RB FOSTER INTERNATIONAL PTY LTD v DEPOGU PTY LTD AND ANOR SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL GLEESON CJ (1); CLARKE JA (2) and SHELLER JA (3) 11 March 1992, 11 March 1992 [1992] NSWCA 291 CONTRACTS — Construction and Interpretation of Contracts — agreement for remuneration based upon the consideration shown in certain "exchanged contracts" — trial judge correct in regarding "exchanged contracts" as a reference to contracts exchanged and completed, not contracts exchanged and later rescinded. CONTRACTS — construction — agreement for remuneration of a party to a contract based upon the consideration shown in certain "exchanged contracts" — HELD — the trial judge was right to regard that as a reference to contracts exchanged and completed, not contracts exchanged and later rescinded — no question of principle involved. ORDERS Appeal dismissed with costs. Gleeson CJ This is an appeal by leave from a decision of Brownie J in the Commercial Division of the Court. The Chief Judge of the Commercial Division, on 16 August 1991, made an order for the separate trial of a question concerning the construction of a written agreement dated 22 December 1987 between R B Foster Real Estate Pty Ltd and Hooker Corporation Ltd. The question of construction raised for separate determination appears at the commencement of the reasons for judgment of Brownie J on 15 November 1991 and his Honour's answer to that question appears on 8 of his Honour's reasons. In my view the answer given by Brownie J to the question raised for separate determination is correct. I find it unnecessary to repeat any of the matters referred to by Brownie J in his reasons for judgment. What I am about to say is expressed on the basis that this judgment can be read together with those reasons. The approach that leads me to the same conclusion as that reached by Brownie J concerning the meaning and effect of the relevant contractual provision may be stated shortly as follows. The primary entitlement of R B Foster Real Estate Pty Ltd to be paid a sum of money under the agreement in question is conferred by CLI of the agreement. That clause addresses two alternative possibilities, one being that twenty-three strata lots will be built upon the property referred to in the agreement, and the other being that twenty-two strata lots will be built upon the property. Depending upon which of those two events occurs, R B Foster Real Estate Pty Ltd will have a primary entitlement to be paid either $750,000 or $587,000. In either event, however, the entitlement to be paid only arises seven days after settlement of the sale of the last strata lot owned by the initial proprietor constructed on the property. It seems to be common ground that the reference to " the initial proprietor" is a reference to the company named Depogu Pty Ltd. CL2 of the agreement goes on to qualify the primary entitlement in certain respects. It is subCL(ii) of CL2 that is of present relevance. That sub-clause is in the following terms: "In the event that 22 Strata lots are built on the property, R 2 UNREPORTED JUDGMENTS v Foster agrees that should the total consideration disclosed on the exchanged Contracts for sale of the said strata Lots to be constructed on the Property be Jess than Eight Million Two Hundred and Fifty Four Thousand Dollars ($8,254,000,00) then the said difference between the amount of Eight Million Two Hundred and Fifty Four Thousand Dollars ($8,254,000) and the total consideration as disclosed on the exchanged Contracts For Sale of the Strata Lots is to be deducted from the amount of Five Hundred and Eighty Seven Thousand Dollars ($587,000.00) prior to payment..." The language of that provision refers to "the total consideration disclosed on the exchanged contracts for sale of the said strata lots". In the events that have happened, in relation to a number of the strata lots contracts for sale were exchanged but the original contracts were rescinded. The occasion for rescission was non-compliance with special condition twenty-four of the standard form of contract for sale. In the cases of those strata lots further contracts for sale were entered into and subsequently completed. Those later contracts for sale were at lower prices than the original and subsequently rescinded contracts and it is that difference which gives rise to the issue with which we are presently concerned. If the words of the clause I have quoted are taken literally there are, it seems to me, logically three possible meanings that could be given to them. The first meaning is that attributed to them by Brownie J, that is to say that the reference to "the exchanged contracts for sale" is a reference to the contracts that were exchanged and subsequently completed. In other words on that approach the relevant consideration is the consideration for which strata lots were actually sold in the sense that not only were there contracts of sale entered into but also those contracts of sale were, to use the language of CLI, settled. The second logical possibility, though one which produces a consequence so bizarre that neither party to these proceedings has embraced it, is that the relevant total consideration is that disclosed on any contracts that were ever exchanged regardless of whether they were ultimately completed. Thus, for example, if in relation to a particular unit there was first a contract exchanged and then rescinded and then a further contract exchanged and then rescinded and then a still further contract exchanged and ultimately settled, the total consideration would be the total purchase price shown on all of those three contracts. The final possibility is that contended for by the appellants, that is to say, that the relevant consideration is that disclosed on the first of the exchanged contracts in relation to a particular strata lot regardless of whether or not such contract was ultimately settled. Bearing in mind the possibility of multiple exchanges of contract prior to ultimate settlement it is not easy to see why one would select the first of the exchanged contracts as opposed to the second or third if such a process of construction were available. However, senior counsel for the appellant has pointed to certain surrounding circumstances which he says indicates that that was the intention of the parties. Those surrounding circumstances are referred to in the judgment of Brownie J and it is unnecessary for me to elaborate upon them. My strong preference is for the first of the three possible approaches that I have outlined. It seems to me to accord best with what I regard as the proper construction of a document such as this which involves reading all of the parts of the document together and giving them a meaning that is harmonious, if that is possible. It is the first of the three possible approaches that makes CL2 fit in more naturally with CL1, which is the clause that contains the primary entitlement to payment. UWABRJFOSTER INTERNATIONAL PTY LTD v DEPOGU PTY LTD AND ANOR (Sheller JAB For those reasons I consider that the appeal should be dismissed with costs. Clarke JA I agree with the Chief Justice. Sheller JA I agree with the Chief Justice. 5 GLEESON CJ:The orders of the Court will be as I have proposed. Appeal dismissed with costs. Counsel for the appellant: BW Rayment QC/RJH Darke 10 Solicitors for the appellant: Aubrey F Crawley and Co Counsel for the respondent: F Lever Solicitors for the respondent: Holman Webb