DN Holdings Qld Pty Ltd v 2620 Ipswich Road Pty Ltd & Ors [2021] QSC 308 [2021] 48 QLR

SUPREME COURT OF QUEENSLAND CITATION: DN Holdings Qld Pty Ltd v 2620 Ipswich Road Pty Ltd & Ors [2021] QSC 308 PARTIES: DN HOLDINGS QLD PTY LTD ACN 644 106 356 AS TRUSTEE FOR THE DN INVESTMENT TRUST (applicant) v 2620 IPSWICH ROAD PTY LTD ACN 127 184 883 AS TRUSTEE UNDER INSTRUMENT 711547396 (first respondent) MCENIERY PROPERTIES PTY LTD ACN 092 592 857 (second respondent) ARCHON CAPITAL PTY LTD ACN 653 661 440 (third respondent) FILE NO: BS No 11985 of 2021 DIVISION: Trial PROCEEDING: Originating Application ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 17 November 2021 (ex tempore) DELIVERED AT: Brisbane HEARING DATE: 17 November 2021 JUDGE: Bradley J ORDER: THE COURT DECLARES THAT: 1. The Applicant duly exercised the Call Option contained in the Call Option Deed dated 2 October 2020 on 30 September 2021. 2. The purported termination of the contract arising from the exercise of the Call Option Deed by the Respondent on 1 October 2021, was invalid and ineffective to terminate that contract or to cause forfeiture of the deposit paid by the Applicant. THE COURT ORDERS THAT: 3. The First and Second Respondents pay the Applicant’s costs of the application. 4. Liberty to apply. -- 1 of 5 -- 2 CATCHWORDS: CONVEYANCING – THE CONTRACT AND CONDITIONS OF SALE – DEPOSIT – TIME FOR PAYMENT – where a Call Option Deed was entered into by which the applicant acquired an option to purchase land at a specified price – where the exercise of the Option Deed required the applicant to deliver an executed copy of the call option notice together with two signed copies of the contract and a bank cheque for the deposit payable under the contract by the specified time – where the applicant delivered the documents and bank cheque required to exercise the option to an address nominated under the contract – where the first and second respondents purported to terminate the contract on the basis the deposit had not been paid on the day the contract was signed – where the Option Deed permitted payment of the deposit to occur up to the option expiry date – whether the Option Deed was duly exercised in accordance with its terms and gave rise to a binding contract for sale Brien v Dwyer (1978) 141 CLR 378, considered COUNSEL: D J Campbell QC, with S W Trewavas, for the applicant J W Peden QC, with M J Doyle, for the first and second respondents J P Hastie for the third respondent SOLICITORS: Hyland Law for the applicant Russells for the first and second respondents Woods Prince Lawyers for the third respondent [1] The applicant seeks two declarations to resolve legal questions arising about the respective rights of the applicant and the first and second respondents under two instruments. The first is a call option deed, by which the first and second respondents granted the applicant a right to exercise an option at any time before 5 pm on 30 September 2021. [2] The exercise of the option was to occur in accordance with clause 2.1 of the deed. It required the applicant to deliver specified things, namely, the call option exercise notice duly executed by it, two copies of the contract signed by it and completed in certain respects, including by inserting the exercise date as the contract date and providing certain particulars, and, thirdly, a bank cheque for the deposit payable under the contract in favour of the deposit holder under the contract. The deed provided, by clause 3.2, that on exercise of the call option under clause 2.1, the contract will be taken to have been entered into on that date whether or not the contract is signed by the grantor. [3] The contract was in a schedule to the deed. It is in the form of the standard Contract for Commercial Land and Buildings approved by the Queensland Law Society and the Real Estate Institute of Queensland. It is for the sale of land owned by the first and second respondents at Darra. It is the eighth edition of that standard form. It provided, by clause 3.1, that: -- 2 of 5 -- 3 The deposit shall be paid by the buyer to the deposit holder at the times stated in item O. [4] Item O provided that a $350,000 initial deposit was: …payable on the day the buyer signs this contract unless another time is specified below. [5] There was no other time specified below. The deposit holder was the person named in item G, and where no person was named there, it was the agent. In item G, the deposit holder was named as HopgoodGanim Trust Account, and in item B, no person was named as the agent. [6] It is common ground that on 30 September 2021, the applicant delivered the call option exercise notice duly executed, two copies of the contract signed by it and completed in the relevant ways, and a bank cheque for the deposit of $350,000 payable to HopgoodGanim Trust Account. These were delivered to the address nominated under clause 7.1 of the deed as the grantor’s address at Bowen Hills. Clause 7.1 provided that: A notice that must or may be given or made to a party under this document is only given or made if it is in writing and sent in one of the following ways. [7] The relevant way was delivered to that party at its address set out below. The day before, that is, 29 September 2021, the solicitors for the applicant had been attempting to deliver the documents required to exercise the option by another method provided by clause 7.1. That was to send it to a fax number set out in that clause. They were unable to do so as the fax line was registering as engaged or busy. [8] They made attempts to contact the first and second respondents because of a concern that had been raised about whether the address for delivery of notices under the deed was still occupied by them. Through those inquiries, the solicitors for the first and second respondents became aware of this activity, that is, the attempt to deliver the documents required for the exercise of the option. [9] On 1 October 2021, the first and second respondents, by their solicitors, purported to terminate the contract on the basis that the deposit payable under it was payable on the day the contract was signed by the applicant, and because a signed copy of the contract was in existence on 29 September 2021 bearing that date, the deposit had not been paid on the day the contract was signed, but a day later. [10] The evidence adduced at the trial establishes that the director of the applicant had, in fact, signed the contract on 16 September 2021 and had then attended again to sign additional copies of the contract on 28 September 2021 or about that date. He had given instructions to his solicitors sufficient to allow them to insert relevant dates in the contract as required, being the exercise date. [11] For the first and second respondents, it is contended that in order to exercise the option under the deed, it was necessary for the applicant to pay the deposit not only to comply with clause 2.1 of the deed but also to comply with clause 3.1 of the contract, and it is said that in order to comply with clause 3.1, the applicant had to pay the deposit on the day the applicant signed the contract. -- 3 of 5 -- 4 [12] As authority for this, the principal submissions were based upon the decision in Brien v Dwyer,1 and the Court has been taken to a number of passages in the various judgments delivered by the High Court in that case. The position prevailing there, and the contract concerned were, of course, different to the particular circumstances here. But the approach the members of the Court adopted in that case are of relevance. They explain, for example, the purpose of a deposit and its significance, and why a requirement that the deposit be paid before, on or upon the signing of the contract has importance for the parties to it, most significantly for the vendor. [13] The different views expressed by the members of the High Court have been variously considered subsequently. It seems to me for present purposes, so far as it matters for today, that the views expressed are consistent with the proposition that by the time the purchaser provides the signed contract to the vendor, whether by the New South Wales practice of an exchange or otherwise, the terms of the standard contract there provided that the deposit had to be paid. [14] Here, the first and second respondents seek to have the relevant provisions in the standard Queensland contract construed so that if a buyer signs the standard contract in the privacy of their own home, for example, and then some days later provides it and the deposit to the purchaser, they will, upon acceptance of the contract by the vendor, be immediately in breach because they did not pay the deposit to the deposit holder on the day they signed the contract. [15] In my view, this makes no commercial sense. It seems a very perverse way to read a standard contract which is entitled Contract for Commercial Land and Buildings. It seems inconsistent also with the approach that the various members of the High Court took in Brien v Dwyer, including the then Chief Justice Barwick, who, when considering the provisions there, took, on any fair analysis, the narrowest view of the provision. His Honour formulated the question in a way so as to refer to: “…when the form of the agreement is signed by the purchaser for transmission to the vendor.”2 or put in this way: “… in my opinion, in the context of clause 1, and being mindful of the function of a deposit in a transaction of the present kind, the word “upon” means, in my opinion, “at the time of” and relates to the time of the signature by the purchaser of the form of agreement for transmission or presentation to the vendor for his signature.”3 [16] If there were any doubt about the objective commercial meaning of a contract, in this particular case, the specific terms contained in clause 2.1 of the deed remove any doubt. The parties plainly gave particular consideration to the mechanism by which the option was to be exercised and a binding contract was to come into effect between them. Those express conditions in clause 2.1 of the deed do not require a payment of a deposit at any time before the day that the option is exercised. They permit that payment to occur up to 5 pm on the option expiry date; in this case, 30 September 2021. The deposit cheque was delivered in accordance with clause 2.1 by that time. 1 (1978) 141 CLR 378. 2 Brien v Dwyer (1978) 141 CLR 378, 384. 3 Brien v Dwyer (1978) 141 CLR 378, 385. -- 4 of 5 -- 5 [17] There are various curiosities to the contract that is annexed to the deed. One is, of course, that the deposit holder is named as a trust account rather than as a person, and the other is that clause 3.1, read literally, would require the deposit to be paid by the buyer to the deposit holder. These inconsistencies between the contract (or the form of the contract) and the express terms in the deed should be resolved by giving pre- eminence to the specific terms agreed in the deed. This can be done by adopting a sensible interpretation of those provisions. It follows that I am satisfied that the option was exercised in accordance with clause 2.1 of the deed and that a contract came into existence on the date that the required documents were delivered to the address stated in the deed. [18] The first and second respondents also contend that the contract that thereby came into existence could be terminated by them because the deposit had not been paid on the day that the contract was signed by the sole director of the applicant. For the reasons I have given in the resolution of the question about the deed, I am also of the view that the provisions in the contract found in clause 3.1 and item O should be read so that they are consistent with the specifically agreed terms in clause 2.1 of the deed. [19] Even if this were not the case, I would still read the provision in item O of the contract as requiring the initial deposit to be paid on the day the buyer signs the contract and provides it to the vendor. The sense of that reading eliminates the prospect that a party, who signs a contract in the standard form in advance of the day that it is provided to the vendor and presents a deposit on the day the contract is presented, is immediately in breach of the contract. In my view, that would be a nonsensical reading of the contract. [20] Here, the provisions of the contract have obviously been modified by the terms agreed in the deed so that, for example, instead of being obliged to pay the deposit to the deposit holder in accordance with clause 3.1 and item O, the obligation of the applicant was to provide a bank cheque for the deposit to the grantor payable in favour of HopgoodGanim Trust Account, as occurred. [21] In the circumstances, I will make declarations to the effect that the applicant duly exercised the call option contained in the call option deed dated 2 October 2020 and did so on 30 September 2021. I will also declare that the purported termination of the contract arising from the exercise of the call option was invalid and ineffective to terminate the contract or to cause the forfeiture of the deposit paid by the applicant at the time it exercised the call option. [22] There are, of course, many steps to occur between today and any settlement of the contract thereby arising. For various reasons, it was not appropriate today to go into evidence as to what has occurred or might occur in respect of the settlement of the contract. In the event that further controversy arises, I will give liberty to the parties to apply for any further orders or relief that might be appropriate between now and whenever the contract is completed or terminated in accordance with its terms. -- 5 of 5 --