New South Wales Supreme Court CITATION : Techno Developers Pty Ltd v The Homes Corporation of Australia [2005] NSWSC 23 HEARING DATE(S) : 23/12/04 JUDGMENT DATE : 23 December 2004 JURISDICTION : Equity JUDGMENT OF : Brownie AJ DECISION : Claim dismissed, other than to order refund of deposits. CATCHWORDS : Contracts - Implied Terms - Customs or usage - Other questions of fact - No question of principle. Trade Practices Act LEGISLATION CITED : Conveyancing Act 1919 s55(2A) Con-Stan Industries of Australia Ltd v Norwich Winter Thur (Australia) Ltd (1986) 160 CLR 226 CASES CITED : Walton v Meadmore, CA (9 October 1975 (unrep)) APPLICANT Techno Developers Pty Ltd PARTIES : DEFENDANT The Homes Corporation of Australia FILE NUMBER(S) : SC 5195 of 2004 DEFENDANT COUNSEL : Mr A D Crossland of Counsel APPLICANT David Milne & Associates SOLICITORS : DEFENDANT Bilbie Dan LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION Enter List Here LIST BROWNIE AJ 23 December 2004 005195/04 TECHNO DEVELOPERS PTY LTD v THE HOMES CORPORATION OF AUSTRALIA PTY LTD JUDGMENT 1 The parties orally agreed that the defendant would sell to the plaintiff forty-four parcels of land, being part of the land in a large sub-division located near Rutherford. Later there were separate written contracts prepared and exchanged, one for each lot. The present litigation is concerned with only twenty-five of those contracts. 2 Apart from recording different purchase prices, deposits and lot numbers the contracts were identical in their terms. They were in conventional form but contained a number of special conditions, including the following. "40. The vendor agrees, subject to the approval of Maitland City Council to clear all trees from the site nominated by the purchaser. This special condition shall not merge on completion. 41. The vendor shall fill and cut the lot to such an extent to enable the purchaser to prepare a slab on flat ground for a dwelling designed by or on behalf of the purchaser. This special condition shall not merge on completion. 42. The vendor agrees that the buyer may prior to completion commence construction on the property of a dwelling approved by the Maitland City Council." 3 The plaintiff says in substance that special condition 41 imposed on the defendant an obligation to fill and cut the lot before completion whilst the defendant says in substance that it might do this after completion. 4 The plaintiff's case was put in various ways, as a matter of construction of the words used, or as a term implied by custom or usage. Alternatively, the plaintiff sought rectification of the contracts so as to insert the words "before completion" at or close to the commencement of special condition 41, or an order under the Trade Practices Act having the same practical effect, and the plaintiff sought specific performance of the contracts considered or dealt with in one or more of these ways. If all else fails, the plaintiff seeks an order for the refund of the deposits paid under the contracts. 5 It appears that the plaintiff is controlled by Mr Aghili. The defendant was mostly represented by Mr Wilson. In August 2003 Mr Aghili spoke to Mr Carroll, an estate agent representing the defendant, and said that he was interested in buying a large number of the then unsold lots in the sub-division. Mr Carroll telephoned Mr Wilson and then handed his phone over to Mr Aghili. There is a dispute as to what was then said, but it is common ground that thereafter the parties negotiated about the prices for the forty-four lots that were later sold, that they instructed their respective solicitors, that the solicitors negotiated about the terms of the contracts, and that then contracts were exchanged. 6 In a sense the contracts were conditional upon the registration of a plan so as to effect the sub-division of the land. Special condition 37 dealt with that topic generally and special condition 30 contained a definition of the term 'completion date' for the purposes of each contract, being nine months after the date of the contract, 26 September 2003, or fourteen after the date of registration of the plan, whichever was the later. 7 On 15 July 2004 the defendant gave notice of the registration of the plan and on 4 August 2004 it gave notice to complete. 8 The solicitors for the parties corresponded with each other, the plaintiff's solicitors alleging and the defendant's solicitors denying that special conditions 40 and 41 required the work mentioned to be carried out before completion. 9 The plaintiff led evidence about a usage to the effect that when a land developer such as the defendant sells multiple lots in a sub-division to a builder/developer such as the plaintiff there is an understanding that the vendor will fill and cut the land before completion and remove any relevant trees from the land before completion and permit the purchaser to start construction work before completion, and the evidence explained why it is to the economic advantage of both vendors and purchasers that there is such a usage. 10 A builder/developer purchasing such land has a financial interest in buying, developing and re-selling the land as quickly as can be arranged, so as to reduce holding costs and to be able to move on to the next project. 11 The land developer obtains an advantage if purchasers of lots in a sub-division act promptly so as to construct good quality homes, so as to encourage sale of other lots. Additionally, it is cheaper to arrange for any necessary earthworks on individual lots to be carried out to the land at a time when the land developer has suitable equipment on or close to the site of the individual lots. This is cheaper than bringing back the same or other earth moving equipment to individual lots later on, perhaps at different times, and the vendor can add the cost of performing the earthworks to the purchase price for the land. 12 The twenty-five lots now under consideration are located in what is called stage four of the overall sub-division. The land in the stage four area is fairly hilly. Mr England, an engineer experienced in land development work, prepared a report recording the ground slope at the centre of each of the twenty-five lots in question varying between 5.9 per cent and 20.3 per cent. It is cheaper to construct a dwelling upon flat ground than upon such a slope. 13 There is also an economic advantage in constructing a dwelling upon a concrete slab system complying with the relevant Australian standard. That is, a builder/developer such as the plaintiff here has an economic advantage if able to construct a dwelling upon a properly constructed concrete slab laid on ground that has been levelled for the purpose, and a land developer such as the defendant here has an economic advantage if it fills and cuts the land whilst its machinery is to hand, passing on the costs to the builder/developer and promoting a prompt and effective sale of other lots in the sub-division. 14 I accept the evidence of Mr England about these matters, which is generally unchallenged and uncontradicted. It is supported to some extent by the evidence of Mr Aghili and of Mr Keasey, although neither of these men had experience comparable to that of Mr England. 15 The words of special condition 41 and for that matter of special condition 40 do not seem to me to support the proposition that considered by themselves the express words of the contracts required the work mentioned to be carried out before completion and the parol evidence rule presents obvious problems from the plaintiff's point of view. 16 One argument advanced by the plaintiff to avoid these difficulties was that since each of special conditions 40 and 41 provided that the condition was not to merge upon completion, it followed that the work was, generally speaking, to be done before completion, but that the plaintiff's rights were not to be lost if the work had not been done or not completely done or not properly done by the time of completion. 17 This does not seems to me to be persuasive. If the parties intended that the work be done before completion ordinary drafting technique would result in the insertion of the words "before completion". 18 A more forceful argument was then advanced to the effect that these words should be implied by reference to the custom or usage of the industry mentioned earlier. 19 Whilst the evidence I have summarised is persuasive as to the existence of that usage, that is not the same thing as the question whether such a term should be implied into the contracts. In Con-Stan Industries of Australia Limited v Norwich Winter Thur (Australia) Limited (1986) 160 CLR 226 236-238 the Court discussed the circumstances in which a trade custom or usage might form the basis for the implication of terms into a contract. 20 One proposition that was said to have been established was that there must be evidence that the custom or usage in question is so well known and acquiesced in that everyone making a contract in that situation may reasonably be supposed to have imported that term into the contract or that it must be so notorious that everyone in the trade enters into a contract with that usage as an implied term. However, Mr England said that it was desirable for there to be an express term to the general effect now contended for, so that his evidence, which is the best evidence for the plaintiff on this topic, falls short of what is required. See also as to the manner in which such a usage might be proved, Walton v Meadmore, Court of Appeal, 9 October 1975, not reported. 21 Dealing next with the claim for rectification of the contracts I go back to the dispute as to what was said in the initial telephone conversation between Mr Aghili and Mr Wilson. 22 Mr Aghili said that he spoke to Mr Wilson of a wish to buy what was then the unsold lots in stage four of the sub-division, asking for three things in return, a concession on the prices then being asked for, an agreement to level the blocks before completion, and the opportunity to buy all of the lots in stage seven of the sub-division. Mr Agahili says that Mr Wilson said that he was happy about the first and second of these matters and would let Mr Agahili know about the third of them. 23 Mr Wilson says that these three matters were raised but that he did not commit the defendant to anything at the time. At that stage Mr Agahili was no more than an unknown person at the other end of a telephone connection. 24 Mr Carroll, who was present with Mr Agahili at the time of the conversation spoke of what he heard, describing what he had heard Mr Agahili say. According to Mr Carroll the only matter that Mr Agahili asked Mr Wilson for was a concession about prices. I reject Mr Carroll's evidence if only because it is inconsistent with the evidence of both Mr Agahili and Mr Wilson. It is also difficult to reconcile Mr Carroll's evidence with the evidence of Mr Bowmaker who was the principal of the real estate agency that was then Mr Carroll's employer. 25 Mr Bowmaker attributed to Mr Carroll a statement that Mr Wilson had agreed to level the land, although it is to be noted Mr Bowmaker did not say that Mr Carroll had said anything about this being done before completion. 26 After the disputed conversation some time went by whilst the parties negotiated about prices. It seems that during this period nothing further was said about what are now special conditions 40, 41 and 42. 27 When the parties had agreed on the prices the defendant's solicitors prepared draft contracts. Mr Carroll took these to Mr Wilson in Sydney and Mr Wilson then took them to Canberra where he met Mr Aghili in a coffee shop. Mr Aghili looked at them and spoke of the need to insert what are now special conditions 40 and 41. Mr Wilson says that he assented generally to that, but pointed out that this would necessarily involve obtaining Council approval to the removal of the trees and to the cutting and filling of any lot where that was necessary, and this might take a long time. 28 After that the plaintiff's solicitors wrote to the defendant's solicitors suggesting amendments to the contracts. 29 The original draft of special condition 30 dealing with the definition of the completion date had defined that term as being the later of thirty days after the date of the contract or fourteen days after notice of the registration of the plan of sub-division, whichever was the later. The plaintiff's solicitors suggested changing the time of thirty days to 365 days and then the parties agreed upon a time of nine months. 30 The original draft of special condition 40 read, "The vendor agrees, subject to the approval of Maitland City Council, to clear all trees from the site nominated by the purchaser as being the site of a dwelling." At the plaintiff's solicitor's suggestion, this was amended to the form that I noted earlier. 31 The plaintiff's solicitors also suggested the addition of special conditions 41 and 42 and the defendant agreed to that. 32 The plaintiff's solicitors also sought confirmation that the expected time for registration of the plan of sub-division was ten to twelve months but the defendant's solicitors said it was expected to be nine to ten months. The parties then exchanged contracts. 33 This material evidences part of the background facts in the context of which I have to decide what was orally agreed upon. Primarily that question was debated by reference to whether I should prefer the evidence of Mr Aghili or the evidence of Mr Wilson. 34 The case effectively received an expedited hearing on the basis that the hearing would finish in a day. Understandably, the plaintiffs were keen to obtain a decision before the end of the year. The defendant is said to be presently incurring a holding cost of about $19,000 a month and I take it that the plaintiff also has a need for a prompt decision. 35 Unfortunately, after the case had been allotted a date for hearing, a good deal of further evidence emerged and the parties chose to try to finish the hearing rather than have the hearing adjourned. This may have resulted in some of the issues being explored in less detail than would otherwise have seemed appropriate to the parties. 36 The defendant submitted that some of the evidence of Mr Aghili had been untruthful. I am quite unwilling to make that finding. He spoke English with a marked accent and sometimes with a quite imperfect command of idiom. Mr Wilson described him as being a Persian and a very likeable person. The latter comment appears to be accurate but should be put aside when one comes to form a judgment about the reliability of his evidence. 37 He appears to have made a success of land development work in Australia, notwithstanding his poor command of spoken English. 38 Whilst I have found it difficult to be confident that I can precisely or accurately assess the reliability of his evidence, I am generally more inclined to accept his evidence as reliable than I am the evidence of Mr Wilson. 39 Mr Wilson presented as a man experienced in his field and perhaps experienced as a witness. He appeared to have a sound grasp of the issues in the case and of the need to focus upon the questions asked of him and to answer those questions, but he also appeared to be ready to act, as it were, as an advocate from time to time. He said that he had read all of the affidavits filed on behalf of the plaintiff. Honourable and loyal as all this may be, it does seem to detract from the reliability of his evidence. In his affidavit, Mr Wilson said that in the original telephone conversation Mr Aghili asked that the defendant level the blocks to enable the plaintiff to build houses on them as part of the purchase price, although, according to Mr Wilson, nothing was then said to the effect that this was to be done before settlement and Mr Wilson says that he replied "That should not be a problem. We have the earthmoving equipment needed on site". This was not explored and it may tend to indicate that the work was to be done sooner rather than later. 40 However Mr Wilson's credit was dented by two further matters. First, he says that he and Mr Aghili went together to see the plaintiff's solicitor Mr Gulan, and Mr Wilson says that on the occasion of that meeting Mr Aghili asked that what are now special conditions 41 and 42 be inserted, whereupon he, Mr Wilson, responded that council permission was necessary and that things could not be held up waiting for this approval. Mr Gulan expressly denied that this was said and Mr Aghili denied it although less clearly. Secondly Mr Aghili, whose evidence on this point was corroborated by that of his, wife spoke of meeting Mr Wilson on the site at Rutherford on 1 July 2004 when there was a conversation debating the question whether the land had to be filled and cut before settlement. Mr Wilson denies that there was such a conversation at all. I see no reason why I should not accept the evidence of Mr Gulan or of Mrs Aghili. 41 On the other hand Mr Aghili's evidence is not without problems. In his affidavit of 22 September 2004 he described this sequence of events: his initial telephone conversation with Mr Wilson, negotiations about prices, his instructing Mr Gulan, a telephone conversation with Mr Wilson in September 2003 when they spoke about the delay in exchanging contracts, his meeting Mr Wilson in the coffee shop, and his then seeing Mr Gulan again. 42 However it is clear that Mr Aghili did not receive the draft contracts until the occasion of the coffee shop meeting so that, at best, he is unlikely to have had discussions with Mr Wilson about a delay in exchanging contracts before that meeting. In addition, it seems that Mr Wilson and Mr Aghili went together from the coffee shop meeting to see Mr Gulan and that thereafter the negotiations were between the solicitors. Further Mr Aghili's account of what happened has improved as he has gone along. There may of course be a perfectly innocent explanation for this but it is another troubling circumstance to be considered when one comes to assess the reliability of his evidence. 43 Then again I found attractive Mr Aghili's evidence that since he was proposing to spend some five million dollars buying the forty four lots he wanted to and he did receive an assurance that what was necessary and appropriate to enable him to move forward promptly and efficiently would be arranged including what are now special conditions 40, 41 and 42. This was I think necessary in order to enable the plaintiff to act efficiently. 44 As against that Mr Aghili's accounts of the responses he received have varied from time to time and at one stage he said in evidence that before the exchange of contracts he had not said to Mr Wilson that the work had to be done before settlement. Mr Aghili later resiled from this and then said that Mr Wilson had said only that "He would organise this" that is, the filling and cutting but without saying that this would be organised before settlement. 45 There was a good deal of debate concerning the proposition that the consent of the council was necessary before the trees on the land could be removed or before the filling and cutting work could be done. On the defendant's case this was a reason why it would not have agreed to a condition that the work be done before settlement, whilst on the plaintiff's case and on the basis of the evidence of Mr England, the usage of which Mr England spoke would have enabled the defendant to itself apply to the council to do this work and to do it and would have required the plaintiff to accept reasonable efforts by the defendant in this regard. 46 On balance I am inclined to think that this dispute favours the defendant. The evidence of Mr England, persuasive as I have said it is as to the existence of some custom or usage, is not sufficiently precise nor does his evidence establish that the custom or usage is sufficiently established to lead me to conclude that the defendant did agree as Mr Aghili says Mr Wilson agreed that these works were to be carried out before completion. 47 I am not persuaded therefore that the plaintiff has made out its case for rectification notwithstanding my rather faint general preference for the evidence of Mr Aghili to the preference of Mr Wilson. In the end it is the objective circumstances of the defendant which seem to me to be persuasive. 48 The same reasoning leads me to reject the case advanced under the Trade Practices Act. That is, I am not satisfied that the plaintiff has made out the case that the defendant made the representations alleged. 49 In those circumstances I need not consider the defendant's further argument that the evidence did not establish that the plaintiff acted in reliance upon that representation. 50 The plaintiff then sought an order under S55(2A) of the Conveyancing Act 1919 for the return of the twenty five deposits paid. The defendant advanced no matter in resistance to that claim. 51 I therefore make the order sought in par 4a of the second amended summons but otherwise dismiss the summons. Subject to what might be submitted I consider that there should be no order as to costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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