City & Industrial Demolitions v Shanahan [2000] NSWSC 1197

Reported Decision : [2001] Aust Contract R 90-122

New South Wales Supreme Court

CITATION : City & Industrial Demolitions v Shanahan [2000] NSWSC 1197 CURRENT JURISDICTION: Equity Division Commercial List FILE NUMBER(S) : SC 50094/99 HEARING DATE(S) : 30.11.00, 4.12.00 JUDGMENT DATE : 15 December 2000

PARTIES : City & Industrial Demolitions (NSW) Pty Ltd v Leo Peter Shanahan & Owen Douglas Tomlinson & Doncaster Holdings Ltd JUDGMENT OF : Hunter J

COUNSEL : Plantiff: G L Turner Second & Third Defendants: J S Drummond SOLICITORS : Plaintiff: John L Merity Solicitors Second & Third Defendants: Booth & Boorman Solicitors CATCHWORDS : Contract- construction of deed - satisfaction of condition precedent- rescission by implication - whether conduct repudiatory. Dan v Barclays Australia Ltd (1983) 46 ALR 437 CASES CITED : Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd (1957) 98 CLR 93 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 DECISION : Summons dismissed. Plaintiff to pay the defendants' costs of the proceedings.

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

HUNTER J

FRIDAY 15 DECEMBER 2000

50094/99 CITY & INDUSTRIAL DEMOLITIONS (NSW) PTY LTD v LEO PETER SHANAHAN & OWEN DOUGLAS TOMLINSON & DONCASTER HOLDINGS LTD

REASONS FOR JUDGMENT 1 In these proceedings the plaintiff (City) sued Leo Peter Shanahan (Shanahan), Owen Douglas Tomlinson (Tomlinson) and Doncaster Holdings Limited (Doncaster) claiming damages arising out of the alleged repudiation by the defendants of their obligations under a deed dated 21 May 1997 (the deed), or, alternatively, claiming payment of the sum of $400,000 under the deed. City has proceeded only against Tomlinson and Doncaster. 2 At the time the deed was entered into Shanahan and Tomlinson were the directors and only shareholders of Doncaster. Parties to the deed were Shanahan, Tomlinson, Doncaster, City and Robert Kidd (Kidd). It is not disputed that City, through the instrumentality of Paul Henry Menere, and Kidd introduced Doncaster to the opportunity of purchasing property situated at Milton in Brisbane (the Milton property) from Royal Queensland Lawn Tennis Limited (the association): the Milton property having a prior use as a tennis club. It is evident from the deed that the parties contemplated the obtaining of approval by the Council of the City of Brisbane (the council) of development of the Milton property with some 200 residential units and the exploitation of that approval by sale of shares in Doncaster or by on-sale of the interest in the Milton property. 3 At the time of the execution of the deed, Doncaster had entered into a sale contract dated 27 March 1997 (the first sale contract) for the purchase of the Milton property from the association for the sum of $3,800,000. The first sale contract was subject to Doncaster obtaining Local Government consent to the rezoning of the Milton property for the purposes of its development with "not less than 200 residential townhouses/ units". It was also subject to the obtaining of such development approval "on terms … acceptable to [Doncaster] in its absolute discretion on or before the Condition Date" which was defined as meaning "subject to clause 48, 9 months after the date of [the] contract". Both the rezoning and development approval conditions were expressed to be for the sole benefit of Doncaster which was expressly entitled to waive the benefit of those clauses. There was provision in the first sale contract for notification by Doncaster of its acceptance of the terms of the development approval and of deemed acceptance, upon notice, by the association. 4 Clause 46 of the first sale contract conferred upon Doncaster the right to terminate in the event that the rezoning and development approval conditions were not satisfied or waived by the Condition Date and for the association to terminate the contract where Doncaster failed so to do. 5 The first sale contract provided for the payment of a deposit of $232,000 by monthly instalments commencing with one of $100,000 on the date of execution of the contract followed by 9 monthly payments of $8,000 succeeded by three payments of $20,000, concluding with the last payment twelve months after the date of the first sale contract. 6 By cl 48, Doncaster was entitled to extend the Condition Date by not more than twelve months after the date of the first sale contract in the event that it had taken all reasonable steps to satisfy the rezoning and development approval conditions, where those conditions had not been satisfied or waived. 7 I think it is also reasonably clear that the parties had in contemplation, at the time of the execution of the deed, a share agreement made some five days after the deed on 26 May 1997 (the Narimar share agreement) between Shanahan and Tomlinson as vendors and Narimar Pty Ltd as purchaser of the shares in Doncaster. 8 The purchase price for the shares was expressed to be $3,460,000 in the event that the first sale contract and two other related property transactions were settled, or, alternatively, $300,000 if such settlements did not take place. The purchase price was payable, as to $200,000 by 30 May 1997, as to a further $100,000 within fourteen business days of the date of the Narimar share agreement and the balance, where applicable, on the Completion Date which was defined to be "…the date for and actual settlement of the [subject property transactions] otherwise the business day following termination or rescission of the [related sale contracts]". 9 Clause 5(h) of the Narimar share agreement required the vendors, to give a written direction to Narimar, on settlement, "to pay the amount of $400,000 to each of City … and … Kidd from the purchase monies payable on … Completion". 10 In the ninth schedule to the Narimar share agreement, a similar provision was made for the deduction of $800,000 from the purchase price and for payment of $400,000 to each of City and Kidd. The reason for those provisions is made clear by the terms of the deed. 11 The recitals to the deed noted that Doncaster had entered into the first sale contract and was "negotiating to enter into an agreement for the sale of [the] shares [in] Doncaster", presumably the Narimar share agreement. 12 Recital D was in the following terms: