Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Sara Investments (NSW) Pty Limited v West Asset Holdings Pty Ltd [2022] NSWCA 207 Hearing dates: 5 October 2022 Date of orders: 19 October 2022 Decision date: 19 October 2022 Before: Meagher JA at [1]; Brereton JA at [2]; Mitchelmore JA at [19]. Decision: Dismiss the appeal, with costs. Catchwords: CONTRACTS – Remedies – Specific performance – Requirement that plaintiff be ready, willing and able to perform its obligations under contract – Presumption in UCPR r 14.11 that a statement to that effect is implied in pleading – Plaintiff's readiness, willingness and ability not traversed in defence and therefore taken to be admitted – Issue not resurrected in cross-examination such as to require evidence to be adduced – No error in primary judge's conclusion that plaintiff was ready, willing and able to perform its obligations APPEALS – Procedure – Grounds of appeal not formally abandoned but not canvassed in written reply submissions and expressly not supported in oral submissions – Grounds taken to raise no issue of principle – Disposal "in short form" under Supreme Court Act 1970 (NSW), s 45(4) and UCPR r 51.55 Legislation Cited: Supreme Court Act 1970 (NSW), s 45(4) Uniform Civil Procedure Rules 2005 (NSW), rr 14.11, 51.55 Cases Cited: ASIC v Hellicar (2012) 247 CLR 345; [2012] HCA 17 Bahr v Nicolay (No 2) (1988) 164 CLR 604; [1988] HCA 16 Dalswinton Pastoral Company v Cole [2006] NSWSC 570 Gates v WA & RJ Jacobs Ltd [1920] 1 Ch 567 Category: Principal judgment Parties: Sara Investments (NSW) Pty Limited (First Appellant) Bulolo Investments Pty Ltd (Second Appellant) West Asset Holdings Pty Ltd (First Respondent) Central Cleaning Supplies (Aust) P/L (Second Respondent) Representation: Counsel: N Kirby with R D Turnbull (Appellants) J Morris SC with S Woodland (Respondents) Solicitors: Solve Legal (Appellants) Gibson Howlin Lawyers (Respondents) File Number(s): 2022/178925 Publication restriction: Not Applicable Decision under appeal Court or tribunal: Supreme Court of NSW Jurisdiction: Equity Citation: [2022] NSWSC 674 Date of Decision: 27 May 2022 Before: Lindsay J File Number(s): 2020/320619 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] HEADNOTE [This headnote is not to be read as part of the judgment] The first appellant ("Sara") planned to sell a warehouse property to the first respondent ("West"). In "Heads of Agreement – Subject to Contract", the purchase price was stated as $7.5 million. Further negotiations resulted in the transaction being restructured to involve a put and call option in respect of the property, which if exercised would result in a contract for its sale at a price of $7.385 million, and a lease by Sara to a related company of West pursuant to which it would pay rent at a rate which would generate revenue of approximately $115,000 until the projected date for completion of the purchase contract. In this way, the originally conceived price of $7.5 million was apportioned as to $7.385 million in purchase money and as to $115,000 in rent. The option was exchanged and then exercised by West. Sara subsequently contended that the correct purchase price was $7.5 million and not $7.385 million, and challenged the enforceability of the put and call option, the validity of West's exercise of the call option, and the entitlement to a lease. West sought specific performance of the contract arising from exercise of the option. The primary judge held that the option was valid and binding and had been duly exercised by West, as a result of which the contract with the purchase price of $7.385 million was valid and binding and ought to be specifically performed. On appeal by Sara: Held, per Brereton JA [18] (Meagher JA and Mitchelmore JA agreeing [1], [19]) dismissing the appeal, with costs: As to grounds of appeal not argued 1. Grounds of appeal which were not the subject of written submissions in reply, and which on the hearing of the appeal were, though not formally abandoned, expressly not sought to be supported, could be taken to raise no issue of principle and were to be disposed of "in short form" as authorised by Supreme Court Act 1970 (NSW), s 45(4) and Uniform Civil Procedure Rules 2005 (UCPR), r 51.55: [10]. As to whether the plaintiff was ready, willing and able to perform its obligations under the contract 2. By Uniform Civil Procedure Rules, r 14.11, a statement to the effect that the plaintiff is ready and willing or was at all material times ready and willing to perform an obligation is taken to be implied in its pleading, and if not traversed in the defence is taken to be admitted. Here, the defences did not traverse the implied allegation that the plaintiff was ready, willing and able to complete, so readiness, willingness and ability were therefore deemed to be admitted and not in issue at the trial: [12]; [15]. 3. The issue was not resurrected in cross-examination such as to require the respondents to adduce evidence in respect of it, but in any event, there was evidence elicited from West's director during cross-examination to the effect that West was ready, willing and able to complete, and there was no evidence to the contrary. In those circumstances, the primary judge was entitled if not bound to accept the director's evidence, and his Honour did not err in holding that West was ready, willing and able to complete the contract: [15]. Judgment 1. MEAGHER JA: I agree with Brereton JA. 2. BRERETON JA: On 10 October 2019, real estate agents retained by the first appellant Sara Investments (NSW) Pty Limited ("Sara") issued a document entitled "Heads of Agreement – Subject to Contract" to the first respondent West Asset Holdings Pty Ltd ("West") in respect of the sale of a warehouse property at 187-189 John Street, Lidcombe, stating the purchase price as $7.5 million with a deposit of 5% payable on exchange, a further 5% six months following exchange, both to be released to the vendor, and a settlement date twelve months following exchange. The special conditions also provided for the purchaser to have the sole use of units 5 and 6 from exchange of contracts, and to be liable for 40% of outgoings from exchange until settlement. 3. Over the next few days, however, further negotiations resulted in the transaction being restructured to involve the following: 1. A put and call option in respect of the property, which if exercised would result in a contract for its sale at a price of $7.385 million to be completed on 19 October 2020; 2. The grant of a licence to West by the second appellant Bulolo Investments Pty Ltd ("Bulolo"), a related company of Sara and the then lessee of the property from Sara, of units 5 and 6 for the period from 25 October 2019 to 31 May 2020 for a nominal rent; 3. The grant of a lease by Sara to Central Cleaning Services (Aust) Pty Ltd ("CCS"), a related company of West, of the property for a term of three years from 1 June 2020 pursuant to which CCS would pay rent to Sara from 1 June 2020 at a rate which would generate revenue of approximately $115,000 until 19 October 2020, the projected date for completion of the purchase contract. In this way, the originally conceived price of $7.5 million was apportioned as to $7.385 million in purchase money and as to $115,000 in rent. 1. On 18 October 2019 at 4:50 pm, Sara's then solicitors submitted the licence agreement, put and call option and lease, signed by their client, to West's solicitors, together with the signed front page of the contract for sale referred to in the option. West's solicitors returned the licence agreement and put and call option duly signed at 5:22 pm, together with the lease, which had been the subject of an amendment and was unsigned. The option was thereby exchanged, although hard copies were subsequently exchanged on 23 January 2020. 2. On 4 June 2020, Sara changed solicitors, and on 19 June 2020, their new solicitors asserted that Sara had not entered into any agreement for the grant of a lease over the property to CCS. By another letter of the same date, the new solicitors confirmed that they acted for Sara in respect of the option, and that for the purpose of any exercise of the call option they were Sara's solicitors. 3. On 13 July 2020, West exercised the option. On 17 July, Sara's solicitors asserted that the contract price was $7.5 million and not $7.385 million. As the primary judge recorded, the parties joined issue on the enforceability of the put and call option, the validity of West's exercise of the call option, and CCS's entitlement to a lease of the property. [1] 4. In the proceedings below, West, subsequently joined by CCS, sought specific performance of the contract arising from exercise of the option. Sara and Bulolo cross-claimed, for declaratory relief to the effect that the option had not been exercised and that Sara was entitled to retain the option fee, and for rectification of the option and any consequent contract to provide that the price was $7.5 million. At trial the essential issues were, first, whether the option was valid and enforceable; secondly, whether the price was $7.5 million or $7.385 million; and thirdly, whether the option had been validly exercised. 5. In the primary judgment, delivered on 27 May 2022, Lindsay J held that the option was valid and binding and had been duly exercised by West, as a result of which the contract in the form annexed to the option (which provided for a price of $7.385 million) was valid and binding and ought to be specifically performed. His Honour also resolved other issues which are not presently relevant. An order for specific performance was made on 9 June 2022, and supplementary and more specific orders on 30 June 2022. 6. Sara and Bulolo appeal to this Court. Their amended Notice of Appeal of 16 August 2022 asserted the following grounds: "1. The learned trial judge erred in failing to find that when the first appellant and first respondent entered into a written put and call option with respect to the property at 187-189 John Street, Lidcombe, New South Wales (the "Property") dated 18 October 2019 (the "Option"), the total purchase price for the sale of the Property was $7,500,000. 2. Further, and in the alternative the learned trial judge erred in failing to find that in addition to the Contract for Sale of Land ("Contract"), there was a collateral agreement that $115,000 of the purchase price was to be paid by the first plaintiff to the first defendant as a condition of completing the Contract, and that the parties' mutual intention in that respect miscarried. 3. The learned trial judge erred in failing to find that the first defendant was under an obligation to pay the sum of $115,000 to the first plaintiff, and that sum was never in fact paid. 4. Further, and in the alternative, if the Court finds that the parties had agreed that $115,000 of the agreed purchase price of $7,500,000 was to be paid as rent or otherwise, then the primary judge erred in granting equitable relief where such further sum was never, in fact, paid. 5. Further and in the alternative, the learned trial judge erred in failing to find that the first plaintiff was estopped from denying that it was obliged under the collateral agreement to pay the sum of $115,000 to the first defendant. 6. Further and in the alternative, the learned trial judge erred by failing to require, as a condition of any grant of equitable relief, the respondents to pay $115,000 to the first appellant. 7. Further and in the alternative, the learned trial judge erred in finding that the first appellant made a calculated decision not to bind itself to the proposed lease in favour of the first respondent. 8. Further, there was a breach of natural justice in making the finding in ground 7, in that it was never put to the defendants' witnesses that they caused the first defendant to make a calculated decision not to bind itself to the proposed lease. 9. The learned trial judge erred in drawing an inference that the then solicitors for the appellants explained to the appellants the nature and effect of the Option entered into on or about 18 October 2019, and erred in failing to give reasons for drawing that inference. 10. The learned trial judge erred in finding that the first respondent was ready, willing and able to discharge its obligations under the Contract at the time for completion under the Contract. 11. The learned trial judge erred in finding that the option was validly exercised in circumstances where the respondents had not, in accordance with the Contract, proffered the guarantee, provision of which was an essential term of the contract. Material facts 12. Pursuant to rule 51.18(2) of the Uniform Civil Procedure Rules 2005, the appellants say that the court below should have found the following material facts: a. That there was a collateral agreement to the Contract under which the respondents were obliged to pay $115,000 to the appellants. b. That the first respondent was not ready, willing and able to discharge its obligations under the Contract at the time for completion under the Contract. 13. Pursuant to rule 51.18(2) the appellants say that the court below should not have found the following material facts: a. That the first appellant did not make a calculated decision not to bind itself to the proposed lease in favour of the first respondent. b. That the then solicitors for the appellants explained to the appellants the nature and effect of the Option entered into on or about 18 October 2019." 1. Although those grounds or most of them were canvassed in the appellants' written submissions, which were answered by the respondents' written submissions, no reply submissions from the appellants were filed to take issue with the respondents' submissions. The day before the hearing, counsel for the appellants notified the Court that although he intended to "formally press all grounds", he would "argue" only Ground 10 and the associated factual challenge at Ground 12(b). When clarification of this was sought at the outset of the hearing, counsel referred to the absence of a reply to the respondents' submissions, and frankly stated that while instructed not to abandon the other grounds, there was nothing he could say in support or defence of them. In those circumstances I am satisfied those grounds raise no issue of principle and may and ought to be disposed of, as authorised by Supreme Court Act 1970 (NSW), s 45(4) and Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 51.55, "in short form". 2. The sole ground argued was that West did not discharge its onus of proving that it was ready, willing and able to complete the contract. On this question, the primary judge said: "[45] I am satisfied that the first plaintiff is and has been at all material times ready, willing and able to complete its obligations under the contract created upon exercise of its call option. I accept the evidence of its director, Mr Camilleri, that it has always had financial arrangements in place sufficient to fund its purchase. It was not necessary for it formally to tender the purchase price on the contractual date for completion (19 October 2019) in circumstances in which the first defendant, by denial of the contract, had implicitly dispensed with any need to do so: Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235; Mahoney v Lindsay (1980) 55 ALJR 118; 33 ALR 601; Foran v Wight (1989) 168 CLR 385." 1. Although the appellants' written submissions asserted that it was necessary for West to aver and prove that it was ready, willing and able to complete, that is incorrect, and the issue was not alive on the pleadings. By UCPR r 14.11, a statement to the effect that the plaintiff is ready and willing or was at all material times ready and willing to perform an obligation is taken to be implied in its pleading, and if not traversed in the defence is taken to be admitted. [2] The defences did not traverse the implied allegation that the plaintiff was ready, willing and able to complete, so readiness, willingness and ability were therefore deemed to be admitted and not in issue at the trial. 2. In those circumstances, understandably, West did not adduce evidence of its readiness, willingness and ability to perform. The issue was however raised in cross-examination of West's director Mr Camilleri, who denied the proposition put to him that he did not have the money, [3] asserted that "finances weren't a problem", [4] and testified "I've got a facility with the banks that at any time, through our property portfolio, there's not an issue with financing". [5] When asked, more than once, if he could prove that he had the money available, he said that he would do so if so advised by his solicitors. 3. The appellants submitted that Mr Camilleri's evidence in this respect was evasive and dissembling, and insufficient to produce the requisite state of actual satisfaction of readiness etc. [6] It was submitted that the issue having been raised in cross-examination in that way, it was incumbent upon him to adduce further evidence to dispel the question. 4. In my view no basis whatsoever for disturbing the primary judge's conclusion in this respect has been demonstrated. First, and foremost, as has been explained, the matter was not in issue on the pleadings. I do not accept that the course of cross-examination was such as to resurrect an issue which was foreclosed on the pleadings. Secondly, there was in any event some evidence, elicited in cross-examination of Mr Camilleri, to the effect that West was ready and able to complete; and there was no evidence to the contrary. The submission that his evidence was evasive and dissembling is one which the primary judge (to whom it was not made) was far better positioned to evaluate than is this Court. The judge was entitled if not bound to accept Mr Camilleri's evidence, and in all those circumstances it would have been wrong for his Honour to do anything but to accept that West was ready, willing and able to complete. 5. It follows that in my opinion the primary judge did not err in holding that West was ready, willing and able to complete the contract created upon exercise of its call option. 6. As has been noted, the other grounds of appeal do not raise any question of general principle, and are not made out. In respect of them the judgment of the primary judge should be upheld, for the reasons given by his Honour. 7. I propose that the appeal be dismissed, with costs. 8. MITCHELMORE JA: I agree with Brereton JA. ********** Endnotes 1. West Asset Holding Pty Ltd v Sara Investments (NSW) Pty Limited [2022] NSWSC 674 ("primary judgment") at [16]. 2. Gates v WA & RJ Jacobs Ltd [1920] 1 Ch 567 at 57 (P O Lawrence J); Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 620; [1988] HCA 16 (Mason CJ and Dawson J); Dalswinton Pastoral Company v Cole [2006] NSWSC 570 at [5] (Hamilton J). 3. Tcpt, 30 March 2022, p 92(48). 4. Tcpt, 30 March 2022, p 93(39)-(40). 5. Tcpt, 30 March 2022, p 95(34)-(35). 6. Cf ASIC v Hellicar (2012) 247 CLR 345; [2012] HCA 17 at [250]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision 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 or Tribunal in which it was generated. Decision last updated: 19 October 2022