TEJAL PRAMEYKANT KAKKAD v TREANA HOLDINGS PTY LTD [2024] SADC 161

First Applicant: TEJAL PRAMEYKANT KAKKAD Counsel: MR M DOUGLAS WITH MR M GUSTAVSSON - Solicitor: MARK GUSTAVSSON & ASSOCIATES Second Applicant: ARUN KUMAR VASHISHTA Counsel: MR M DOUGLAS WITH MR M GUSTAVSSON - Solicitor: MARK GUSTAVSSON & ASSOCIATES Third Applicant: RITA VASHISHT Counsel: MR M DOUGLAS WITH MR M GUSTAVSSON - Solicitor: MARK GUSTAVSSON & ASSOCIATES First Respondent: TREANA HOLDINGS PTY LTD Counsel: MR L GENTRY - Solicitor: L GEE AND JULIUS LAWYERS Second Respondent: AMERONIX PTY LTD Counsel: MR L GENTRY - Solicitor: L GEE AND JULIUS LAWYERS Hearing Date/s: 03/06/2024, 11/06/2024, 21/06/2024 File No/s: CIV-23-000937 B DISTRICT COURT OF SOUTH AUSTRALIA (Civil) DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment. The onus remains on any person using material in the judgment to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court in which it was generated. KAKKAD & ORS v TREANA HOLDINGS PTY LTD & ORS [2024] SADC 161 Judgment of his Honour Auxiliary Judge Chivell 11 December 2024 ESTOPPEL - ESTOPPEL BY CONDUCT - PROMISSORY ESTOPPEL TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION - CONSUMER PROTECTION - MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS - FALSE REPRESENTATIONS GENERALLY CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS EQUITY - EQUITABLE REMEDIES - SPECIFIC PERFORMANCE In 2020, the applicants entered into contracts with the respondents for the sale and purchase of two units in a residential development in Adelaide. The first contract related to Unit 1 and was signed by the first applicant, Mrs Kakkad, on 13 September 2020. The second contract related to Unit 6 and was signed by the second and third applicants on 19 September 2020. The applicants alleged that the respondents, through their agent, made a representation that a 'sunset clause' in the contracts, which gave the respondents the right to terminate the contracts would not be deployed against them. On 10 December 2023, the respondents terminated the contracts. -- 1 of 62 -- The applicants claim entitlement to an equitable estoppel against the respondents preventing them from exercising their right to terminate on the basis of the representation. Alternatively, the applicants invoke the Australian Consumer Law on the basis that the representation was misleading or deceptive. Held: The representation has not been proved by the applicants. The applicants also sue for breach of contract. The contract contained a condition obliging the respondents to use 'reasonable endeavours' to achieve practical completion of the project before the sunset date. The development was not completed by the sunset date. Held: The respondents were in breach of contract in that they failed to use 'reasonable endeavours' to complete the development, and that as a consequence, their termination of the contract was invalid. Held: The applicants should be granted specific performance of the contracts. Australian Competition and Consumer Act 2010 (Cth) Schedule 2; ss 2, 4, 24, 236, 237, referred to. Manassen Holdings Pty Ltd v Commercial and General Corporation Pty Ltd [2019] SASC 171; Aalborg CSP A/S v Ottoway Engineering Pty Ltd (2017) 129 SASR 283; Walton Shores (Interstate) Pty Ltd v Maher (1988) 164 CLR 387; Seven Network (Operations) Ltd v Warburton (No 2) [2011] NSWSC 386; Commonwealth v Verwayan (1990) 170 CLR 394; Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582; Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Day v Perisher Blue Pty Ltd (2005) NSWLR 731; Wang v Kaymet Corporation Pty Ltd [2015] NSWSC 1459; Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; Schenk v ACN 08111231140 Pty Ltd [2002] NSWSC 123; Blatch v Archer (1774) 98 ER 696; Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345; Electricity Generation Corporation as Verve Energy v Woodside Energy Ltd (2014) 251 CLR 640; Joseph Finance and Investment Pty Ltd v Eastwood Retirement Pty Ltd [2023] VSC 731; Northwalker Realty Pty Ltd v TFM Chatswood Land Pty Ltd (No 2) [2022] NSWSC 1409; Blackburn v Logos Research Institute Pty Ltd [2015] SADC 175, discussed. Sentinel Orange Homemaker Pty Ltd v Davis Investment Group Holdings Pty Ltd (in liq) [2021] NSWSC 550; Hall v Foster [2011] NSWSC 295, considered. -- 2 of 62 -- KAKKAD & ORS v TREANA HOLDINGS PTY LTD & ORS [2024] SADC 161 1 In September 2020, the applicants Mrs Tejal Kakkad, Mr Arun Vashishta and his wife Mrs Rita Vashishta purchased units in a residential development at 141-143 Anzac Highway, Kurralta Park, South Australia. The units were purchased ‘off the plan’. Construction had not yet commenced. 2 The vendors of the two properties were the respondents Treana Holdings Pty Ltd and Ameronix Pty Ltd. 3 Mrs Kakkad entered a contract for the sale and purchase of Unit 1 in the development. Mr and Mrs Vashishta signed an identical contract in relation to Unit 6 in the same development. 4 The contracts contained several ‘Special Conditions’. One of these was a provision for a ‘Sunset Date’ after which, if practical completion of the building had not been achieved, the parties had the right to terminate the contract. 5 The contracts were signed during the COVID-19 pandemic. To quote the report of Mr Stephen Sentschuk, the applicants’ expert witness:1 The COVID-19 global pandemic had a profound impact on both the South Australian real estate and building industries from early 2020 through to early 2023. During the early stages of the pandemic there was widespread confusion and apprehension relating to how building projects would progress, if at all, during this phase. 6 The contracts were signed by the applicants during the ‘early stage of the pandemic’. 7 Practical completion was not achieved by the respondent by the Sunset Date, 29 December 2022. The respondents exercised what they argue were their rights under the contract and terminated it. 8 The issues in this case are: 1. Whether the respondents are estopped from exercising their right to terminate as a consequence of The Representation made by the respondents’ real estate agent during the pre-contractual negotiations; 2. Whether the respondents are liable for misleading and deceptive conduct arising from the same pre-contractual negotiations; 3. Whether the respondents lost their right to terminate the contract because they were in breach of another Special Condition of the contract by failing to use ‘reasonable endeavours’ to achieve practical completion before Sunset Date. 1 Exhibit A1, Tender Book Vol 4, Tab 232, pp 3178-3203. -- 3 of 62 -- [2024] SADC 161 2 9 For the reasons which follow, I find on the balance of probabilities that: 1. The alleged Representation was not made; 2. The respondents were not estopped from exercising their rights by pre- contractual Representation; 3. The respondents did not engage in misleading and deceptive conduct; 4. The respondents did fail to use ‘reasonable endeavours’, even in the context of the COVID–19 pandemic, to achieve practical completion before the Sunset Date; 5. The respondents were therefore in breach of contract, and lost their right to terminate the contracts pursuant to the Special Conditions; 6. The termination of the contracts by the respondents was invalid; 7. The applicants are entitled to specific performance of the contracts. The Contracts 10 The contract for Unit 1 was signed by Mrs Tejal Kakkad on 13 September 2020. The purchase price was $399,000. A deposit of $19,950 was paid. The contract for Unit 6 was signed on 19 September 2020 by Mr Arun Vashishta and Mrs Rita Vashishta. The purchase price was $399,900. They paid a deposit of $19,995. Apart from the purchase price and the date, the contracts were identical. 11 The contracts were subject to a number of ‘Special Conditions’. These were in a separate section of the contract, and a number of them were printed with a larger font and in bold lettering. 12 The definitions of ‘Proposed Practical Completion Date’ (29 June 2022), and ‘Sunset Date’ (29 December 2022) were highlighted in this way.2 13 Also highlighted was para 7 of the Special Conditions, headed ‘Conditions Precedent to Settlement’. These were: 7.1 … (a) The Developer obtaining Development Approved in the Development on or before 31 December 2021; (b) deposit of the Community Plan with the LTO by the Registrar-General to create a separate lot for the Land …; (c) the Building Works achieving practical completion on or before the Proposed Practical Completion Date. 2 See Tender Book Volume 2, pp 574, 575. -- 4 of 62 -- [2024] SADC 161 3 7.2 If any of the settlement conditions are not satisfied by the relevant date, the vendor may terminate this contract by notice to the purchasers at sole discretion. For the avoidance of doubt, this clause is for the sole benefit of the vendor, and the vendor may waive any of the Settlement Conditions. 7.3 Notwithstanding any other provision of this Contract, if any of the Settlement Conditions are not satisfied on or before the Sunset Date, then either party may terminate this Contract by providing the other party with notice in writing. 7.4 Upon termination of the Contract under this clause all money paid by the Purchaser to the vendor under this contract will be refunded without deduction and each party releases the other in respect of all claims arising out of or in respect of the contract (other than in respect of any antecedent breach). 14 The rights granted to the parties to the contracts by para 7 are repeated in para 13, headed ‘Delays and Extension of Time’. This paragraph is also highlighted in the same manner. It provides that if a delay specified therein has occurred, the ‘Developer’ may extend the date in the Conditions Precedent to Settlement. Pursuant to this power, the Developer extended the date for ‘Proposed Practical Completion’ from 29 June 2022 to 29 December 2022, the same date as the ‘Sunset Date’. Paragraph 13 also provides as follows: … PROVIDED THAT if the land is not brought to a state of Practical Completion and/or settlement does not occur by the Sunset Date (other than by virtue of a default by the purchaser), then either the Vendor or the Purchaser may at any time thereafter by notice in writing to the other determine the Contract and all money paid by the Purchaser to the Vendor under this Contract will be refunded with neither party having recourse against the other in respect of that determination. 15 Paragraph 10 of the contract is headed ‘Development Works’. Paragraph 10.1(b) reads: The developer will use its reasonable endeavours to achieve practical completion of the development by the proposed date for practical completion. 16 The building works did not reach a state of practical completion by 29 December 2022. There is no dispute about that. The applicants argue that the respondents did not use their ‘reasonable endeavours’ to achieve practical completion by then and are therefore in breach of contract. 17 On 10 January 2023, the respondents’ conveyancers gave written notice in writing to the applicants that they were exercising their right to terminate the contract, with ‘immediate effect’. The notice states that the rights to terminate the contract arise from clauses 7.2, 7.3 and 13 of the contracts. 18 The grounds stated for exercising the vendor’s rights were: 3 a. The deposit of the Community Plan at the Land Titles Office… has not been achieved by the Proposed Practical Completion Date of 29 December 2022; 3 Tender Book Volume 1, pp 301-304. -- 5 of 62 -- [2024] SADC 161 4 b. the building works have not been brought to a state of practical completion by the Proposed Practical Completion Date of 28 December 2022; c. settlement has not occurred by the Sunset Date. 19 The applicants caused a caveat to be entered upon the titles to the land to secure their asserted rights pursuant to the contracts. The caveats were warned by the respondents, and applications to extend the time for removal of the caveat and for injunctions were made to this Court. On 17 February 2023, these applications were resolved by the respondents’ giving undertakings to the Court not to sell the properties in question and other matters, whereupon the applications to extend the time for removal were not pursued. 20 The applicants have also instigated claims in estoppel by representation, or promissory estoppel, misleading and deceptive conduct contrary to the Australian Consumer Law (‘ACL’), and breach of contract. The first three of those causes of action are alleged to have arisen from certain statements made by the respondents’ real estate agent, Mr Kevin Xu, around the time that the contracts were signed. The breach of contract is alleged to consist of a failure by the respondents to use reasonable endeavours to achieve practical completion in accordance with the contract. The applicants seek declarations, orders varying the Special Conditions, specific performance of the contracts as varied, equitable or common law damages, interest and costs. 21 The respondents deny that any misrepresentations were made, or if they were made, they were made without their actual or ostensible authority, and deny that the applicants relied upon any such representations. Further, the respondents say that the project was not completed due to the unavailability of material and labour during the COVID-19 pandemic. 22 They say they used their reasonable endeavours to complete, but despite this, they were unable to so. The respondents deny liability in relation to all causes of action pleaded by the applicants and deny that the remedies sought should be granted. Chronology 23 The following is a short chronology of the significant events in this litigation. August 2020 24 Mr Prameykant Kakkad, Mrs Tejal Kakkad’s husband, became interested in the proposed development at 141-143 Anzac Highway, Kurralta Park. His interest was prompted by the advertising signs at the property. The Kakkad family lived nearby. 24 August 2020 25 Mr and Mrs Kakkad attended a meeting with Mr Kevin Xu, the real estate agent representing the respondents of the property, at the office of Prohomes -- 6 of 62 -- [2024] SADC 161 5 Realty Pty Ltd on Unley Road at Unley. At the meeting, Mrs Kakkad submitted a written offer to purchase Lot 1, or Unit 1, of the development for the price of $393,000. 12 September 2020 26 Mr Kevin Xu advised Mr Kakkad that the respondents rejected the offer of $393,000, and that their price was $399,000. 13 September 2020 27 A meeting took place, again at the office of Prohomes Realty Pty Ltd. At Mr Kevin Xu’s invitation, Mr and Mrs Kakkad were joined by the second and third applicants Mr and Mrs Vashishta, and Mr and Mrs Jayadeva. Mr Xu informed them that their offer of $399,000.00 on the conditions they requested, was accepted by the respondents. The Vashishta’s were also interested in purchasing a unit. At this meeting, Mrs Kakkad signed a contract to purchase Unit 1 for $399,000. The Vashishta’s and the Jayadeva’s did not sign a contract at that time. It is the applicants’ case that ‘the Representation’ complained of were made by Mr Xu. 19 September 2020 28 Mr and Mrs Vashishta attended another meeting with Mr Xu at Prohomes’ office. Mr Kakkad also attended. During the meeting, the Vashishta’s signed a contract to purchase Unit 6 of the development for $399,900.00. It is the applicants’ case that ‘the Representation’ was repeated by Mr Kevin Xu at this meeting. December 2020 29 Mr Kakkad contacted Mr Kevin Xu to express concern that delays in commencement of construction might prejudice their application for a Home Owner’s Grant. 20 January 2021 30 In emails sent on this date, Mr Kevin Xu sent ‘new’ contracts to Mr Kakkad and Mr Vashishta with ‘updated’ signing dates of 13 December 2020 for presentation to Revenue SA in relation to the grants. It was not suggested by any of the parties these ‘contracts’ had any legal effect.4 The contracts signed on 13 and 19 September 2020 were treated as the only relevant contracts in the litigation. May 2021 31 Building work commenced. The respondents say that the later commencement date was due to delays in obtaining final Development Approval. In an email sent on 20 January 2021, Mr Kevin Xu told Mrs Vashishta that ‘it is very slow at the moment’.5 On 8 April 2021, Mr Kevin Xu advised Mr Kakkad in 4 See Applicants’ written submissions, [86]-[87]. 5 Exhibit A1, Tab 20, p 171. -- 7 of 62 -- [2024] SADC 161 6 an email that ‘Planning SA has approved the plan’, and that ‘we are just waiting for the council to issue the DA now. Should be very soon’.6 I note that the Decision Notification form issued by Planning SA states that the Development Application was lodged with them on 6 April 2021, building consent having been obtained on that day from Clifford Young-Hendry Group Pty Ltd.7 On 15 April, Mr Kevin Xu advised that Development Approval had been achieved.8 He added, ‘Now it is about to commence construction’. 32 It was not until 4 June 2021 that Mr Kevin Xu advised Mr and Mrs Vashishta that construction had commenced. 12 April 2022 33 Mr Kakkad and Mr Vashishta had been contacting Mr Kevin Xu on various occasions expressing concern at the lack of progress in building the units. Mr Kevin Xu had offered to meet with them ‘on the instructions of the respondents to update.. the new owners’, but Mr Vashishta was in India, and could not meet until early May.9 34 On 12 April 2022, Mr Kevin Xu wrote to Mr Vashishta10 by email enclosing copies of an invoice from both builders claiming a ‘Variation (Construction Fee)’ of $50,000 for each of the 13 units in the development. The invoices were identical, except that 1884 Construction had six units, and Noble Built had seven units. 35 The main points in Mr Kevin Xu’s email were: 1. The ‘Variation’ amount was $50,000 for each unit; 2. ‘It is essential to ensure that the development proceeds’; 3. the increase was ‘an unavoidable consequence of the effects of COVID-19 on both the timeframe for the project, logistics in material supply and the building industry generally’; 4. ‘the contract provide for termination in these circumstances’; 5. ‘the Developer is keen to be able to work with you to ensure that you get the property which we are sure you have been eagerly anticipating’; 6. ‘we ask you to consider an amendment to the contract to adjust the purchase price to, in Mrs Kakkad’s case, $454,000, and in the case of Mr and Mrs Vashishta, $454,900’; 11 6 Exhibit A1, Tab 20, p 151. 7 Exhibit A1, Tab 20, p 152. 8 Exhibit A1, Tab 23, p 161. 9 Email Mr Kakkad to Mr Xu dated 8 April 2022. Exhibit A1, Tender Book, Vol 1, Tab 36. 10 Exhibit A1, Tender Book, Vol 1, Tab 37. 11 The price was inclusive of GST of $5,000 per unit. -- 8 of 62 -- [2024] SADC 161 7 7. ‘if you are unable to agree to these amendments, then the Developer will continue to comply with its obligations under the contract, but the Developer may need to terminate the contract in accordance with its terms if it is unable to satisfy the relevant conditions’. 16 May 2022 36 Mr Kakkad responded by email12 to Mr Kevin Xu’s email of 12 April 2022 and after their meeting on 12 May 2022. Mr Kakkad confirmed that he was ‘happy to cooperate’ and requested a meeting with the respondents. He requested more details as to how the $50,000 figure was arrived at, and some other details. None of that information was provided, and no meeting took place. June 2022 37 Mr Otto Zhu instructed his real estate agent, Mr Kevin Xu that he was not to take the issue of negotiating the price any further.13 29 June 2022 38 Proposed Practical Completion Date pursuant to Special Condition 10 of the contract. 5 August 2022 39 By letters on this day, the Respondents’ conveyancer advised Mr Kakkad and Mr and Mrs Vashishta that they were extending the Proposed Practical Completion Date, pursuant to clause 13.1 of the contract, to 29 December 2022. This date was also the ‘Sunset Date’ of the contract. 7 November 2022 40 Mr Kevin Xu emailed the respondents expressing his doubt that practical completion would be achieved by 29 December 2022. He said that Mr Zhu told him that he would keep him ‘updated’. 18 November 2022 41 Mr Kevin Xu emailed Mr Kakkad in answer to an email from him, advising ‘based on my experience, I guess the completion would be in March April next year’.14 29 December 2022 42 Revised Proposed Date for Practical Completion for the development and Sunset Date of the contracts. 12 Tender Book, Exhibit A1, Vol 1, Tab 38. 13 T465. 14 Exhibit P1, p 269, Tab 53. -- 9 of 62 -- [2024] SADC 161 8 29 December 2022 43 Mr Kakkad sent an email to Mr Kevin Xu expressing his family’s distress at the failure to complete the project on time and requesting his help. Mr Kevin Xu responded saying that respondents ‘just got back to me that they will have a discussion about the issue and get back to me after the new year’.15 10 January 2023 44 By letter sent by email on this date, the respondents, through their conveyancers, gave notice to the applicants that they were terminating the contract, ‘effective immediately’.16 17 February 2023 45 On application by the applicant to extend caveats over the properties and for injunctions, the respondents undertook to the Court not to sell or purport to sell Units 1 and 6 of the development, and other matters. Causes of Action Unfair Terms 46 In [18], [19] and [20] of the first revised Statement of Claim (‘SOC’),17 the applicants sought to invoke s 24 of Schedule 2 of the Australian Consumer Law and s 237 of the ACL on the grounds that the Special Conditions in the contracts are unfair. 47 This cause of action was not pressed by Mr Douglas,18 counsel for the applicants, so I will not discuss it further. Promissory Estoppel 48 In [21] of the SOC, the applicants assert that the respondents are estopped from exercising their rights under the Special Conditions in the contracts because: The respondents, through their agent Mr Xu, made (the Representation) when they knew or should have known that they would be relied upon by the applicants in entering the contracts; the applicants relied upon (the Representation) and adopted the assumption that they would receive ‘the lots’ - that is, titles to their respective units; the departure by the respondents from (the Representation) in unconscionable in all the circumstances. 49 In his written submissions, Mr Gentry conveniently listed the elements of promissory estoppel as articulated by Doyle J in Manassen Holdings Pty Ltd v 15 Exhibit P1, pp 293-296, Tab 58. 16 Exhibit P1, p 299, Tab 59. 17 FDN 58. 18 T12. -- 10 of 62 -- [2024] SADC 161 9 Commercial and General Corporation Pty Ltd,19 quoting Aalborg CSP A/S v Ottoway Engineering Pty Ltd20 (‘Aalborg’) as follows: The elements of equitable estoppel (promissory estoppel) are: 1. The plaintiff makes a representation or engages in other conduct which is capable of occasioning the formation by the defendant of the assumption the subject of the second element; 2. the defendant forms an assumption as to the manner in which rights will be exercised or enforced; 3. the conduct of the plaintiff is a material cause of the formation of the assumption by the defendant; 4. the defendant takes or omits to take action in damage of his position in reliance on the assumption; 5. the defendant would suffer detriment if the plaintiff were permitted to depart from the assumption; 6. it would be the unjust or unconscionable for the plaintiffs to depart from the assumption. 50 Mr Douglas referred to the judgment of Brennan J in Walton Stores (Interstate) Pty Ltd v Maher,21 in which his Honour sets out a list which was expressed slightly differently, but which was to the same effect. 51 The only conduct described in [11] of the SOC which would come within the list of criteria for promissory estoppel described in the Full Court of South Australia in Aalborg quoted above are: • Mr Kevin Xu stated to the applicants that they would be assured of eventual possession of the lots if they signed the September contracts notwithstanding any terms within the Special Conditions (SOC, [11.4] in particular); and • conveyed to the applicant that the Special Conditions would not be deployed against the applicants (SOC, [21.5(vi)]). 52 I reject the suggestion that the other statements pleaded could constitute a representation as to the ‘manner in which rights are to be exercised or enforced’ as described in Aalborg. 53 I refer to the allegations that Mr Kevin Xu: 19 [2019] SASC 171, [196] – this decision was reversed on appeal (see [2021] SASCFC 40) but the approach of Doyle J to the issue of promissory estoppel was upheld (see judgment of Livesey J. at [159]). 20 (2017) 129 SASR 283. 21 (1988) 164 CLR 387; [1988] HCA 7, [34]. -- 11 of 62 -- [2024] SADC 161 10 • directed the applicants to ignore the Special Conditions; • discouraged the applicants from taking the contracts away to obtain independent legal advice; • told the applicants to not worry about the Special Conditions; • told the applicants that the Special Conditions were formalities. 54 In his written submissions, Mr Douglas confirmed the applicants’ case in equitable estoppel is:22 By reason of the conduct of Mr Xu at the 13 September 2020 meeting, the respondents caused the applicant to assume the sunset clause termination mechanism would not be deployed against them, and that the respondents are therefore estopped from relying on the express termination mechanism in the contract. 55 I agree with the submission of Mr Gentry that the applicants’ contention, thus identified, is basically that although they signed a very detailed and clearly expressed contract, with the ‘termination mechanisms’ printed in large font and highlighted, and with a signature acknowledging each special condition in turn, they considered that such key conditions in the contract did not apply to them, and would not, and should not, be enforced. 56 Also, in Walton Stores (Interstate) Ltd v Maher, Mason CJ and Wilson J said:23 … As failure to fulfil a promise does not of itself amount to unconscionable conduct, mere reliance on an executory promise to do something, resulting in the promisee changing his position or suffering detriment, does not bring promissory estoppel into play. Something more would be required. Humphreys Estate24 suggests that this may be found, if at all, in the creation or encouragement by the party estopped in the other party of an assumption that a contract will come into existence or a promise will be performed and that the other party relied on that assumption to his detriment to the knowledge of the first party. Humphreys Estate referred in terms to an assumption that the plaintiff would not exercise an existing legal right or liberty, the right or liberty to withdraw from the negotiations, but as a matter of substance such an assumption is indistinguishable from an assumption that a binding contract would eventuate… 57 Mr Gentry also referred to Seven Network (Operations) Ltd v Warbuton (No 2) in which Pembroke J said:25 As is well understood, the application of the doctrine of estoppel is circumscribed by established legal principles. For sound reasons, caution must be exercised before finding that an estoppel has been established. For if found, the effect of an estoppel will be to suspend or abrogate the valuable legal rights of a party. The quality of the evidence, the commercial reality, the inherent probabilities and the detriment to the party who seeks to 22 Applicants written submissions, [162]. 23 (1988) 164 CLR 387; [1988] HCA 7, [34]. 24 Attorney-General of Hong Kong v Humphreys Estate Ltd (1987) 1 AC 114. 25 [2011] NSWSC 386, [46]. -- 12 of 62 -- [2024] SADC 161 11 set up the estoppel, must indicate that there is a good reason why the other party should be prevented from having the full benefit of the bargain to which it originally agreed: Summer Hill Business Estate v Equitrust [2010] NSWSC 776 at [35]-[40]. In particular, an estoppel may well be difficult to establish in a formal legal relationship between arms length commercial parties, where their rights and obligations are carefully and extensively set out and formally documented: Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 at 585-6 (Kirby P). It is self-evident that, except for good reason, commercial parties do not usually conduct themselves in such a way as to forfeit their entitlement to exercise valuable legal rights. In such a case, it is necessary to scrutinise carefully the circumstances that are said to lead to the conclusion that it would be inequitable to permit a party to insist on its legal rights. 58 It is also important to recall the words of Doyle J in Manassen Holdings (supra) where his Honour said: While thus accepting at least some positive operation for promissory estoppel, I consider it appropriate to exercise caution in giving effect to this positive operation so as to ensure that promissory estoppel does not operate to outflank or undermine the well-established principles of contract law. 59 His Honour referred to Walton Stores (supra), the Commonwealth v Verwayen,26 Austotel Pty Ltd v Franklins Selfserve Pty Ltd,27 and the judgment of Pembroke J in Seven Network quoted above, and, in particular, the comments of Kirby J in Austotel Pty Ltd v Franklin Selfserve Pty Ltd:28 If courts do not show caution here they will effectively force on commercial parties terms which the court may think to be reasonable and as ought commonly to govern such a contract but which the parties have themselves held back from concluding. Moreover, the contract then enforced will not be that which the parties have concurred in but a different one, determined by the court. Misleading and Deceptive Conduct 60 The applicant’s case in misleading and deceptive conduct also relies upon the conduct pleaded in [7], [8], [11] and [12] of the SOC,29 which is the conduct said to constitute ‘the Representation’, being proved. If it has not been proved, that claim must also fail. 61 Even if the applicants prove on the balance of probabilities that the statements relied upon were made by Mr Xu were made, I reject the submission that the statement, that they were ‘assured eventually of getting the lots’ was misleading or deceptive, or likely to mislead or deceive. Reasonable Grounds 62 Firstly, I agree with the submission of Mr Gentry that the Representation, if made, was no more than a statement of opinion, or prediction, by Mr Xu which 26 (1990) 170 CLR 394, [445]. 27 (1989) 16 NSWLR 582. 28 (1989) 16 NSWLR 582, [585]-[586]. 29 SOC, [23]. -- 13 of 62 -- [2024] SADC 161 12 was consistent with his state of mind at the time. Further, it was based upon what he had been told by the respondents. Section 4 of the ACL provides: 1. If: (a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and (b) the person does not have reasonable grounds for making the representation; the representation is taken, for the purposes of this Schedule, to be misleading. 63 I find that it was reasonable for Mr Xu to rely on the information provided by the respondents, and I find that it was reasonable for the respondents to have provided the information to him. Respondents not ‘involved in Representation’ 64 The second argument put by Mr Gentry was that the respondents were not ‘involved in’ making the Representation, as alleged in [13] of the SOC. The applicants invoke s 236 of the ACL which provides: 1. If: (a) a person (the claimant) suffers loss or damage because of the conduct of another person; and (b) the conduct contravened a provision of Chapter 2 or 3; The claimant may recover the amount of the loan or damages by action against that other person, or against any person involved in the contravention. 65 Section 2 of the ACL defines ‘involved’ as follows: A person is involved … if the person: (a) has aided, abetted, counselled or procured the contravention; or (b) has induced, whether by threats or promises or otherwise, the contravention; or (c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or (d) has conspired with others to effect the contravention. 66 I agree that the applicants have not pleaded the manner in which the applicants were alleged to have been involved in the alleged contravention. I agree that none of the four criteria in the definition in s 2 of the ACL quoted above have been specifically proved against the respondents. For these additional reasons, the applicants’ claim pursuant to the ACL must fail in any event. -- 14 of 62 -- [2024] SADC 161 13 The Representation 67 The ‘Representation’ was defined in [11] of the SOC as follows: At the Meeting30, Mr Xu, after presenting the September Contracts to the applicants: 11.1 directed the applicants to ignore the Special Conditions; 11.2 asked the applicants to sign the September contract at the Meeting; 11.3 discouraged the applicants from taking the September contracts away with them to obtain independent legal advice; 11.4 stated to the applicants that they would be assured eventual possession of the lots if they signed the September contracts.” Particulars At the meeting, after the applicants were presented the September contracts to sign, Mr Kakkad noticed the Special Conditions and asked Mr Xu to explain them. In response, Mr Xu said words to the effect of: Do not worry about Special Conditions, they are just formalities. Just sign the contract and you will get the properties. Everything will be fine. 68 The SOC also provides in [12] that the ‘Representation’ was: In engaging in the conduct pleaded at paragraph 11, the respondents and Prohomes (or one of them) represented to the applicants that, if the applicants signed the September contracts, the applicants would be assured possession of the Lots notwithstanding any terms within the Special Conditions. (The Representation). 69 In his written submissions, Mr Douglas refined his clients’ case even further. He put his clients’ case in this way: 31 By reason of the conduct of Mr Xu at the 13 September 2020 meeting, the respondents caused the applicant to assume the sunset clause termination mechanism would not be deployed against them, and that the respondents are therefore estopped from relying on the express termination mechanism in the contract. The Evidence 70 There is a dispute about whether or not the alleged ‘Representation’ were made at all. Mr Kevin Xu flatly denied that he made them. 71 There were at least six adults at the 13 September 2020 meeting, possibly seven on the applicants’ side, and Mr Kevin Xu on the respondents’ side. The seventh person on the applicants’ side was, on Mrs Kakkad’s evidence, 30 Defined in [7] as the meeting held on 13 September 2020 at which Mrs Kakkad signed her contract. 31 Applicants’ written submissions, [162]. -- 15 of 62 -- [2024] SADC 161 14 Mrs Jayadeva’s sister.32 Of those people, Mr and Mrs Kakkad, Mr and Mrs Vashishta, and Mr Jayadeva gave evidence. 72 The applicants’ evidence was riddled with contradictions and inconsistencies. 73 The person who conducted most of the negotiations with Mr Xu was Mr Kakkad. This is to be expected since he was a legal practitioner in India for 18 years before coming to Australia.33 I note Mr Douglas’ submission that Mr Kakkad ‘struggled at times with the process of giving evidence in English, which is not his first language’. Mr Douglas raised this issue at the time he called Mr Kakkad. He told me his client was concerned about how he might cope with giving evidence, and that he had persuaded his client that ‘it is much better if answers come directly from the witness’.34 He informed me that an interpreter in Mr Kakkad’s first language was in the vicinity of the court if needed. 74 I take into account when considering Mr Kakkad’s evidence that he had these difficulties, but I also take into account that he had the opportunity to obtain the assistance of an interpreter and chose not to avail himself of that assistance, except to a very limited extent. 75 Mr Kakkad practiced in the Gujarat High Court in India. He practised ‘on the civil side’ and in motor accident cases until 2018 when he moved to Australia with his family. In 2022, he became a qualified conveyancer. Having regard to these matters, I am satisfied that Mr Kakkad has more knowledge of legal principles and practices than a person without training would have. I do not accept his protestations of ignorance of Australian contract law when he was questioned about Mr Xu’s alleged misrepresentations. 76 Mr Kakkad’s evidence from his trial affidavit35 was: • On 24 August 2024 he and his wife attended a meeting at Prohomes’ office at which Mrs Kakkad signed an ‘expression of interest’ in Lot 1 of the development;36 • he also received a marketing brochure;37 • he and his wife discussed the property and decided it was ‘perfect for us’; • Mr Xu told them they had all approvals from the Council; 32 T73. 33 T58. 34 T58. 35 Exhibit A5. 36 Exhibit A5, Attachment PK-2. 37 Exhibit A5, Attachment PK-3. -- 16 of 62 -- [2024] SADC 161 15 • Mr Xu said construction would start ‘very soon – before December 2020’; • after this discussion he asked his wife to sign the ‘offer letter’ for $393,000.00. Clearly, this offer was made before the alleged ‘Representation’ took place; • on 12 September 2020 in a telephone call Mr Xu told Mr Kakkad that the offer of $393,000.00 was rejected, and that the price was $399,000.00; • he and his wife discussed this maths and decided to offer $399,000.00 if the developers agreed to their condition concerning air conditioning, solar power, a second wash basin upstairs, bifold doors, double-glazed windows, and blinds were accepted. Again, this decision was made before the alleged ‘Representation’ took place; • at the meeting on 13 September 2020 his wife Tejal, their daughters, their neighbours, Mr and Mrs Vashishta and their daughters and other friends, Mr and Mrs Jayadeva and their two children were present. Mr Xu told Mr Kakkad their offer of $399,000.00 was accepted, as were their other conditions. Mr and Mrs Vashishta did not agree to sign a contract that day, Mr and Mrs Jayadeva did not do so either; • Mr Kevin Xu handed Mrs Kakkad a copy of the contract and opened it to the first page and indicated where she should sign it. Mr Kakkad said he wanted to read it. Mr Kevin Xu said it was ‘just a formality’ and ‘you do not need to read it’. Then he gave the contract to Mr Kakkad and he ‘looked through it’. He saw special conditions in larger font and bolded. They were around page 14 or 15. He and Mr Vashishta ‘objected’ to these conditions. Mr Kakkad said ‘I do not consent to these terms’, and Mr Vashishta said the same thing; • Mr Xu replied that they should ‘ignore the special conditions clauses, they are just formalities’. He said they would ‘definitely get possession of the Lots’. He also said ‘you will get possession around mid-2021, it is just formally written with a Sunset Date in December 2022’; • Mr Kakkad said that he knew that in order to get the Home Builders Grant, construction needed to start within 3 months; • Mrs Kakkad signed the contract on each page and initialled the Special Conditions as well. Mr Xu did not explain the clauses as she signed it; • at another meeting on 19 September 2020, Mr Kakkad attended with Mr and Mrs Vashishta and their daughter. Mr Vashishta had requested that Mr Kakkad attend so they could get the same changes to their contact for Lot 6; -- 17 of 62 -- [2024] SADC 161 16 • Mr Vashishta expressed concern to Mr Xu about the Special Condition at this meeting as well. Mr Xu replied in the same way, namely that they ‘did not need to worry’, they ‘would definitely get the Lots’, ‘it is a fixed price contract’, ‘construction will start in December 2020’, and ‘the Special Conditions clauses are just formalities’; • Mr and Mrs Vashishta signed the contract for their unit at this meeting; • Mr Xu emailed the contract to Mr and Mrs Kakkad on 15 September 2020. The Form 1 vendor statement was sent at a date later in September. Mrs Kakkad agrees and returned that to Mr Xu; • On 2 October 2020, Mr Kakkad paid the 5% deposit due under the contract. 77 Some aspects of Mr Kakkad’s evidence are as follows: • he contradicted himself about being told by Mr Xu that all council approvals had been obtained.38 In evidence he said that he knew that all approvals had not been obtained, and that more were required before construction commenced;39 • he and his wife decided to buy the unit during the 24 August 2020 meeting with Mr Xu which was before the ‘Representations’ were allegedly made on 13 September 2020. On 24 August, they made an offer to buy the property for $393,000.00 which was rejected by the respondents; • he and his wife decided to accept the counter-offer by the developers of $399,000.00, provided their conditions concerning air-conditioning, solar power, a second washbasin, bifold doors, double-glazed windows and blinds was accepted.40 This was also prior to the 15 September meeting; • he contradicted himself several times about whether he looked through the contract before his wife signed it on 13 September 2020. He said he did not read it because Mr Xu did not give him the chance to do so.41 In his trial affidavit, he had said that he saw the Special Conditions in the contract ‘as I was looking through the contract’. Then he said he looked at it but didn’t ‘go through it’. He just ‘flipped it’.42 Later,43 that he also didn’t read Special Condition 13, even though his wife initialled the clause immediately below it. Then he said he did read the clause and queried it with Mr Xu.44 Then he said he only saw the date, 29 December 2022, the ‘Sunset Date’ in the 38 Trial affidavit Exhibit A5 (FDN 94), Exhibit PK-4. 39 T70. 40 T65. 41 T83. 42 T82-83. 43 T131. 44 T136. -- 18 of 62 -- [2024] SADC 161 17 contract. He queried it because it was a long time away, but he accepted it because Mr Xu assured him it would be completed before then;45 • Mr Kakkad’s evidence about the ‘file note’46 which he kept of the 13 September 2020 meeting was also contradictory and unsatisfactory. Commencing at the second dot point, the note reads: • Me and my wife go through contract on page 14 and 15 we object condition 6 regarding price but Mr Kevin replied this only formality47 you ignore it. It is fixed price contract and by end of next year you get ready we are behaving in quality and service. Once sign contract, we never hike price… • … • Above all statement given by Kevin in presence of me, my wife Tejal … Kevin promised this is fixed price contract. • Due to short time we did not … to read all pages properly but we did … confirm with Kevin regarding price, construction quality, additional changes as promised and … ready Dec 21 to May 22. • Mr Kakkad said that he made these notes after he received a copy of the contract on 15 September 2020.48 He later said that he made the notes during the evening of 13 September 2020. Leaving this inconsistency to one side, clearly the note was made soon after the 13 September 2020 meeting, when Mr Kakkad’s memory would have been fresh. • Significantly, the notes make no mention of the Sunset Date, or any other Special Conditions in the contract. • Even more significantly, the notes make no mention of Mr Kakkad asking Mr Kevin Xu about any of the Special Conditions in the contract. However, they make specific mention of him questioning Mr Kevin Xu about condition 6 of the general conditions, and the notes are factually correct in the sense that condition 6 is on p 14 of 73 pages.49 • The context of the file note indicates that if Mr Kakkad raised any objection to one or the conditions in the contract, it was to condition 6 on p 14, and not to the Special Conditions which do not commence until Annexure 1 of the Contract, which follows p 30 of 73; 45 T138. 46 Tender Book, Exhibit A1, Tab 5. 47 Mr Kakkad’s handwriting is obscure here, but he confirmed in evidence that the word is ‘formality’. 48 T87. 49 Tender Book, Exhibit A1, Tab 77. -- 19 of 62 -- [2024] SADC 161 18 • Mr Kakkad’s explanation for the fact that there was no mention of the Special Conditions in the file note because Mr Kevin Xu told him to ignore them50 was ludicrous, and did him no credit; • Mr Kakkad’s evidence that he objected to the Special Conditions was also contradicted by the evidence in his trial affidavit51 in which he deposed that the conditions he objected to were around pp 14 or 15 of the contract.52 The affidavit was consistent with the file note in this respect; • Mr Kakkad was also contradicted by his friend Mr Jayadeva, who said he saw Mr Kakkad ‘going through the contract and asking questions’,53 although he also tried to backtrack to some extent by saying that Mr Kakkad was ‘skimming the contract’;54 78 These aspects of Mr Kakkad’s evidence reflect very seriously upon the credibility and reliability of Mr Kakkad’s evidence. 79 I reject Mr Kakkad’s evidence that he did not read the contract and that he did not understand its terms, particularly in relation to the Sunset Date. Mr Kakkad explained the contract to his wife and told her that it was appropriate that she sign it. She proceeded to initial every page, and sign the contract in his presence. 80 Even if his evidence was true, and he did not read the contract before his wife signed it, the issue must be considered in the light of the law of contract as it has been explained by the High Court in Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd:55 40. This Court, in Pacific Carriers Pty Ltd v NP Paribas56 has recently reaffirmed the principle of objectivity by which the right and liabilities of the parties to a contract are to be determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.57 … 50 T93. 51 Exhibit A5, [29]. 52 Exhibit A5, [29]. 53 T106. 54 T106. 55 (2004) 219 CLR 165 at [40], [43], [46]; [2004] HCA 52, [40], [43], [46]. 56 [2004] HCA 34. 57 Pacific Carriers Ltd v BNP Paribas (2004) 78 ALJR 1045 pp 1050-1051 [22]; 208 ALR 213, [221]. -- 20 of 62 -- [2024] SADC 161 19 43. More recently, in words that are apposite to the present case, in Wilton v Farnworth58 Latham CJ said: “In the absence of fraud or some other of the special circumstances of the character mentioned, a man cannot escape the consequences of signing a document by saying, and proving, that he did not understand it. Unless he was prepared to take the chance of being bound by the terms of the document, whatever they might be, it was for him to protect himself by abstaining from signing the document until he understood it and was satisfied with it. Any weakening of these principles would make chaos of every-day business transactions.” … 46. The statements in the above authorities accord with the well-known principle stated by Scrutton LJ in L'Estrange v F Graucob Ltd59 ("L'Estrange v Graucob") that "[w]hen a document containing contractual terms is signed, then, in the absence of fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly immaterial whether he has read the document or not." 81 On the basis of those principles, it is immaterial whether Mr Kakkad read the contract or not, before instructing his wife to enter the contract, and it is immaterial for the same reasons whether Mrs Kakkad had read the contract before she signed it. 82 Some further aspects of Mr Kakkad’s evidence are as follows: • the allegation in [11.3] of the SOC, that Mr Kevin Xu ‘Discouraged the applicants from taking the contracts away with them to obtain independent legal advice’ is not consistent with Mr Kakkad’s evidence. He did not say he needed the opportunity to obtain legal advice. Mr Kevin Xu told him that he would have the contract signed by Mr Otto Zhu, and would then send it to Mr Kakkad by email.60 Mr Kakkad acknowledged that he received the signed contract and the Form 1 – Vendors Statement in late September 2020.61 The provision of that statement gave Mrs Kakkad another two business days to cool off. That gave them about two weeks to seek legal advice if they wished to; • Mr Kakkad contradicted his own trial affidavit when he denied that his wife signed the Form 1.62 A signed copy of the Form 1 was an appendix to the affidavit.63 He then said that he didn’t go through the form ‘clearly’, he didn’t obtain any advice about it. He didn’t ask a lawyer for advice. He didn’t ‘cool off’ because ‘I’m not aware regarding this’;64 58 (1948) 76 CLR 646, [649]; [1948] HCA 20. 59 [1934] 2 KB 394, [403]. 60 T30. 61 T192. 62 T192. 63 Exhibit A5, Annexure PK8. 64 T194. -- 21 of 62 -- [2024] SADC 161 20 • Mr Kakkad’s evidence that Mr Kevin Xu told him to ignore the Special Conditions because they were a ‘formality’ was vague and confusing. He seemed to regard the words ‘formality’ and ‘formal’ as interchangeable. His evidence was that Mr Kevin Xu’s words were:65 It is a formal contract. Its (a) formality. You can sign it now and you will get the lots. • In cross-examination,66 he said Mr Kevin Xu’s words were: Its formality. It is formal contract … you will definitely get the lots. 83 The last passage suggests to me that Mr Kevin Xu was saying ‘it is a formal contract – you can rely on it’, rather than ‘it is just a formality, you can ignore it’. 84 I conclude that Mr Kakkad’s evidence about these events, and particularly about what occurred at the meetings on 13 and 19 December 2020 is unreliable and without credibility. Contamination of Evidence – Mrs Kakkad 85 In cross-examination, Mr Kakkad denied discussing his evidence with his wife, or that she had discussed her evidence with him.67 Mrs Kakkad contradicted him about that.68 86 Mrs Kakkad made it clear that she deferred to her husband in relation to the contract to purchase their unit, even though she was the person who signed the contract on their behalf.69 87 Mrs Kakkad also said that she was struggling to remember what happened, and that she was ‘not that much involved with all their things’. 88 In her affidavit sworn on 5 December 2023,70 Mrs Kakkad deposed: I was at the (13 September 2020) meeting with my husband, and I remember Pramaey and Arun (Vashishta) talking with Kevin (Xu) about different things. I do not recall exactly what they discussed but recall an assurance by Kevin to the effect that we would have the property. I would not have signed without that assurance. I signed the contract after my husband had talked with Kevin. Rita (Vashishta) and I let our husbands do most of the talking with Kevin. 89 In her later affidavit sworn on 6 May 2024,71 Mrs Kakkad provided a little more detail about the meeting. Mrs Kakkad deposed: 65 T141. 66 T141. 67 T214. 68 T241. 69 T189. 70 Exhibit R8, [3]. 71 Exhibit A7. -- 22 of 62 -- [2024] SADC 161 21 13. At this (13 December 2020) meeting, I remember speaking with my husband Pramey. Kevin asked me to sign the contracts and told me that the contracts were okay to sign. I remember this occurred after Pramey, Arun and Yogendra had been speaking to Kevin and Peggy for maybe for about one hour. 14. … 15. I do not remember much else about this meeting because I was taking care of my children at the time. I believe Rita and I were taking of the children while our husbands spoke with Kevin and Peggy. 16. I only remember some assurance by Kevin to the effect that “we would have the property” because he said this a couple of times before I signed. I think he said this after Pramey asked him some question about the contract. I remember Kevin said to Pramey you can sign now and read it later. I heard Pramey talking about some points about the Special Conditions with Kevin, but I do not know what about. 90 Mrs Kakkad admitted in cross-examination that the extra information in the May 2024 affidavit was the result of her memory being ‘improved’ as a result of discussion with her husband.72 91 At another stage of her evidence Mr Kakkad insisted that she could remember that both Mr and Mrs Vashishta were present at the first meeting with Mr Kevin Xu on 24 August 2020. In cross-examination she said, ‘No, they were not there’.73 92 Then, when questioned further, she said ‘I mean, I need to discuss this with my husband’. 93 I find that Mrs Kakkad’s evidence does not assist her husband’s version of events. It is highly likely that she does not have any real memory of the incident, and that her recollection was contaminated by discussion with her husband, and, as I will presently discuss, reading his affidavit. Contamination of Evidence – Mr Vashishta 94 Mr Arun Vashishta, the second applicant, also had a confused recollection of events, and was clearly trying to support the applicants’ case by clinging to the key points in Mr Kakkad’s evidence. 95 Mr Vashishta’s evidence about the meeting with Mr Kevin Xu, commencing with 13 September 2020, in his trial affidavit74 was: • the wives took care of the children while Mr Kakkad and Mr Jayadeva spoke with Mr Kevin Xu and Ms Peggie Sim; 72 Affidavit Exhibit, A7, [8]; T222-2213. 73 T224. 74 Exhibit A9. -- 23 of 62 -- [2024] SADC 161 22 • Mr Kakkad asked most of the questions because he was studying conveyancing; • Mr Xu told them about the Home Builders Grant and the First Home Owners Grant; • Peggie Sim left the room to prepare the contract for Mr and Mrs Kakkad; • Mr and Mrs Vashishta were not ready to sign a contract at that meeting; • Mr Xu said the contract was a ‘generic, fixed price contract’; • Mr Kakkad revised the contract. He said there were Special Conditions in bold and bigger font. He said there was a Sunset Clause in the contract; • Mr Xu said the Special Conditions were generic, do not worry about it, you can ignore the Special Conditions; • both Mr Kakkad and Mrs Vashishta said they did not want the Special Conditions but Mr Xu said we don’t need to worry about them; • on 19 September 2020, Mr Kakkad attended with Mr and Mrs Vashishta so that they would get the same conditions as Mr Kakkad had negotiated for his unit; • the same changes were made to the Vashishta’s contract, then Mr Kakkad ‘directed’ Mr and Mrs Vashishta to sign their contract; • Mr Xu emailed a copy of the contract, with the Form 1 on 21 September 2020, Mrs Vashishta signed the Form 1 and returned it to Mr Xu. 96 It can be seen that Mr Vashishta’s statement is different in several respects from Mr Kakkad’s evidence, particularly in relation to the use of the word ‘generic’, the fact that Mr Kakkad ‘went through’ the contract, and that he mentioned the Sunset Date to Mr Vashishta. Having signed his own contract six days earlier, Mr Kakkad approved and encouraged Mr Vashishta to sign an identical contract. 97 Mr Vashishta used the words ‘a generic contract’, and clauses in the contract which are ‘formalities’, interchangeably. He said:75 Q I’m trying to understand whether Kevin used the word “formalities” or not. A Best of my knowledge, I remember he says these terms are okay, it's a normal course of way of making a contract to buy these type of land and house package, my honour. 75 T265. -- 24 of 62 -- [2024] SADC 161 23 Q So Kevin was trying to reassure you that the written terms were normal or generic, is that right. A Yes, generic, yes. This is how the contracts are made and he showed that this is general contract which is used to - for these type of developments. Q And that's what you say at the start of para.14.76 You say 'I remember Kevin said the contract is a generic, fixed-price contract'. A Yeah, he said is a generic contract. Q That is different from you remembering Kevin using the word 'formalities', isn't it. A The other way of - the other word, my honour, to say that these type of clauses are there in these contracts, it can be, my honour, formalities and a generic contract. 98 Again, it is not clear to me from Mr Vashista’s evidence that, in context, the use of the word ‘formalities’ implies that Mr Kevin Xu was saying, if he did say it, that the conditions of the contract could be ignored, or that the respondents’ rights would not be exercised against the applicants. 99 Mr Vashishta later gave very confusing evidence about whether the Sunset Clause was mentioned in conversation with Mr Xu at the 19 September 2020 meeting. He repeated several times that the Special Conditions were ‘formalities’ as discussed earlier, but when pressed about whether the Sunset Clause was specifically mentioned, Mr Vashishta was evasive and refused to depart from the generalities in his earlier answer.77 100 Mr Vashishta gave me the clear impression that he did not have any real memory of these discussions, and that he was clinging to key points, as I have already mentioned. It is clear that he has discussed these issues with Mr Kakkad on many occasions, and, like Mr Kakkad, he was preoccupied with ensuring that the property met his requirements, rather than with the terms of the contract. Contamination of Evidence – Mrs Vasishsta 101 Mrs Rita Vashishta was also present at the 13 September 2020 meeting. I found Mrs Vashishta to be the least voluble and most reasonable of the applicants’ factual witnesses. She is an accountant. She said that she and her husband attended the meeting on 12 September 2020 to find out about the property, but they had not sorted out their finances, and could not commit to a purchase on that day. She deposed in her May 2024 affidavit:78 After the initial introduction from Kevin, Pramey, Arun and Yogendra (Jayadeva) had more questions about the development. Teyjal (Kakkad) and I (had) moved away from the table and were supervising the children. My husband and Yogendra continued to speak with 76 Exhibit A9. 77 See T271–273. 78 Exhibit A11, [11]. -- 25 of 62 -- [2024] SADC 161 24 Kevin and Peggie but I was not involved in any detailed discussion with Kevin or Peggie. I did not ask questions to them about the property. 102 Mrs Vashishta added:79 I remember Pramey discussing some changes to the contract for Lot 1. I do not remember what the changes were, but I remember them being discussed because my husband asked me if we wanted the same changes. I heard Pramey ask Kevin about some Special Conditions, and I heard Kevin say Pramey can ignore those conditions and he will get the house. 103 Mr and Mrs Vashishta returned to the Prohomes office on 19 September 2020 with Mr Kakkad. She and her husband signed the contract on that day. Her description of the meeting was as follows:80 I recall at the meeting on 19 September 2020, my husband asked Kevin about some special conditions in the contract. I understood from what my husband said to Kevin that a similar conversation took place at the meeting on 13 September 2020. Kevin said in response to Arun’s questions that “yes, these conditions are just formalities, ignore the special condition, and you will definitely get the lots”. I then asked about when we would get the lots, Kevin replied “constructions starts in December 2020, and you will get the lots by mid-2021”. Kevin went on to say words to the effect of “the dates in the contracts don’t mean much”, I understood the date he was talking about to be the Sunset Date of 29 December 2022. I also remember Kevin saying “not to worry” and “just trust him”. I recall that I signed the contract after Kevin spoke these words. 104 Mrs Vashishta said they received the signed copy of the contract by email on 21 September 2020, and the formal vendor statement on 29 September 2020. 105 Mr Arum Vishishta signed the vendor statement on that date.81 106 When giving evidence in cross-examination, Mrs Vashishta walked back from some of the above statements in her affidavit. In particular, she conceded that she no longer had a memory of the exact words used by Mr Xu. She said the ‘gist’ of the conversation was that the Special Conditions had no relevance.82 She conceded that Mr Xu may not have used the word ‘formalities’. She said:83 Q You say 'Kevin said "Ignore the special conditions". A Yes. Q You understood him to mean, by 'ignore them', that they are very unlikely to be a problem in the future. 79 Exhibit A11, [14]. 80 Exhibit A11, [17]-[18]. 81 Tender Book, Exhibit A1, p 183. 82 T314. 83 T317. -- 26 of 62 -- [2024] SADC 161 25 A Yes, that's what my interpretation was. Q And your interpretation was that, whilst they would be unlikely to be a problem, they still needed to be formal terms of the contract. Do you agree with that. A Yes. Q And that means you understood that they would be binding terms. A I don't deny what is being said, but I would like to say something. That was the first house that we bought after we came to Australia. We were not familiar with how the contracts are drafted, what are the clauses in it, so though there were certain clauses that we did not understand fully, we went, or we accepted Kevin's statement, sunset clause was one of them. 107 Although I found Mrs Vashishta to be a straightforward and honest witness, I have no doubt that some of the evidence in her affidavit, and her evidence in court has been reconstructed and bolstered particularly by the affidavit of Mr Kakkad. I will presently discuss the contamination of evidence as it applies to Mrs Vashishta, as it does to all of the other witnesses for the applicants. Contamination - Affidavits 108 I agree with the submission of Mr Gentry that the process by which the various affidavits were prepared and put before the court was inappropriate and improper. He cited the following passage from Day v Perisher Blue Pty Ltd:84 It has long been regarded as proper practice for legal practitioners to take proofs of evidence from lay witnesses separately and to encourage such witnesses not to discuss their evidence with others and particularly not with other potential witnesses. For various reasons, witnesses do not always abide by those instructions and their credit suffers accordingly… 109 Contrary to this principle, reference was had by each of the applicants to the affidavit of Mr Kakkad sworn in January 202385 when their own affidavits were being prepared. 110 For example, Mrs Tejal Kakkad deposed in her affidavit sworn on 5 December 2023 that she had no recollection of what was discussed by her husband and Mr Vashishta and Mr Xu. Then Mrs Kakkad deposed:86 I have read the affidavit of my husband. I agree with what my husband says in his affidavit. 111 In my view, this statement, when coupled with her earlier statement that she had no recollection, renders any later purported recollection by Mrs Kakkad worthless. 84 [2005] NSWCA 110, (2005) NSWLR 731, [30] per Sheller JA. 85 Exhibit R4. 86 Exhibit R12, [3], [9]. -- 27 of 62 -- [2024] SADC 161 26 112 When cross-examined about this statement, Mrs Kakkad denied that she had read her husband’s affidavit,87 directly contradicting her own affidavit. She then conceded she ‘might have read it but she did not remember at the moment what he has written particularly in that affidavit’.88 She then admitted she did read it.89 113 The same can be said of the affidavit of Mr Vashishta sworn in January 2023:90 The same sequence of events as described in the affidavit of Prameykant Kakkad (Pramey) occurring on the 13 September 2020 occurred at a meeting on 19 September 2020 with Kevin Xu and Peggie Sims where my wife and I signed the contract for lot 6. I was present at the meeting with Pramey on 13 September 2020 and Pramey was present at the meeting on 19 September 2020 when I signed the contract. I have read Pramey’s affidavit affirmed on 31 January 2020. I believe the facts deposed in Pramey’s affidavit are true and accurate. I was present and involved in all the meetings described in Pramey’s affidavit except for Pramey’s meeting with Kevin regarding further costs of materials held or around 12 May 2021. Everything else described by Pramey in his affidavit, I can confirm personally. 114 Mrs Rita Vashishta deposed in her affidavit sworn in December 2023:91 I have read the affidavit of Pramey and I agree with the accuracy of Pramey’s content. 115 Mrs Vashishta also referred to conversations with her husband and Mr Kakkad about these events:92 Kevin did not ever change his position and tell that it was possible that we would not get the lots, or that there were any problems with the respondents. My husband and Pramey would tell me about their conversation with Kevin. Presence of Ms Peggie Sim 116 Another example of this contamination is demonstrated by the evidence about the presence or absence of Ms Sim at the 13 September 2020 meeting. Ms Sim was an employee of Prohomes Realty Pty Ltd, the selling agent. The respondents demonstrated by unchallenged evidence that Ms Sim was not present at that meeting.93 Without going into too much detail, the applicants’ affidavits were replete with references to Ms Sim being present at the meeting.94 87 T243. 88 T243.34. 89 T244.11. 90 Exhibit R10, [3]-[5]. 91 Exhibit R12, [16]. 92 Exhibit R12, [12]. 93 Exhibit R15 - Ms Sim’s affidavit. 94 Exhibit A3, R6, A7, A9, R10, A11. -- 28 of 62 -- [2024] SADC 161 27 117 For example, in his affidavit sworn on 24 November 2023, Mr Kakkad referred to ‘two meetings with Kevin Xu and Ms Sim from Prohomes in September 2020’.95 118 Mr Kakkad’s response to cross-examination on this topic was highly unsatisfactory.96 When asked an open question about where people were sitting at the meeting on 13 September 2020, he said that Ms Sim was sitting on the other side of the table to him. Then he said:97 Yeah, according to my memory Peggie is there but I can’t remember at that moment. 119 Then he began backtracking, saying: Because I met Peggie three, four times and in beginning there are other lady, two or three ladies similar faces there in the reception agency, so I think Peggie is there according to my knowledge. 120 Mr Kakkad had made no mention of Ms Sim being present at that meeting in his trial affidavit.98 He had been told by his lawyers that Ms Sim had filed an affidavit in which she deposed that she was not present at the meeting and was in fact overseas.99 She gave evidence to the same effect and was not challenged in cross-examination on this topic.100 Later, Mr Kakkad said that he didn’t know what was in Ms Sim’s affidavit.101 He denied having discussed the matter with Mr and Mrs Vashishta and with his wife.102 I found his evidence unconvincing. He was clearly backtracking from his earlier evidence to account for Ms Sim’s evidence that she was not present. 121 The same can be said for the evidence of Mr Jayadeva, when he backtracked from his clear statements in his affidavit that Ms Sim was present.103 122 Mrs Kakkad’s evidence on this topic was also very unsatisfactory. Despite clear statements in her affidavit104 that Ms Sim was present, she quickly went from being not sure, to conceding that the affidavit was incorrect. Then Mrs Kakkad reverted to her position that Ms Sim was present105 finally conceding that this may have been wrong.106 95 Exhibit R6, [4]. 96 T76-78, T167. 97 T76. 98 Exhibit A5, sworn 6 May 2024. 99 Exhibit R15. 100 T503-505. 101 T78. 102 T79. 103 T118-119. 104 Exhibit A7, [15], [17]. 105 T235. 106 T236. -- 29 of 62 -- [2024] SADC 161 28 123 Likewise, Mr Vashishta’s reaction to cross-examination on this topic was highly unsatisfactory.107 124 Mrs Vashishta’s evidence was also less certain than was expressed in her affidavits. She said that she thought the woman present was Ms Sim, and conceded she was ‘not sure’.108 125 I agree with Mr Gentry’s submission that the evidence given by these witnesses about the presence or otherwise of Ms Sim at the 13 September 2020 meeting is a clear example of how Mr Kakkad’s obviously incorrect evidence on the topic has contaminated the memories of the other witnesses to the extent that I am unable to rely on their evidence. 126 There are other areas where there have been blatant inconsistencies in the evidence of the applicants, particularly as to who else was present at the September 2020 meetings, and between the content of various affidavits with trial evidence. It is not necessary to canvas them in further detail. 127 It is sufficient to indicate that I do not place weight upon any of the evidence of the applicant’s witnesses for the reasons expressed above. Mr Xu’s evidence 128 As I have previously mentioned, Mr Xu denied that he made the alleged ‘Representation’. In view of my findings about the strength of the applicant’s case on that topic, I will need to discuss Mr Xu’s evidence only briefly. 129 Mr Xu said in his trial affidavit,109 sworn in May 2024, that he worked as a real estate agent for nine years until he resigned as a director of Prohomes Realty Pty Ltd in January 2024. In 2020, he had a contract with the respondents to sell the townhouses at Anzac Highway, Kurralta Park. Lots 1 and 6 were part of the group to be sold. 130 Mr Xu described the meeting with Mr and Mrs Kakkad on 24 August 2020 where he explained the project and supplied them with a sale brochure and the drawings and specifications for the development. He said that Mrs Kakkad submitted an offer to purchase Lot 1 for $393,000. Ms Sim was present at this meeting. The respondents rejected the offer and instructed him that they would accept $399,000. 131 Mr Xu also described the 13 September 2020 meeting. He remembered that Mr and Mrs Kakkad and Mr and Mrs Vashishta were also present but could not remember anyone else. He confirmed that Ms Sim was overseas on that day. 107 T207-269. 108 T312. 109 Exhibit R14. -- 30 of 62 -- [2024] SADC 161 29 132 Mr Xu said that Mr Kakkad did most of the talking to him. He said he produced a clean ‘template’ of the sale contract to Mr and Mrs Kakad. Mr Kakkad read through the contract and discussed it with his wife. Mr Kakkad looked at the Special Conditions in the contract. He asked when construction was likely to finish. They discussed some extras such as bifold doors in the loungeroom and a washbasin near the dining room. These were added as an addendum. They discussed a commencement date for the building work which was relevant to their application for a Home Owners’ Grant. 133 Mr Xu said that Mrs Kakkad signed the contract at the meeting. She went through the contract page by page and initialled each one. Mr Kakkad was present when she did that. The Special Conditions were in bold printing and in a larger font than the rest of the contract. Each Special Condition had to be initialled as well. Mrs Kakkad signed each Special Condition. Mr Xu said he read out the Special Conditions aloud before she did so and Mr Kakkad was present when he did so. 134 As to the meeting on 19 September 2020, Mr Xu said that Mr and Mrs Vashishta requested the same conditions in the contract as Mr and Mrs Kakkad had requested, including the bifold doors and the washbasin. They also requested a condition that construction would commence within three months to qualify for the Home Owners’ Grant. 135 Mr Xu said he followed the same procedure in relation to signing the contract as the one he had followed on 13 September 2020. Mr and Mrs Vashishta went through the contract and signed each page. Mr Kakkad was present when they did that. Mr Xu said he read aloud each of the Special Conditions which were in bold print and larger font. He told them the conditions were significant and each one needed to be initialled. Mr and Mrs Vashishta signed rather than initialled the Special Conditions. 136 Mr Xu denied each and every allegation in the SOC which is said by the applicants to comprise ‘the Representation’ in relation to both the 13 and 19 September meetings. 110 In particular, he said he was not familiar with the word ‘formality’ and did not use it.111 He said:112 I never said just trust me, nothing will go wrong. I am an experienced agent. I don’t believe in communicating this way and would never say this. To me, speaking like this would undermine trust with a potential buyer, it would not improve trust. The buyers in this case were not friends or family or known to me. I always speak carefully and professionally. The purchaser has to be well-informed and make their own decisions. I don’t want purchasers to make a decision based on me saying something like ‘trust me’. 110 T441-447. 111 Exhibit R14, [33a-i.]. 112 Exhibit R14, [33j]. -- 31 of 62 -- [2024] SADC 161 30 137 Mr Xu said he gave Mr and Mrs Kakkad the following information:113 • the contract was (for) a fixed price; • construction would start in December 2020 (this was what he was told by the respondents); • construction may take 18 months (the Proposed Practical Completion Date in the contract was 29 June 2022); • to get the Home Owners’ Grant, construction was required to start within three months; • he explained Mrs Kakkad’s cooling off rights to her - once the respondents had signed, the conveyancer would prepare a Form 1 vendor statement which would take about one to seven days. From receiving the Form 1, she had two more business days to cool off and that she could withdraw from the contract at any time throughout this period. 138 Mr Xu said he gave the same information to Mr and Mrs Vashishta at the 19 September 2020 meeting.114 He said the Form 1 was sent to both Mr and Mrs Kakkad and Mr and Mrs Vashishta on or about 25 September 2020. 139 Mr Xu said that both contracts were redrawn in December 2020 because construction had not commenced. The applicants were concerned because the Home Builder Grant would not be paid unless construction commenced within three months of the contract being signed. Mr Xu proposed that the contract be redrawn and re-signed to avoid this difficulty. The respondents agreed. The contract with Mrs Kakkad was re-signed on 13 December 2020, and the contract with the Vashishta’s was re-signed on 19 December 2020. The contracts were identical, and no charge was made for the change.115 Inconsistencies in Mr Xu’s evidence? 140 It was asserted by the applicants that one inconsistency in Mr Xu’s evidence was that in his affidavit116 he stated: 33d. I never pressured or rushed Prameykant and Tejal (Kakkad) to sign the Lot 1 contract without reading it. 141 This was in direct response to the assertion in [11] of the SOC that he ‘directed the applicants to ignore the Special Conditions’, ‘asked (them) to sign the contracts at the meeting’ and ‘discouraged (them) from taking the contracts away with them to obtain independent legal advice’. 113 Exhibit R14, [34]. 114 Exhibit R14, [43]. 115 T446. 116 Exhibit R14. -- 32 of 62 -- [2024] SADC 161 31 142 In cross-examination, Mr Xu said:117 Q You encouraged the Kakkad's to sign the contract on the spot, didn't you. A On the spot, this means on the same time or - HIS HONOUR Q Straight away. A Straight away. No, no, no, no. We just list this ... to me. If you want to sign, of course, we welcome you to sign. But if you don't want to sign, we won't say anything. XXN Q You didn't discourage the Kakkad's from signing the contract before they'd had the opportunity to read it, did you. A No, I didn't. I didn't discourage them to sign before they read it. Actually, I give - I give the contract for them. They actually is reading all the condition, and that's their choice if they want to sign or doesn't want to sign. Also, I have to say, even they want to sign this contract, is not the - I say it's not a lock-in contract because I still have to present to the developer for signing the contract, and then the developer's comments 'We're starting to prepare form 1', which is actually take upon nearly 10 days for preparing form 1. Once the form 1 ready, I serve to the buyer and then they have another two days as the cooling-off period. So, the total will be 12-15 days until the contract become, I will say, lock-in contract. They have to take deposit. So, I gave them the order contract for their information as a reference. They can read through it but if they're not happy with anything, they can simply send me a email, say 'I want to withdraw the contract, withdraw the offer'. They even haven't paid a deposit yet on that period over 10 days. 143 It was suggested by the applicants that Mr Xu’s evidence about this topic suggests that he did pressure the applicants to sign the contracts, because they could always withdraw later. 144 To the extent that Mr Xu’s evidence was inconsistent with the statement in his affidavit, and I am not convinced of that, it is a matter of no significance. Mr Kakkad made it clear in his evidence that he had no intention to seek independent legal advice.118 145 I reject the submission of Mr Douglas that Mr Kevin Xu’s credibility should be questioned because he wished to seek counsel’s advice about potential self- incrimination before giving evidence. No adverse inference can be drawn from this. It is a fundamental right to seek such legal advice. The fact that Mr Xu took no further objection to answering questions after receiving advice confirms that no adverse inference can be drawn. 117 T440. 118 T193. -- 33 of 62 -- [2024] SADC 161 32 146 Mr Douglas also submitted that Mr Kevin Xu is still a shareholder of Prohomes Realty Pty Ltd, and so he has a financial interest in the outcome of these proceedings. Prohomes is no longer a party to these proceedings, so I fail to see how his evidence can be criticised on this basis either. 147 It is also noteworthy that Mr and Mrs Vashishta did not give evidence that they felt pressured to sign the contract on 13 September 2020. They opted not to do so on that day.119 Neither Mr nor Mrs Vashishta gave evidence that they were discouraged by Mr Kevin Xu from seeking legal advice at any stage or that they had any wish to do so. They merely wanted to ensure their financial position enable them to sign the contract. I had the distinct impression from their evidence that if Mr Kakkad was happy to sign the contract, they were happy to sign it as well. Conclusions about ‘the Representation’ 148 I have reached the following conclusions on the evidence as to the September meetings and the alleged ‘Representation’: 1. The evidence of the applicants’ witnesses was contaminated by their reading of Mr Kakkad’s affidavit in December 2022 to January 2023, and in other verbal conversations with him; 2. Mr Kakkad’s evidence was inconsistent and unsatisfactory, and his protestations of being ignorant of Australian law and procedure were disingenuous; 3. The evidence of other witnesses was also inconsistent and contradictory with the exception of Mrs Vashishta; 4. Mr Kakkad was aware of the presence of the Special Conditions in the contract. He said that he verbally objected to them. In his file note, however, he said he objected to condition 6 which had nothing to do with the Sunset Clause in the contract. I reject his evidence that he objected to any of the Special Conditions in the contract; 5. Mr Kakkad had no intention of seeking independent legal advice; 6. The applicants all had the opportunity to ‘cool off’ during the period from signing the contract until the two day period provided in the Form 1 Notice expired, yet they chose not to do so; 7. Mr Kakkad’s evidence, and that of the other witnesses on this topic, that Mr Kevin Xu described the Special Conditions as ‘just a formality’ is unreliable; 8. Mr and Mrs Kakkad had already decided to enter the contract before the 13 September 2020 meeting took place. They had decided before that 119 Affidavit of Arun Vashishta, Exhibit A9, [7]-[9]. -- 34 of 62 -- [2024] SADC 161 33 meeting. Mr and Mrs Vashishta had also decided to enter the contract before the 19 September 2020 meeting. They made an offer on 24 August 2020. They were not induced to enter the contracts by anything Mr Xu said or did. They did not rely on the Representation when they entered those contracts; 9. The applicants case as to ‘the Representation’ allegedly made by Mr Xu is not proved on the balance of probabilities. Breach of Contract 149 Special Condition 10.1(b) of the contracts states: The Developer will use its reasonable endeavours to achieve Practical Completion of the Development by the proposed date for Practical Completion. 150 It is common ground that the Respondents did not achieve practical completion by that date, which was 29 December 2022. 151 The applicants claim that the respondents breached that Special Condition by failing to use their reasonable endeavours to complete. The respondents deny that they breached the contracts in this way. 152 The applicants submit that, being in breach of the contracts, the respondents were not entitled to terminate as they did. They seek specific performance of the Contracts. 153 The respondents do not dispute that, if they were in breach, they were not entitled to terminate. The respondents’ defence is confined to whether or not they were in breach. 154 In any event, I accept Mr Douglas’ submission that the applicants’ proposition is correct. He quoted Wang v Kaymet Corporation Pty Ltd120 and Suttor v Gundowda Pty Ltd.121 In Wang, Stevenson J quoted with approval the words of Bryson J in Schenk v ACN 0811123140 Pty Ltd:-122 Each of many decisions in this field is a decision on the particular contract in question, but some recurringly important general principles, which are applicable in the present case, were stated in Plumor Pty Ltd v Handley … at 34 and 35 by McLelland CJ in Eq. The principles there stated and now relevant are to the effect that a party to a contract is not entitled, as against the other party, to rely on an event resulting from the first party’s wrongful act; that if the failure by the rescinding party to obtain some relevant consent or registration within the contractual period resulted from any default by him in the performance of express or implied obligations, that party is not entitled to exercise a right of rescission otherwise available; and that causation of the failure to obtain consent or registration by the wrongful act must be proved unless the terms of the contract make obtaining the consent or registration a condition for the exercise of the right of rescission. 120 [2015] NSWSC 1459, [67]. 121 (1950) 81 CLR 418, [441]. 122 [2002] NSWSC 123, [20]. -- 35 of 62 -- [2024] SADC 161 34 155 Stevenson J continued:123 Further, it is well established in “off the plan” cases such as this that a vendor’s right to rescind by reason of the development not being completed by the nominated date may be lost when the reason that the development has not completed is the vendor’s breach of a causally related obligation under the contract. 156 In this case, the obligation on the respondents to use their reasonable endeavours to complete is causally related to the respondents right to terminate the contracts pursuant to Special Conditions 7 and 13. Burden of Proof 157 Mr Douglas made it clear in his final submissions on this topic that it is not suggested that the burden of proof has shifted to the respondents. He said:124 At the outset, it is accepted that an applicant has the onus of proving the essential elements of a cause of action, including assertion of a negative: Henderson v Queensland [2014] HCA 52 at [90]. 158 However, he invoked the authority of Blatch v Archer125 to submit: Where a matter is peculiarly within the knowledge of a respondent, silence or non- production by a respondent may furnish sufficient evidence to warrant a conclusion in an applicant’s favour. 159 The principle in Blatch v Archer was stated by Lord Mansfield: It is certainly a maxim that all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and the power of the other to have contradicted. 160 In Australian Securities and Investments Commission v Hellicar, the High Court, pointed out that ‘…principles governing the onus and standard of proof must faithfully be applied’ and that ‘Lord Mansfield’s dictum is not to be understood as countenancing any departure from any of these rules’.126 161 In his opening address, Mr Douglas had said:127 …there was very little activity occurring to progress the build on site between May and December 2022 and relying on the fact that there is a dearth of material indicating efforts were going on unknown to my client in the background, and that the build didn't get completed by the sunset date, that prima facie establishes my clients' case that reasonable endeavours were not made and it then becomes a matter for the respondents to satisfy what's sometimes now called the tactical burden of proof… 123 [2015] NSWSC 1459, [66]. 124 Applicants written submissions, FDN 133, [4]. 125 (1774) 98 ER 696. 126 [2012] HCA 17; (2012) 247 CLR 345, [165]. 127 T36.37-T38.8. -- 36 of 62 -- [2024] SADC 161 35 162 This was taken by Mr Gentry as a submission that the onus of proof had reverted to his clients. 163 In his final address, Mr Douglas made it clear that he is not seeking to reverse the onus of proof, so there is no longer a controversy about that. As to the principle in Blatch v Archer, I agree with the following points made by Mr Gentry: • it deals with principles as to how evidence is to be weighed; • it does not deal with the onus of proof;128 • it cannot be relied upon to ‘fill gaps in the evidence’ or ‘convert conjecture and suspicion into inference’; • the onus is on the plaintiff to show that the defendant was in breach of its “all reasonable endeavours” obligation and that the breach or breaches caused the event (the non-satisfaction of the condition precedent to settlement).129 164 I will approach the evidence addressed on that basis. The applicants have asserted the failure, and ‘he who asserts must prove’.130 Reasonable Endeavours 165 Both Mr Douglas and Mr Gentry referred to Electricity Generation Corporation v Woodside Energy Ltd.131 Three general observations can be made about obligations to use reasonable endeavours to achieve a contractual object. First, an obligation expressed thus is not an absolute or unconditional obligation. Secondly, the nature and extent of an obligation imposed in such terms is necessarily conditioned by what is reasonable in the circumstances, which can include circumstances that may affect an obligor’s business. This was explained by Mason J in Hospital Products Ltd v United States Surgical Corporation132 which concerned a sole distributor’s obligation to use ‘best efforts’ to promote the sale of a manufacturer’s products. His Honour said: “The qualification [of reasonableness] itself is aimed at situations in which there would be a conflict between the obligation to use best efforts and the independent business interests of the distributor and has the object of resolving those conflicts by the standard of reasonableness… It therefore involves a recognition that the interests of [the manufacturer] could not be paramount in every case and that in some cases the interests of the distributor would prevail.” As Sellers J observed of a corporate obligor in Terrell v Mabie Todd & Co Ltd, an obligation to use reasonable endeavours would not oblige the achievement of a contractual 128 T651.11-13. 129 Sentinel Orange Homemaker Pty Ltd v Davis Investment Group Holdings Pty Ltd (in liq) [2021] NSWSC 550, [66]. 130 Hall v Foster [2011] NSWSC 295, [65]. 131 (2014) 251 CLR 640; [2014] HCA 7, [41]. 132 (1984) 156 CLR 41; [1984] HCA 64. -- 37 of 62 -- [2024] SADC 161 36 object “to the certain ruin of the company or to the utter disregard of the interest of the shareholders”. An obligor’s freedom to act it its own business interests, in matters to which the agreement relates, is not necessarily foreclosed, or to be sacrificed, by an obligation to use reasonable endeavours to achieve a contractual object. 166 In Joseph Finance and Investment Pty Ltd v Eastwood Retirement Pty Ltd,133 Croft J said: Care should be taken before applying observations from courts in respect of different commercial contexts. In O’Rourke v P & B Corporation Pty Ltd, Martin CJ stated: Care should be taken before applying observations made in that commercial context to a quite different context, such as the present circumstance of a contract for the sale of land. In the context of a distribution agreement Dawson J observed in Hospital Product: Nor does the existence of a best efforts clause or best endeavours clause … impose a duty upon the distributor to disregard his own interests. In speaking of a ‘best endeavours’ clause in a licence agreement, in Transfield Pty Ltd v Arlo International Ltd Mason J said that it went no further than to prescribe ‘a standard of endeavour which is measured by what is reasonable in the circumstances, having regard to the nature, capacity, qualifications and responsibilities of the licensee viewed in the light of the particular contract’… Clearly that leaves room for a balancing of interests and does not require the elimination of any conflict”. Observations of that kind are apt to a continuing commercial relationship, such as that of manufacturer and distributor, or licensor and licensee, in which the interests of the parties may compete and even conflict from time to time. However, different considerations apply to a once-off contract such as a contract for the sale of land, in which both parties can be taken to have an interest in the contract being performed. Accordingly, I would not be inclined to accept the proposition that P & B could take account of its own interests in the discharge of its obligations under its contracts with the plaintiffs… (my underlining). 167 It is not suggested by the respondents, and there is no clear evidence in this case that there was any conflict between compliance with the obligation in the contract and the interests of their businesses. Their case is simply that in the circumstance of the COVID-19 pandemic, they ‘could do no more’134 than what they actually did to complete the development within time. 168 I note the respondents’ submission135 that in Joseph Finance Croft J also referred to causes in which it has been held that ‘there can be no beach of a best endeavours obligation, let alone a reasonable endeavours obligation, where to fulfil 133 [2023] VSC 731, [66]. 134 Respondents written submissions, [358]. 135 Written submissions, [356]. -- 38 of 62 -- [2024] SADC 161 37 that obligation would leave the obligor exposed to a potential breach of contract claim by another party’.136 169 Mr Gentry argued that, for example, to terminate the contract for pre- fabricated joinery manufactured in China might have exposed the respondents to an action for breach of contract. I reject this submission. No evidence was led as to the nature of the contract with the manufacturers, except that the respondent paid one half of the contract price ‘up front’. At no time has it been suggested that the respondent should have terminated the contract. The applicants’ case was that the respondent should have sought ways to work around delays in relation to the joinery. 170 Further, if no joinery had yet been built, and if the price had been paid up front, and the delays were substantial, it is difficult to see how the respondent could have been exposed to a claim for breach of contract if they had cancelled the order. 171 In the context of a contact for sale and purchase of land, Mr Douglas also referred to Northwalker Realty Pty Ltd v TFM Chatswood Land Pty Ltd (No 2).137 In that case, Richmond J said: Given that TFM was ultimately successful in achieving registration of the strata plan, albeit later than the Sunset Date in the relevant contracts, the question whether it used all reasonable endeavours to achieve that registration by the Sunset Date turns on whether there was delay in the steps necessary to achieve that registration and whether that delay was caused by TFM’s failure to use reasonable endeavours. (references omitted). 172 There is no dispute in this case that there was a delay in the steps necessary to achieve practical completion of the development by the proposed practical completion date which was, after it was extended, 29 December 2022. So the question is, was that delay caused by the respondent’s failure to use their reasonable endeavours to achieve that completions. Were reasonable endeavours used? 173 Mr Gingui (Otto) Zhu is a director of both of the respondent companies, along with his brothers Qingwei (Ben) Zhu and Qingning (Reno) Zhu. Mr Otto Zhu was the only director to give evidence. 174 Mr Otto Zhu took no part in the negotiations with the applicants prior to the signing of the contracts. He said he did not discuss what might be said to the applicants by Mr Xu prior to the meetings he had with them.138 175 Mr Otto Zhu engaged 1864 Constructions Pty Ltd to build Lots 1 to 6 of the development. The units purchased by the applicants were part of this group. Mr Changhui (Justin Wu) was the building supervisor for 1864 Constructions. Noble Built Pty Ltd was engaged to build Lots 7 to 13. Jiyu (Kevin Zhu) was the 136 Optus Vision Pty Ltd v Australian Rugby Football League Ltd [2003] NSWSC 288, [14] – [15]. 137 [2022] NSWSC 1409, [56]. 138 Trial affidavit, Exhibit R19, [28]–[29]. -- 39 of 62 -- [2024] SADC 161 38 building supervisor for Noble Built. Otto Zhu and Kevin Zhu are not related. Mr Otto Zhu said that building work commenced in May 2021. Initial progress was ‘rapid’ but: 139 The COVID-19 pandemic really began affecting the development during late 2021. That impact then extended through all of 2022. 176 Mr Otto Zhu said he based this understanding on conversations he had with the two building supervisors. He described a number of problems with the development in his trial affidavit. I summarize them as follows: • lack of tradespeople following the lockdown in Adelaide in late July 2021; • difficulty sourcing timber for the internal fit-out (although they did source timber for the main framework earlier on); • when they did source timber, it took longer to arrive and cost a lot more than they expected; • inability to source the external cladding; • delay in supply of double-glazed window units from China; • difficulty in sourcing gyprock and installers; • delay in supply of joinery from China, even though the builders paid ‘up- front’ the Chinese manufacturers; • delay in provision of water connections to the units by SA Water;140 • difficulty in securing tradespeople and labourers. 177 Mr Otto Zhu said that practical completion of Lots 1-6 was not achieved until September 2023, and Lots 7-13 were not completed until December 2023. No explanation was given for the discrepancy between the two completion dates, and no evidence was led as to the rate of building work during that period. 178 Mr Otto Zhu’s affidavit provides no details of any efforts made by him to deal with any of the difficulties he identified, apart from the ‘up-front’ payment for the joinery. He said:141 [99] The builders were best placed to advise us as developers as to what could or should be done regarding materials and labour. We relied upon the builders and their advice as to procuring the materials and labour that the development required. 139 Exhibit R19, [50]-[51]. 140 Exhibit R19, [56] – [73], [88]. 141 Exhibit R19, [99], [102]-[103]. -- 40 of 62 -- [2024] SADC 161 39 … [102] through our regular discussions with the builders, we formed the view that the material and labour shortages were being managed as best as possible. [103] we considered the development could only proceed as materials and labour became available to the builders. That there was nothing further we could do to speed the process up. We understood that Covid had impacted the building industry significantly and that we were unlucky to have commenced the development during such a time. 179 In Hall v Foster,142 a contract for the sale and purchase of land was conditional on the registration of a subdivision plan to create a second lot within 12 months from the date of the contract. There were also other conditions. The contract required the parties to use their ‘best reasonable endeavours’ to satisfy those conditions.143 If the conditions were not satisfied despite those endeavours, then either party could rescind the contract. The defendants engaged a ‘planning agent’ to seek the relevant registration. Tamberlin AJ said: On the other hand where the expressions “best endeavours” or “best reasonable endeavours” are used the emphasis is on the attempts made by the party or parties obliged to achieve the result. Where an independent agent is retained, such as a town planner or consultant, the “best reasonable endeavours” will include taking steps to check and ensure that the reasonable measures are taken by the agent to procure the result. The pursuit of the measures to achieve the outcome cannot be abdicated to the independent agent. There remains a continuing obligation on the party liable to perform the obligation to follow through by communication and instructions to the consultant… (my underlining). 180 His Honour then quoted from Professor Peter Butt:144 The vendor must pursue the application for registration with reasonable diligence. This includes following up the progress of the application with the authority in question, and where the contract imposes a short time for securing registration, advising the authority of the need for urgency. The vendor must take all reasonable steps to overcome objections or rebuffs received along the way from the relevant authorities… 181 His Honour added: While it is necessary to show that the “best reasonable endeavours” have been used it is not necessary to show that had a particular step been taken it would have produced the outcome sought. It is sufficient if there is a reasonable possibility that it might have the desired outcome and it is this possibility that makes the step one the obliged party should have taken. 142 [2011] NSWSC 295, [57] – [59]. 143 It does not seem useful to analyse whether ‘best reasonable endeavours’ places a different onus on the obligor from ‘best endeavours’ and ‘reasonable endeavours’. They all seem to depend upon what is reasonable in the circumstances. 144 “The Standard Contract for Sale of Land in New South Wales”, 2nd Ed, 1988, [28.5]. -- 41 of 62 -- [2024] SADC 161 40 182 The applicant’s case145 is that the respondents failed to make reasonable endeavours in that they: (i) failed to make proper enquiries with other builders as to the availability of resources and materials; (ii) failed to make reasonable enquiries about the capacity of the (builders) to supply and source adequate labour and materials for construction of the development before engaging the builders; (iii) failed to source, or failed to attempt to source, alternative supplies of materials and labour for the development; (iv) failed to make reasonable and timely inquiries with the builders as to the progression of the development; (v) failed to exercise contractual rights available to them against the builders for their failure to complete the development by the extended date for practical completion; (vi) failed to issue any direction to the builders to complete the development; (vii) failed to issue a work resumption order to the builders. 183 I agree with the applicants that if such measures were taken, and they might have been effective in achieving the completion of the development by the above date, then those measures should have been taken, and a failure to take them would constitute a failure to make reasonable endeavours to achieve that result. 184 As I have mentioned, Mr Otto Zhu took a ‘hands off’ approach towards his builders. In his trial affidavit.146 He described how he: 147 • communicated with the builders and visited the site regularly about every two weeks; • during COVID he visited the site less often and relied on telephone calls; • arranged with the builders to make payment to the Chinese manufacturer for the joinery in advance in the hope of prioritising their order. He said that the advance payment was the reason why they did not seek alternative services for these materials. 185 There was a distinct lack of specificity in the description of Mr Otto Zhu’s visits to the site and discussions with the builders about delays, shortages and difficulties with labour and materials. There was no mention of him seeking advice from anyone else about how to deal with these issues. He said he was unaware of the fact that one of the builders, 1864 Constructions, had a number of other projects under construction, whether it was making better progress with them, or which 145 In the applicants’ SOC, [25.2]. 146 Exhibit R19, [45]-[73]. 147 Exhibit R19, [114]-[116]. -- 42 of 62 -- [2024] SADC 161 41 project, if any, was receiving priority.148 There is no assertion in his evidence about what questions he asked of his builders, whether they were seeking alternative sources of labour and/or materials, what rates were being paid or whether higher prices were being offered. 186 Mr Justin Wu for 1864 Constructions, and Mr Kevin Zhu for Noble Built, both swore trial affidavits149 and gave evidence. 187 The way in which these affidavits were prepared was, like the affidavits of the applicants’ witnesses, very unsatisfactory. No less than 40 paragraphs of these affidavits were either identical or almost identical.150 188 When questioned about how these similarities came about, the explanations given by the two witnesses were markedly different. 189 Mr Justin Wu said that the respondents’ lawyers set him a draft of the affidavit, and then, at a meeting with the lawyers, he signed it after correcting some ‘typos’ and some incorrect ‘terminologies’.151 He said he had not read the affidavit of Mr Kevin Zhu from Noble Built.152 He said that the similarities between the affidavits were because ‘Yes, as I said before, its prepared by a lawyer, not by me’. 190 Mr Justin Wu said that the affidavit was not accompanied by a Mandarin translation when it was presented to him, nor was there an interpreter present at the meeting with the lawyers.153 English was obviously not his first language. I observe that Mr Justin Wu did not require the assistance of an interpreter when giving evidence however, and he appeared to have no difficulty understanding the questions asked of him. 191 As for Mr Kevin Zhu, he said that he also received a draft of his affidavit from the respondents’ lawyers, it was in English and there was no Mandarin interpretation for him either.154 He met the lawyer in a coffee shop. He changed the affidavit by adding ‘a little bit more detail’155 and corrected things that were ‘not right’. He then retyped it himself and signed it at another meeting at a car dealership.156 192 Mr Kevin Zhu said he spoke with Mr Justin Wu before signing his affidavit. He also read Mr Justin Wu’s affidavit. When asked why there were so many 148 T588. 149 Exhibit R17 and R18 respectively. 150 See the ‘Comparison of Evidence’, MFI A17A. 151 T535. 152 T535. 153 T535. 154 T572. 155 T572. 156 T573. -- 43 of 62 -- [2024] SADC 161 42 identical paragraphs in the two affidavits, Mr Zhu said ‘We work together on this one’. 157 193 It is perfectly clear that there was mutual contamination of the evidence of these two witnesses, and I reject Mr Justin Wu’s evidence to the contrary. The words of Sheller JA in Day v Perisher Blue Pty Ltd158 quoted above apply with the same force. These affidavits are not the words of the deponents, but mainly the words of the respondents’ legal representatives. It is not possible to now judge whether any changes they have made were the result of memory or consultation between them. 194 The weight to be given to the evidence in these two affidavits, and to the evidence of the witnesses generally, has been severely diminished as a result. 195 As to their evidence, Mr Justin Wu said that they, the builders, were responsible for sourcing materials and labour. He said they reported to the respondents about delays and shortages when they were ready to claim a progress payment.159 His evidence was not detailed as to what specific measures were taken. He referenced [82] of his affidavit160 as giving details of shortages of labour and materials. This quotes from his builder’s diary: 82. Exhibited and marked JW8 is a copy of my builder’s diary. The relevant entries in my diary in relation to the Project delays are summarised as follows: Date Entry 31/8/21 All floor truss not shown up. Due to lack of labour in factory. Reschedule truss delivery for two weeks. 14/9/21 Timber floor truss not shown up. Jamie and Brook reschedule for 4 more days. Reschedule to 20/9/21. 23/9/21 Roof structure redesign for air conditioner as the Mitsubishi […] not available due to stock. Air warehouse rechecked. Solar panel removed. 29/9/21 Site roof truss installation. Carpenter Matt does no show up. All sick “4” reschedule for COVID. Tuesday next week 12/10. Diary also an entry in relation to another site referring to COVID related labour issues. 3/12/21 Cabinet delay due to shipment. Labour lack. No ship. Contact Luey. May be 2 months… factory. 11/7/22 Cabinet price increased Greg. … increased $17,250 + GST. Shipment still not certified/check next week. 157 T574. 158 [2005] NSWCA 110. 159 T540.1-11. 160 Exhibit R17. -- 44 of 62 -- [2024] SADC 161 43 21/9/22 Cabinet arrived. Fitting delayed. No ship scheduled. No answer. Ring Danny tonight for ETD. Date unclear 10mm gyprock shortage. ADX depot, ring Matt. Wait 3 weeks. 196 The fact that the diary contains only eight entries over a 13 month period does not demonstrate ‘reasonable diligence’. Mr Justin Wu’s attitude to receiving directions from the respondents was summed up at T550: Q That answer was about reports that you made to the developer; my question was about instructions given to you by the developer, so I'll put it again. Your affidavit does not mention any instruction given to you by the developer about how to handle material shortages, does it. A They never, ever need to ask. Q Is that because the developer never gave you an instruction about how to handle a material shortage at all. A That's not their role, that's not their job. Lack of documentation 197 It was the applicants’ submission that: on the probabilities (it is) overwhelmingly unlikely that a party could have made genuine and earnest efforts, or even lowering it to the standard they have to meet here, reasonable efforts, to try to complete a build in these circumstances and generate almost no paper that evidenced those efforts. 198 Mr Gentry submitted that, to the contrary, there was ‘extensive documentary material … including that which has been produced by the builders in response to the applicants’ own subpoenas’. He pointed out that invoices produced evidence of ‘building work occurring in each of the months of June, July, August, September and December 2022’ including air conditioning, ceilings, labour trades, painting, Hebel products and roofing. Building invoices for work and supplies during this period totalled $335,807.00. 199 Having regard to the fact that there were 13 units under constructions, that is an average of $25,831.31 spent on each unit over a total period of seven months. There are no grounds for assuming that the spending rate was equal for each unit, however there is no evidence before me as to whether that spending rate was higher or lower than, or similar to the spending rate throughout the project. Nor am I able to conclude whether or not the respondents were using reasonable endeavours to complete the project on the basis of these figures. -- 45 of 62 -- [2024] SADC 161 44 200 The principal of the respondent companies, Mr Otto Zhu, gave evidence that, during this period, on the basis of his periodic visits to the site, which he was unable to enumerate:161 When I visit the site, ‘cos they got a locked gate outside, I always went into there and I always can see, yeah, not many tradies in there, but there was always someone in there. 201 The topic on which Mr Justin Wu provided the most specific evidence was the supply of timber. His evidence was presented in [34] to [45] of his trial affidavit as follows:162 Unavailability of timber [34] A first main delay related to the timber required for the internal fit out of the townhouses. [35] A lot of timber was required to complete the internal fit out as we were dealing with 13 townhouses in total. Significant additional timber, including specialised timber products, was required for the internal fit out. [36] Normally, 1864 Construction would have been able to source timber from within Australia, particularly NSW. I know from my discussions with suppliers that COVID began to affect the Australian suppliers of timber. I am also aware from these discussions that other factors also impacted supply from within Australia, for example, the bushfires in NSW which occurred around 2019. [37] Due to these reasons, the timber was not available at the time we required it to commence the internal fit out. Ultimately, we had to source timber we needed from Russia. Timber was very hard to obtain and became very expensive. [38] One of the timber suppliers I worked with around this time was Flinders Timber and Building Supplies (Flinders Timber). Exhibited and marked JW6 is a copy of an email exchange dated 22 December 2020 between Pei Huo, Director of 1864 Construction, and Flinders Timber. I was copied into this email in which Jamie Phillis of Flinders Timber says: ‘At the moment there is a National Timber shortage. It is major issues and is the result of a number of unfortunate events 2020 has thrown at Timber Producers. We are working closely with our suppliers but at this stage we would not be able to meet your requested delivery date with our current stock holdings and supply.’ [39] Material shortages during COVID were extremely difficult to overcome and delays became unavoidable. Using timber as an example, it was not simply the case that timber could be obtained from supplier B if supplier A could not provide it. There are not that many major timber suppliers and timber was in short supply among all of them. [40] Bunnings for example had little to no timber left on its shelves, or available to builders or contractors, around this time. Bunnings is a major national supplier of 161 T595. 162 Affidavit of Changhui (Justin) Wu made on 22 May 2024 (FDN 103), [34]–[45]. -- 46 of 62 -- [2024] SADC 161 45 timber and other building materials. If Bunnings does not have even small amounts of timber, this is a clear sign that timber is just not available across the board. [41] Kevin and I called upon our preferred suppliers of materials, e.g. Flinders Timber, for what we needed. When materials such as timber were unavailable, suppliers like Flinders Timber Couldn’t assist even if an above market price was offered. Suppliers preferred to support their existing customer base if small amounts of product were available. Suppliers sometimes refused to take orders from new customers. [42] It reached a point where it was not just large scale orders of materials such as timber which could not be fulfilled. Obtaining even small amounts of timber for a minor fix was not possible and there may be weeks of delay to obtain even small amounts. [43] A variety of timber products are required to build a dwelling, not just simple raw timber beams. Specifically engineered timber products are required and these customised products were also often unavailable or in short supply. [44] Were it not for these delays, we would have been in a position to commence the internal fit out in around September 2021. Ultimately, by reason of these timber shortages, the internal fit out could not be commenced until around March 2022 with around five months of delay. [45] These delays had a flow on impact on all works that were to occur afterwards. Certain works could not commence until the internal fit out had been completed. 202 Mr Justin Wu said in cross-examination that he made no attempts to contact alternative timber suppliers apart from Flinders Timber. He referred to obtaining timber from Russia at [37] above, but no further details were provided. 203 As for considering modifying the specifications to enable the project to proceed, Mr Justin Wu said in cross-examination:163 A Give me example - way as I explain to you, you be given a drawing, it's architectural drawing been signed off by council. You're not allowed to just go ahead and change stuff. You're not even allowed to. Unfortunately, you don't. If you want to change every single piece of material, you need to prepare a variation, get signed off by private certifier, and go through council. Council give 10 days to proceed, and then you're waiting for a result, say yes or no, and then you need to pay for the according fees. So, as a supervisor, as a construction company, why they need to asking for alternative? And that's a very big process we're talking about, it's massive process; it's very impractical, unfortunately. Q And you didn't even raise that with the developer, did you. A No, it is impossible to raise because you just never, ever. Q And to your knowledge, the developer didn't raise that sort of question, that is modifying the specifications, with the customer. A I don't know how he deal with customer; I can't comment on that one. Yeah, sorry. 163 T553.22-554.6. -- 47 of 62 -- [2024] SADC 161 46 Indeed, Mr Justin Wu did not appear to regard the time being taken by the development to be his problem. He said:164 A I don't know what day we need to finish, but as far as I know, we need to finish as soon as possible, otherwise we cannot move onto the next project. 204 It is apparent from this answer that Mr Justin Wu was not aware of the Proposed Date of Practical Completion in the contract, being 29 June 2022, or that it had been extended to 29 December 2022. The impression he gave me was that the date for completion was the respondents’ problem, not his. 205 The evidence of Mr Kevin Zhu, the supervisor of Noble Built, was to the same effect. Noble Built were contracted to build Units 7 to 13. 206 Mr Gentry’s submissions as to the specific matters raised were as follows: 1. The criticism that the respondents failed to source alternative supplies of materials was simplistic and might have been ‘to the certain ruin of the company or to the utter disregard of the interests of the shareholders’. It might have exposed them to a proceeding for breach of contract. 207 I reject this submission. Firstly, the implication of the words of Sellers J in Terrell v Mabie Ltd, quoted above, is inapt in a case involving the sale and purchase of land, to quote Croft J in Joseph Finance v Eastwood Retirement, also quoted above. Secondly, there is no evidence that the respondents’ obligation to use reasonable endeavours would have had those effects on the respondents. Mr Otto Zhu said in evidence that he had not sought any advice about the financial position of the companies.165 208 The only example presented in the evidence of a detrimental effect on the respondents being caused by seeking alternative suppliers was the payment of a 50% deposit to the Chinese manufacturers for joinery. Cancellation of that order may have caused them to lose that deposit. I accept that, although if work had not commenced on the joinery, they could expect the deposit to be returned. 2. It cannot be said that funds were withheld or that any delay fell to any inaction of the Respondents. 209 This is factually correct, but to the extent that it implies that the respondent’s only obligation was to fund the project, and not to exercise control or oversight over the builders, the submission is correct. 3. It would have been prejudicial to the builders to not program the development as quickly as it could have been. Any delays help the builders out of their rights to payment under the costs-plus arrangement. 164 T554.3-5. 165 T591-594. -- 48 of 62 -- [2024] SADC 161 47 210 The obligation to progress the development was not that of the builders, it was the obligation of the respondents. There was evidence that the builders were handling other projects at the relevant time. There is the issue of their competence, familiarity with the local conditions, business acumen, all of which should have been taken into account by the respondent when exercising appropriate oversight of the progress of the development. 4. The builder’s compulsory insurance policies effectively capped the work and the projects they were able to take on. 211 This is the same argument as in 3. above, that it was against the builders’ interest to not progress the work if it could have been progressed. I make the same comment here. It was the respondents’ obligation, not the builders’, to progress the development. 5. The respondents agreed to a cost-plus contract with the builders being substituted for a fixed price contract to do the work. 212 Clearly, this agreement had the effect that the risk of increasing prices affecting profit margins was transferred from the builders to the respondents. I have no way of knowing what the financial significance of this was in the circumstances, or what business factors prompted the change. These issues were not explored in the evidence. 6. The respondents’ contracts with the builders had a ‘finish date’ of 5 November 2022. 213 This date was after the original Sunset Date of 28 June 2022, but before the amended Sunset Date of 28 December 2022. There is no evidence that the builders even knew what the Sunset Date in the contracts between the applicants and respondents was, let alone whether they were encouraged to meet it by the respondents. 7. The respondents extended the Proposed Practical Completion Date in the contracts from 29 June 2022 to the Sunset Date of 29 December 2022, when they could have terminated the contracts in June. 214 This submission ignores the evidence of Mr Otto Zhu that he didn’t know he could terminate the contract until after the December Sunset Date had passed.166 It is unclear why Mr Zhu extended the Proposed Date for Practical Completion. He did so after it had been passed, in August 2022. He denied that he did so knowing that the development still would not be completed by December. He said ‘Anything can happen in 4 months’. 167 166 T595-596. 167 T596. -- 49 of 62 -- [2024] SADC 161 48 8. The building works did not recommence rapidly in January 2023. They were not completed until September 2023 (Units 1-6) and December 2023 (Units 7-13). They are still not on the market. 215 The applicants arranged to have caveats registered on the property in early to mid-January 2022 after the contracts were purportedly terminated. The properties have been subject to the caveats, and to the subsequent undertakings to the court, ever since. The expert evidence is that the major effects of COVID-19 were felt in the building industry from March 2020 to early 2023. It is not clear from the evidence what steps the respondents took to complete the projects earlier than they were completed, or what commercial considerations drove their decision-making in that regard. Expert Evidence 216 The applicants called Mr Steven Sentschuk to give expert evidence. He has had about 29 years of experience as a builder, building inspector, and developer. He is a licensed building supervisor. 217 Mr Sentschuk’s report dated 17 April 2024 was tendered.168 The summary of his opinions as to the progress of his development through the period of the COVID-19 pandemic between early 2020 and early 2023 is as follows:169 Summary: The Covid-19 global pandemic had a profound impact on both the South Australian real estate and building industries from early 2020, through to early 2023 (Covid-19 timeframe). During the early stages of the pandemic there was widespread confusion and apprehension relating to how building projects would progress, if it all, during this phase. In conjunction with this, the Homebuilder stimulus package, announced in June 2020 which was part of the national Homebuilder program launched by the Australian government, had a significant impact on the building industry in the state. The stimulus package aimed to boost the construction sector by providing grants to eligible homebuyers and homeowners for building or renovating their properties. This led to a surge in demand for new homes and renovation projects in South Australia, as more people took advantage of the financial incentives offered by the program. The sudden increase in demand for housing and construction services caused by the Homebuilder stimulus package put pressure on the supply chain, resulting in shortages of materials and skilled labour. This not only delayed construction projects but also led to increased costs for builders. By mid to late 2022 pricing for materials required in nearly all stages of domestic and commercial construction rose sharply. Numerous suppliers began implementing monthly or quarterly price hikes for materials acquired on credit, while maintaining the previous pricing for any order placed before this period. As a result, materials ordered up to that 168 Tender Book Exhibit A1, Tab 232, pp 3178-3203. 169 Report, p 5. -- 50 of 62 -- [2024] SADC 161 49 specified date would be billed at the prevailing rate, with subsequent orders subject to the new, elevated prices. This was a warning signal provided to builders undertaking projects during the tumultuous Covid-19 timeframe. All builders were well advised to ensure orders for materials were made in a timely manner. At the same time, labour costs were also increasing. Many larger trade contracting businesses were working with builders to honour project pricing pre Covid-19. In some cases, trades resolved the absorb some component of the labour cost increase to mitigate the responsibility of bearing the entire cost by the general builder or developer. The construction pricing for (The Development) at 141-143 Anzac Highway Kurralta Park would have been finalised prior to any property sales being offered and would have likely been completed at, or prior to building approval being obtained. Builders and property respondents faced significant challenges with costing and project scheduling during the Covid-19 period. This amplified any shortcomings in their building practices. In essence builders who struggled prior to the pandemic found it difficult to cope with the increased challenges, leading to the collapse of several building companies towards the later stages of the Covid-19 period. During this timeframe, many builders issued adjustments to contracts that would have appeared to be excessive prior to the Covid-19 pandemic, such as footings and siteworks. It was not uncommon for residential builders to request an additions $20,000 to $40,000 for footings. Many builders utilised these variations to maintain profitability for projects that had been previously costed. The $50,000 variation proposed to the end purchasers for this project would have comfortably offset the rise in building costs for this specific style of construction. The vagueness of the specifications on this project would be an advantage that the builder could use to ensure the build progressed expeditiously. The limited time allowed to prepare this report, requires keeping brief the volume of satisfactory completed projects I have experience with over the relevant Covid-19 timeframe. I have presented a variety of project styles as examples, providing evidence for the opinion given. It is the opinion of this builder, inspector and developer that (the development) could have and should have, been able to be completed to a satisfactory conclusion in the timeframe provided, and that whilst the Covid-19 pandemic caused delay and difficulty, it should not be attributed as the cause of this project not being completed in the timeframe. 218 Mr Sentschuk said that he visited the Anzac Highway property, although he did not inspect it internally.170 219 Mr Sentschuk’s report contained a very helpful chronology of the pandemic, from the declaration of the public health emergency on 22 March 2020, the restrictions placed on public gatherings, the economic stimulus packages implemented, through the seven day ‘lockdown’ in July 2021, to the removal of border restrictions in February 2022, the declaration that the emergency response 170 T349. -- 51 of 62 -- [2024] SADC 161 50 was over in September 2022, and the expiration of all remaining public health directions in relation to the pandemic in September 2023.171 220 Mr Sentschuk made the following points in his report in answer to questions posed by the applicant’s solicitor:172 • builders were faced with multiple challenges during COVID-19, including enforced lockdowns, labour force restrictions, material shortages, restrictions on meetings and gatherings; • builders needed to adapt their systems and procedures to deal with these challenges; • the product specifications for this development were vague and broad in some respects and offered opportunities to obtain supplies form alternative sources; • the specifications provided by the builders to the respondents also contained a disclaimer:- ‘The builder reserves the right to change the specifications as required with a replacement of similar or comparable quality’; • builders resorted to inventive ways to continue building despite the shortages. For example, some resorted to wrapping the building with sarking foil, allowing them to continue the interior fit out while waiting for availability of a bricklayer to construct the external walls; • shortages in supply resulted in increased costs. These were passed down the supply chain to the final users and to the client; • the best course of action to deal with the material shortages was to have options available which could allow substitution of materials which would not breach such vague specifications; • affirmative options for procuring materials and labour were readily available in most cases. This included timber although this was sometimes delayed.173 He cited a case where a builder had the roof of an extension re-engineered so that it could be bult using conventional materials without requiring trusses which were difficult to get; • the proposed increases in price of $50,000, which I will discuss shortly, were ‘more than sufficient’ to cover the increased cost of labour and materials brought about by the pandemic. He established this by reference to ‘Rawlinsons List of Building Data for 2020, adjusted using the Building Price Indices.’ • during the COVID-19 period, many developments similar to the one in question in this litigation were successfully completed; • to not honour a fixed price at the completion of a development undermines the risks taken by the purchaser who committed early in the development; 171 Report p 2. 172 There was some repetitiveness in the questions asked, so I have distilled Mr Sentschuk’s answers in the following summary. 173 T357. -- 52 of 62 -- [2024] SADC 161 51 • a developer, acting prudently, would be constantly liaising with the builder during the course of the development. When any damages or variations to the original contract are required, the builder should inform the developer in writing for approval; • he expected to see some documentation evidencing that builders and respondents in this case were ‘scrambling for options to get past problems created by the pandemic;174 • he had not seen a job before where no such documentation existed;175 221 Mr Sentschuk concluded: The COVID-19 pandemic combined with the government stimulus package created an unprecedented time in modern building history. Whilst this was challenging for all concerned undertaking projects at this time, good communication and cooperative measures between builder and developer would ensure that projects progressed expeditiously to completion. 222 Mr Sentschuk identified several examples of building developments which were successfully completed during the time of the pandemic. These included: • an extension to a private residence Malvern completed in August 2022; • a duplex of two courtyard homes in Para Vista completed in May 2023; • a 13–dwelling townhouse development of three stories in Walkerville completed in November 2023 • a block of 14 three-storey townhouses in Port Adelaide completed in February 2022. 223 Mr Sentschuk accepted that the development in Walkerville was the most readily comparable development with the Anzac Highway one, and that development approval had been granted in June 2019. Completion in 2023 meant that the development took four years and five months, a similar period to the project the subject of this litigation. Since approval remains current for some time, and the date construction commenced is not stated, it is difficult to draw direct comparisons. For example, the Port Adelaide development is also similar to this one, and the period between development approval and the project took one year less to complete. 224 Mr Sentschuk emphasised that the four examples were not a complete list of the projects completed during the pandemic of which he was aware. He said:176 The limited time allowed to prepare the report requires keeping brief the volume of satisfactorily completed projects I have experience with over the relevant Covid-19 174 T353. 175 T355. 176 Report, p 5. -- 53 of 62 -- [2024] SADC 161 52 timeframe. I have presented a variety of project styles as examples, providing evidence for the opinions given. 225 Mr Sentschuk’s main contention was that these developments were all completed during the time of the pandemic, and that contention was not shaken in cross-examination. To illustrate this point, Mr Sentschuk gave evidence that, in one of his own developments, he purchased a property, demolished it, had it rezoned, and built two new properties. The concrete slab was poured in July 2022 and the dwellings were completed in May 2023, a construction time of only 10 months, during the pandemic. 226 Mr Sam Paddick was the expert witness for the respondents. Mr Paddick is a quantity surveyor with over 30 years’ experience. He is a national director of a partnership which provide services in cost management, project management, project planning and control to the construction industry, as well as quantity surveying and commercial dispute services to that industry. 227 Mr Paddick did not visit the Anzac Highway site for the purposes of his report.177 228 In answer to questions posed by the respondents’ solicitor, Mr Paddick made the following points:178 • from the commencement of the pandemic until early 2021 the availability of construction materials virtually ceased and construction activity ground to a halt; from early 2021 to mid-2022. There was an ongoing significant supply and cost volatility; • there was a confluence of factors impacting supply and demand for materials and labour including price increases, supply chain instability, logistics costs, extreme weather events, and difficulties in securing a available and affordable skilled labour; • once construction materials became available in early 2021, albeit at a drastically reduced volume, construction works recommenced at close to 50% of the pre-COVID pace; • the construction period in a large house has gone from about 12 months in a pre- COVID period to 24 months at the present time; • price increases for materials in the range of 10% to 50% were passed onto the contractors, resulting in cost increases in the order of 3-5% depending on the project scope, material constituents, specification level and reliance on importing of material; • from early 2020 to early 2021 there was no way to replace imported products which had become unavailable. This included timber, gyprock, metal products, and 177 Exhibit R16, [2.1.1]. 178 There was some repetitiveness in the questions asked, so I have distilled Mr Paddick’s answers in the following summary. -- 54 of 62 -- [2024] SADC 161 53 prefabricated products from China including tapware, window frames, glazing and joinery. • there were no alternative sources for the products during this period; • from early 2020 to current time, there has been a significant increase in labour costs and availability in Australia due to an increase in construction activity resulting from low interest rates, government stimulus packages, the cessation of immigration of skilled workers, and increased wage costs; • there were no real alternative sources for skilled labour during the period in question. There was in fact an ‘exodus’ from South Australia of people during this period (although the graph at [3.10.2] of his report shows negative migration from South Australia in a period only from about July to October 2021); • the increase in construction costs has impacted on the financial viability of numerous developments in South Australia. Numerous residential contractors have failed predominately due to lump sum/fixed price contracts having been entered some time ago, and the cost of labour and materials increasing a combined total of 22.5 % to 2021-22. 229 When he gave evidence, Mr Paddick confirmed the opinions expressed in his report. 230 In examination-in-chief, he said: • he disagreed with Mr Sentschuk that delay associated with the pandemic could have been avoided if alternative materials were sourced which were within the specifications. He said most building products came from China, and while China was shut down these products were not available;179 • he also disagreed with Mr Sentschuk that ‘a developer, acting prudently, would be liaising constantly in the course of the development with the builders, confirming that when any changes or variations to the original contract are required’. He said: The builder would have a lump-sum contract to construct the house or apartments. If the pricing of his materials and/or labour has increased, he's going to really struggle to maintain that lump-sum contract. So, you can look at alternatives, as we've discussed in the previous questions, ie, different materials or different engineered solutions, but chances of getting it for the right price are negligible, and the builder would be definitely looking to extract himself from the contract.180 231 Mr Paddick acknowledged that one option open to a builder in that position is to seek to extend the Sunset Date for the development, but he also observed that this was not overcoming the delay, merely ‘wearing it’.181 179 T511. 180 T514.5-14. 181 T514. -- 55 of 62 -- [2024] SADC 161 54 232 Having made those opinions clear, Mr Paddick made a number of concessions in cross-examination: • as to his comment about the builder ‘looking to extract himself from the contract’, he accepted that a builder is still obliged to work to the best of their activities’ to achieve practical completion, and make a ‘real and genuine effort to do so; 182 • he acknowledged that the specifications in the building contracts were generic and less precise and provided more flexibility in the builder to seek alternative solutions;183 • he said he had never seen a job where there had been no documentation of communication between a builder and developer, although he said there were many jobs where the communication was mainly verbal;184 • he accepted that it is incumbent on a builder to try to source alternatives where there are delays caused by shortages of labour and materials. This would be achieved by contacting their present suppliers, looking at alternative suppliers, working out variations to the specifications, approaching the respondents to see whether other options can be approved, and making recommendations as to how the job might be completed in a timely fashion. These processes would generate documents;185 • he accepted that he had not conducted any research into what materials were available, and from which supplier, for the period 2021-2022, instead relying on his memory;186 • he was aware of a number of residential developments which were completed in 2021-2022, but did not compare them with the Anzac Highway project;187 • he acknowledged that timber, gyprock and Hebel products were not wholly unavailable during 2021-2022.188 He had no knowledge of Hebel having a plant in New South Wales producing large quantities of their product; • he had not conducted any research with the international availability of timber in 2021-2022. He said that the availability of engineered timber was severely affected by the Russian invasion of Ukraine, where much of it was produced;189 182 T515. 183 T516. 184 T516. 185 T517. 186 T519. 187 T579.20. 188 T520. 189 T522. -- 56 of 62 -- [2024] SADC 161 55 • his comments about the ‘exodus’ of people from South Australia were based on migration figures for the whole population, and did not apply specifically to skilled workers;190 • it was put to him that his estimate that the cost of materials and labour had risen by 22.5% over 2021-22191 meant that the cost of the Anzac Highway project rose by about $50,000. In those circumstances, he conceded that if the purchaser was willing to pay such an increase there would not be a ‘problem’. He said he would have expected that such discussions would have been held with the purchaser, and pursued to a conclusion as to whether or not the purchaser was willing to meet the increased cost of the development. 233 Having regard to the concessions made by Mr Paddick in cross-examination, I find that the evidence given by the expert witnesses is not very different. Mr Paddick remained sceptical that a better outcome could have been achieved, but his evidence was general, and he had not researched particular issues, such as the whereabouts of alternative building materials, specifically. Mr Sentschuk’s evidence was specific, and he provided examples of developments which had been successfully completed. Mr Paddick’s evidence referred to the period from early 2020 to early 2021, whereas Mr Sentschuk referred to a longer period, from March 2020 to December 2022. 234 In all the circumstances, where their evidence differs, I accept the evidence of Mr Sentschuk, and find on the balance of probabilities that with the exercise of reasonable diligence on the part of the respondents, the Anzac Highway Development could have been completed by 29 December 2022. Negotiating the price increase 235 In April 2022, it had become apparent to Mr Otto Zhu that the cost of the development had increased. He asked his builders to estimate the increased cost for each townhouse in the development. They informed him that the increase was $50,000 for each unit.192 As I have already mentioned, this is consistent with Mr Paddick’s evidence that the price increase was 25.29%. 236 Mr Otto Zhu instructed his real estate agent, Mr Kevin Xu, to communicate with the purchasers with a view to ascertaining whether they might be willing to renegotiate the purchase price. Mr Kevin Xu complied with Mr Zhu’s direction and wrote to the applicants. The email was dated 12 April 2022,193 and made the following points: • ‘it is essential to ensure that the development proceeds’; 190 T524. 191 Report, Exhibit R16, [3.14.2]. 192 Exhibit R19, [75]. 193 Tender Book Exhibit A, Vol 1, Tab 37, p 203. -- 57 of 62 -- [2024] SADC 161 56 • the increase in the purchase price is an unavoidable consequence of the effects of COVID-19; • ‘we note that the contract provides for termination in these circumstances’; • ‘the developer is keen to be able to work with you to ensure that you get your property which we are sure you have been eagerly anticipating’; • ‘we ask that you consider an amendment to the contract to adjust the purchase price to $454,900’; • ‘if you are unavailable to agree to these amendments, then the developer will continue to comply with the obligations under the contract’; • the developer may need to terminate the contract in accordance with its terms if it is unable to satisfy the relevant conditions. 237 The builders had supplied the figures of $50,000 plus GST for each unit to Mr Otto Zhu in the form of ‘tax invoices’. They were identical.194 238 In a subsequent discussion, Mr Kakkad did not reject the approach out of hand. He requested an itemised invoice which justified the amounts claimed. Mr Kevin Xu conveyed this request to Mr Otto Zhu. However, Mr Otto Zhu did not supply this information. In June 2022 he instructed Mr Kevin Xu not to take the issue any further. 239 In his trial affidavit, Exhibit R19, Mr Otto Zhu explained his decision as follows: [79] In around June 2022, we decided to stop any efforts to renegotiate with the purchasers. It became apparent that we would not meet the proposed practical completion date of 29 June 2022. It appeared we would need to extend the construction time and we didn’t want to continue negotiating under these circumstances’. 240 This statement fails to explain satisfactorily why Mr Otto Zhu did not want to continue negotiating with the applicants. 241 Furthermore, his statement that it only became apparent in June 2022 that they would not meet the 29 June 2022 completion date is not credible. Mr Otto Zhu gave a further explanation for not providing details of the alleged increased costs in cross-examination:195 Q You didn't ask the builders to provide that breakdown to Mr Xu, did you. A Not a detailed one. 194 Tender Book, Exhibit A1, Volume 1, Tab 34, p 204-205. 195 T591.10-16. -- 58 of 62 -- [2024] SADC 161 57 Q You didn't ask the builders to provide any breakdown for an increased costing at all, did you. A I did, but it was, like, too many of them, and too detail, so - 242 I find Mr Otto Zhu’s explanations for his decision not to peruse re- negotiations with the applicants to be completely unconvincing. 243 This event, combined with Mr Otto Zhu’s actions in extending the proposed completion date to 29 December 2022, and his other evidence, lead me to conclude, on the balance of probabilities, that Mr Otto Zhu was fully aware, in June 2022, that the development would not meet practical completion by 29 December 2022 and decided then that he would terminate the contract after the Sunset Date was reached and put the properties back on the market at a substantially higher price rather than negotiate with the respondents. Mr Kevin Xu was in regular contact with the applicants during this time, and they were becoming increasingly anxious about this issue, yet he did nothing to ease their concerns or accelerate the project. 244 The applicants argue that an email sent from the real estate agent Mr Kevin Xu to the respondents on 11 January 2023,196 the day after the respondents purported to terminate the contracts, indicated an intention to put the properties back on the market to different purchasers. The email reads: The purchaser has received the Termination Letter and send us an Email regarding to this. We have to forward it to you and keep you posted. Have you worked out a new price for the property and the buyers can put an offer for it? 245 Mr Kevin Xu gave evidence that, when he was referring to ‘the buyers’ in the second paragraph, he was referring to the applicants.197 246 I accept Mr Kevin Xu’s evidence about that. However, I do not accept Mr Gentry’s submission198 that the acceptance of Mr Kevin Xu’s evidence destroys the applicants’ case alleging that the respondents breach of the ‘reasonable endeavours’ clause was deliberate. The respondents’ breach and purported termination enabled the respondents to put the property back on the market at 2023 prices which were substantially higher than the purchase prices in the contracts. Mr Otto Zhu acknowledged this obvious fact.199 All Mr Kevin Xu was doing was requesting the ‘new price’ from the respondents so that he could solicit a new offer from the applicants. 247 Mr Zhu said that by the time 29 December 2022 came around, the townhouses were only 75% complete.200 Yet he refused to accept in cross- 196 Exhibit A1, Tab 61A, p 314. 197 T478, T479-482. 198 Written submissions, [394]. 199 T594. 200 Exhibit R19, [82]. -- 59 of 62 -- [2024] SADC 161 58 examination that he knew in August 2022 that the development would not be completed on time. He asserted that he did not realise that he had a right to terminate the contract until after December 2022.201 248 He said that it was only after that date that he realised that if he didn’t terminate, the companies would lose money. He said: At the time (ie: at 29 December 2022), we still didn’t know how long it would take to complete the development. COVID was causing higher costs and ongoing delays. The timing and fixed costs of the development remained uncertain. We knew by this time however that the development would result in a loss if we did not terminate the contracts. 249 I do not believe Mr Zhu’s evidence about that. In my view, the evidence points to a conclusion that he knew well before 29 December 2022 that the respondents were facing a loss, and that was the reason he instructed Mr Kevin Xu not to continue with the renegotiation discussions with the applicants in June 2022. He realised then that he could make a larger profit by terminating the contract than he could by increasing the purchase price by $50,000. For that reason, he made no effort to achieve practical completion by 29 December 2022. Conclusion 250 I conclude from all of this evidence that the respondents did not use reasonable endeavours to achieve practical completion of the applicants’ townhouses by the Sunset Date in the contracts. 251 Mr Otto Zhu delegated, or in the words of Tamberlin AJ in Hall v Foster, ‘abdicated’ responsibility for meeting his obligation under Special Condition 10.1(6) of the contracts, to use reasonable endeavours to achieve practical completion by that date, to the builders. He failed to do anything substantial towards discharging his personal obligations in this regard. 252 Accordingly, I find that the respondents were in breach of their contracts with the applicant, and that the breaches were causally related to the event which triggered their power to terminate the contracts. That being the case, the termination of the applicants’ contracts with the respondents was invalid. Remedies 253 The applicants seek specific performance of the contracts. They cite Meagher, Gummow and Lehane in Equity: Doctrines and Remedies202 where the learned authors state: Contracts for the deposition of interests in land are, far more commonly than contracts of any other description, the subject of orders for specific performance. Damages are not an adequate remedy for failure by a vendor to complete a contract for the sale of land 201 T595. 202 4th Ed., 2002, at [20-035]. See also Dal Pont and Cockburn, Equity and Trusts: in Principle, 2nd Ed., [31.15]. -- 60 of 62 -- [2024] SADC 161 59 (Adderley v Dixon (1824) 1 Sim & St 607 at 610; Dougan v Ley (1946) 71 CLR 142 at 150 per Dixon J). 254 In Blackburn v Logos Research Institute Pty Ltd203 Slattery DCJ conveniently listed the five requirements for the award of specific performance of a contract: • damages are not an appropriate remedy; • the court is in a position to find that there is an enforceable agreement; • there has been a breach of that agreement; • it must be possible to perform the agreement; • the claimant must be able to satisfy the ‘discretionary factor’. 255 Requirement 1 has been satisfied having regard to the nature of the contracts and the authorities quoted above. 256 In my judgment requirements 2, 3 and 4 have clearly been satisfied in the reasons already given. As to the discretionary factors, Slattery DCJ said:204 Discretionary factors are usually grouped under the headings of mutuality, readiness and ability to perform, futility of ordering specific performance, the question of whether the plaintiff comes to equity with “clean hands”, hardship, contracts for personal services and the question of supervision. 257 In his written submissions,205 Mr Douglas refers to a list in Paterson, Robertson and Duke, Principles of Contract Law206 to similar affect: (a) whether specific performances would require the continued supervision of the Court; (b) whether the contract involves provision of personal services; (c) whether the applicant, if granted specific performance, will be able to perform his or her obligations; (d) whether the applicant has delayed seeking relief; (e) whether the applicant is in breach of the terms of the contract; (f) whether the applicant is ready, willing and able to perform all of his or her obligations under the contract; (g) whether hardship will be caused to the respondent by an order for specific performance; 203 [2015] SADC 175, [138]. 204 At [138]. 205 At [108]. 206 3rd Ed., [30.35]. -- 61 of 62 -- [2024] SADC 161 60 (h) whether the transaction has been affected by unfair conduct on the part of the applicant. 258 All of the above criteria have been satisfied by the applicants. I conclude that having regard to the above criteria, it is appropriate to make orders for specific performance of the contracts in this case. I will hear the parties as to the making of appropriate orders to give effect to this ruling. -- 62 of 62 --