstances in which it is appropriate for the appellate court to interfere with the exercise of such discretion.^22
Conclusion
[56] For the above reasons, I would substitute for the indemnity costs order made on 2 February 2007 an order for costs on the standard basis and otherwise dismiss the appeal with costs.
[57] PHILIP McMURDO J: I agree with Muir J.
(^22) See Mallet v Mallet (1984) 156 CLR 605 at 622 and the authorities there cited.
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