New South Wales Supreme Court CITATION : Six Stars Investments & Ors v Anpor Holdings [2004] NSWSC 793 HEARING DATE(S) : 18 August 2004 JUDGMENT DATE : 18 August 2004 JUDGMENT OF : McDougall J at 1 DECISION : See para [40] of judgment CATCHWORDS : CONTRACT - where contract provided for right of rescission if strata plan not registered by particular date, subject to extension of time on certain terms - where vendor sought to extend time - where contract provided that vendor's architect to determine whether vendor entitled to extend registration date - where claim initially assessed by surveyor - where claim subsequently assessed by architect - where purchaser sought to rescind contract - whether purchaser has exercised right to rescind - whether determination by vendor's architect could be made after as well as before extension of time - where no evidence as to basis upon which vendor able to conclude that it would be delayed in causing registration of the strata plan - whether entitlement to extension of time depends upon vendor's actual knowledge Six Stars Investments Pty Ltd (Plaintiff 1) SRGA Investments Pty Limited (Plaintiff 2) Mohamed Boussi (Plaintiff 3) Johanna Cruz (Plaintiff 4) Simon Miks (Plaintiff 5) Yanal Dweik (Plaintiff 6) Hasham Elmasry (Plaintiff 7) Tamer Ibrahim (Plaintiff 8) Sharif Elkotby (Plaintiff 9) Yasser Elgammal (Plaintiff 10) May Karnib (Plaintiff 11) Haissam Yassine (Plaintiff 12) Edward Matush (Plaintiff 13) PARTIES : Mohamed Mustapha (Plaintiff 14) Allen Nassouh (Plaintiff 15) Rammiz Omar (Plaintiff 16) Bassim Omar (Plaintiff 17) Majde Saffaga (Plaintiff 18) Wissam Tawbe (Plaintiff 19) Ali Tawbe (Plaintiff 20) Mohamed Teffaha (Plaintiff 21) Ali Faeeh (Plaintiff 22) Bassem Bou Younes (Plaintiff 23) Issam Bou Younes (Plaintiff 24) Gebran Boulattouf (Plaintiff 25) Suzan Boulattouf (Plaintiff 26) Anpor Holdings Pty Ltd (Defendant) FILE NUMBER(S) : SC 3623/04 COUNSEL : G M Thomas (Plaintiffs) F G Lever SC (Defendant) SOLICITORS : Vosnakis & Associates (Plaintiffs) Swaab Attorneys (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION McDOUGALL J 18 August 2004 Ex tempore (Revised 20 August 2004) 3623/04 SIX STARS INVESTMENTS PTY LIMITED & ORS v ANPOR HOLDINGS PTY LTD JUDGMENT 1 HIS HONOUR: The plaintiffs and the defendant ("the vendor") entered into a number of deeds described as Deed of Put and Call Option. The particular deed before me is dated 13 February 2002 and is made between the first plaintiff ("the purchaser") and the vendor with a number of other plaintiffs as guarantors. The subject matter of the particular deed was land described as apartment number 804 "State Apartments" at 15-23 Orara Street, Waitara ("the property"). The deeds were for what is popularly known as sales off the plan. 2 The central question in dispute between the purchaser and the vendor is whether the purchaser has exercised the right of rescission given to it by cl 6.5 of the deed. The deed, as its name suggests, provides for the grant of a call option whereby the vendor granted an option to the purchaser to purchase the property on certain terms and a put option whereby the purchaser granted to the vendor an option to require the purchaser to purchase the property on certain terms. The call option was to be exercised relevantly no later than 5 pm seven days after the day on which the vendor served notice on the purchaser that the strata plan relating to the development had been registered. The put option was to be exercised during a period commencing at 9 am eight days after that date and ending at 5 pm twenty eight days later. 3 The deed referred to and annexed a draft contract for the sale of land. That contract made provision for what it called a "Plan Registration Date" in cl 49.2. By that clause, if the strata plan was not registered by that date, which was 31 March 2004, subject to extension on certain terms, then the purchaser could rescind. 4 By cl 49.3, the vendor was given a right to extend the Plan Registration Date from time to time on certain terms. It is necessary to have regard to the entirety of cl 49.3 and I set it out: "49.3 Delay The vendor may from time to time extend the Plan Registration Date by the number of days that the vendor is delayed in completing the Building Works or causing registration of the Strata Plan by reason of any matter or thing beyond the vendor's control including: (a) industrial conditions; (b) inclement weather; (c) latent conditions of the Land; (d) repudiation or abandonment by a contractor; (e) changes in the law; (f) directions by or the requirements of any of the Council or any other competent authority or person; (g) delays in obtaining any approval or consent required for registration of the Strata Plan; (h) delays in obtaining any approval or consent required in relation to the Building (including limiting the generality), approval for occupancy and use for the intended purposes. The Vendor's Architect, acting as an expert, will determine whether the vendor is entitled to extend Registration Date pursuant to this clause and that determination will be final and binding." 5 Returning to the deed, cl 6.5 gave the purchaser the right to rescind the deed if the plan had not been registered by the Plan Registration Date. Clause 6.5 read as follows: "6.5 Option Fee Refunded If the Strata Plan has not been registered on or before the Plan Registration Date defined in clause 49.2 of the Contract (as it may be extended under clause 49.3 of the Contract) and the Option has not yet been exercised, either party will be entitled to rescind this Deed in which case the Purchaser will be entitled to a refund of the Call Option Fee." 6 On 10 March 2004, the vendor's solicitors wrote to the purchaser's solicitors notifying them that the strata plan "is currently with Land and Property Information" and that it was numbered SP72335. I take that notification to be that the strata plan had been lodged for registration. 7 On 22 March 2004, the vendor's solicitors wrote to the purchaser's solicitors purporting to extend time under cl 49.3. Omitting formal parts, that letter read: "In accordance with clause 6.5 of the option deed (if applicable) and clause 49.3 of the contract, the vendor extends the Plan Registration Date by 90 days to 29 June 2004." 8 There was nothing attached to that letter. 9 On 5 April 2004, the purchaser's solicitors sent notice to the vendor (with a copy to the vendor's solicitors) purporting to rescind the deed. No point is taken about the form or service of that notice, nor is it suggested that, if the purchaser were otherwise entitled under cl 6.5 to rescind the deed, the notice was in some way ineffective. 10 On 7 April 2004, the vendor's solicitors reminded the plaintiff's solicitors that the vendor had extended the Plan Registration Date and did not believe that the purchasers were entitled to rescind. There was correspondence between the solicitors thereafter which did little to advance the dispute. 11 On 21 April 2004, the strata plan was registered and the vendor gave notice thereof to the purchaser. It is not suggested that, if it were otherwise open to the vendor to do so, the notice was in form or otherwise defective. Thereafter, by notice dated 30 April 2004, the vendor purported to exercise the put option. Again, it is not disputed that, if it were then open to the vendor to exercise the put option, the notice of exercise was for some reason defective. 12 When the vendor's solicitors gave the notice of 22 March 2004 purporting to extend the Plan Registration Date, they did not provide any supporting documentation or indicate the basis upon which, either pursuant to cl 6.5 of the deed or cl 49.3 of the contract, it was open to the vendor to do so. However, some seven days later, on 29 March 2004, Rider Hunt (Sydney) Pty Limited ("Rider Hunt") wrote to the vendor, for the attention of its secretary, referring to the progress of the building works. 13 The background to that is that Rider Hunt, a firm of quantity surveyors, who describe themselves as "property and construction consultants", had been retained by the vendor to assess progress claims made by the builder, Development and Building Contractor Pty Limited ("DBC"). The progress claims assessed by Rider Hunt included progress claim 16 apparently dated 14 January 2004 and progress claim 17 apparently dated 17 March 2004. It appears from Rider Hunt's assessment of the first claim that in their view the works were by then approximately 97.5 per cent complete. 14 It appears from the second progress claim that the works were by then completed and at an end. The DBC tax invoice which is part of that progress claim is dated 31 January 2004. It refers to progress claim number 17 as being for "practical completion". It states that "all works are complete" and attaches a trade summary in support of that claim. 15 One of the attachments to progress claim 17 was a document on the letterhead of DBC, but unsigned, purporting to be a claim for extension of time under the building contract. It referred to three matters, namely, the "Christmas industry shutdown", latent ground conditions and inclement weather. It asserted an entitlement to twenty one weeks' extension of time in all but, apparently by way of grace or benevolence, claimed only ten weeks. 16 The extension of time claim was provided to Mr Oliver (of Rider Hunt) for his assessment. Mr Oliver is a chartered surveyor. He is not an architect. I do not mention this matter, however, to suggest that he was not qualified to assess the claim for extension of time. Mr Oliver reviewed the claim for extension of time pursuant to instructions given to him on about 24 March 2004, ie two days after the vendor had purported to extend time under the contract. Mr Oliver thereafter reviewed the claim and a number of other documents and produced a letter to the plaintiff dated 29 March 2004. In that letter, after commenting on the various matters that DBC had raised, Mr Oliver said: "Under the sales contract between the Principal and the purchasers of units in the development, the Principal can extend the sunset date (Plan Registration Date) if completion of the project is delayed through factors beyond the Principal's control. We are satisfied that the extensions sought by the Contractor are outside the Principal's control and therefore confirm our determination that the Principal should be entitled to a 90 day extension of the sunset date." 17 It does not appear that Mr Oliver's letter of 29 March 2004 was provided to the purchaser or its solicitors until these proceedings were commenced and it formed part of the evidence that the parties amassed. 18 At some stage, it appears that the vendor became concerned that Mr Oliver's assessment in relation to the claimed extension of time might not be what was called for by the contract for sale. That concern presumably arose because, as cl 49.3 states, the assessment is to be carried out by "the Vendor's architect". The expression "Vendor's architect" is defined in the contract to mean "The architect appointed by the Vendor from time to time." Accordingly, the vendor asked Rider Hunt whether Mr Nicholas Ferrara, an architect in their employ, could himself assess the claim for extension of time. Mr Ferrara did so. It was not communicated to the purchaser, until it was served with his affidavit sworn 23 July 2004, that this assessment had been carried out. It is not suggested that Mr Ferrara had provided any earlier written assessment to the vendor. 19 Against that background, the question is whether the purchaser has exercised its right to rescind under cl 6.5 of the deed. It appears to be accepted that cl 6.5 of the deed is to be read in conjunction with cl 49 of the contract. That, I think, must be so. Clause 6.5 of the deed calls up in particular cll 49.2 and 49.3 of the contract. It is clear that the right of rescission given by cl 6.5 is one the content of which is to be determined not just by reference to the wording of cl 6.5 itself but also by reference to the wording of cll 49.2 and 49.3. 20 If the letter of 22 March 2004 was effective to extend the Plan Registration Date, then the purchaser's rescission was ineffective. If the letter of 22 March 2004 was not effective to extend the Plan Registration Date, then the purchaser's rescission was effective. 21 The parties have agreed that the question of construction is one that it would be appropriate for me to determine on a final basis. I mention that because what is before me today is not a final hearing of the amended summons but a claim for interlocutory relief in accordance with prayers 17 and 18 of the amended summons. However, it was not suggested that I needed to come to a view only on the basis of whether there was an arguable case. 22 Mr Lever of Senior Counsel, who appeared for the vendor, submitted that cl 49.3 fell into two parts. The first part was the right of extension given to the vendor and included conditions (a) to (h) by reference to which (among other things) the right of extension might arise. The second part was the provision for the vendor's architect acting as expert to determine whether the vendor is entitled to extend the registration date pursuant to cl 49.3. Mr Lever submitted that the determination by the vendor's architect could be made before as well as after the extension under the first part of the clause. 23 It is necessary to have regard to the overall contractual scheme. That includes the provision under the deed for the payment of a call option fee and the provision under cl 6.4 of the deed for the option fee to be forfeited in certain circumstances. It includes also the provision in cl 6.5 of the deed for a purchaser to have a refund of the call option fee if it validly rescinds the deed. 24 Mr Thomas of Counsel, who appeared for the purchaser, referred in submissions to the circumstances in which the extension of time had been claimed and approved. He referred to the fact that (as appears to be the case) the extension of time claim had not been notified by DBC to the vendor within ten working days of the occurrence of each of the events relied upon, as required by cl 6 of the building contract. He referred also to the fact that the extension of time claim had not been made until after the completion of the building works. 25 I do not know if by those submissions it was intended to suggest that the opinion formed by Mr Oliver, and independently by Mr Ferrara, or the expressions of that opinion in the letter of 29 March 2004 and the affidavit of 23 July 2004 were in some way vitiated by bias. If that submission were made I would reject it. 26 Neither Mr Oliver nor Mr Ferrara was required for cross-examination. There is no basis upon which I could conclude that either gentleman did anything other than assess the extension of time claim on its merits. 27 Nor do I think it is to the point that the vendor may have been entitled to reject the extension of time claim because it was not notified within ten working days of the occurrence of each of the events. 28 Under cl 49.3 of the contract, an entitlement to extend time arises where the vendor is delayed in completing the building works or delayed in causing registration of the strata plan by reason of any matter or thing beyond its control. It is one thing to say that the vendor may have been entitled, by reason of the terms of the contract between it and DBC, to reject the extension of time claim. It is another thing to say that the causes underlying the extension of time claim were thereby rendered in some way within the control of the vendor. 29 On balance, I do not think that the construction of cl 49.3, or its application in the circumstances of this case, makes it relevant to consider whether or not the vendor is obliged to grant an extension of time, or whether (perhaps) it is entitled to liquidated damages. 30 It does not appear from the evidence what information the vendor had available to it as at 22 March 2004 when it purported to extend time. Presumably, if it was aware of the conditions on site, it would have been aware of the fact that, as claimed by DBC, construction was complete by 31 January 2004. It would have been aware that the strata plan had been lodged for registration by 10 March 2004. Had it made inquiries of Rider Hunt, it might have been aware that (as Mr Ferrara said in paragraph 10 of his affidavit) "registration of the strata plan after completion of the building works could take up to fourteen calendar days." It might have been aware that DBC had made a claim for extension of time. However the progress claim, under cover of which that application for extension of time was made, was addressed to Rider Hunt. It does not appear from the document that it was copied or otherwise communicated to the vendor. There is nothing in Mr Oliver's affidavit to suggest that he discussed the progress claim or its contents with the vendor prior to or on 22 March 2004. 31 There is, therefore, nothing in the evidence to allow me to assess on what basis (if any) the vendor was able to conclude as at 22 March 2004 that, in terms of cl 49.3, it would be (or had been) delayed in causing registration of the strata plan by reason of any matter or thing beyond its control. Indeed, if the strata plan had been lodged for registration on 10 March 2004, as the letter of that date suggests, the vendor might have found (had it made inquiry of Rider Hunt) that the strata plan would be registered by 31 March 2004. 32 Nonetheless, Mr Lever submits, it was then open to the vendor to extend time because it knew that the building works had been delayed in completion. The program for the works projected completion around 19 December 2003. On the evidence, and assuming that the vendor was aware of conditions on site, they were not completed until about 31 January 2004 – a delay of approximately six weeks (not including public holidays, weekends, rostered days off and the like). 33 In this case, I think, the answer to the question that I have described does not depend upon the actual state of the vendor's knowledge. I think that cl 49.3 on its proper construction gives the vendor an entitlement to extend time by an amount determined by its architect acting as expert. That is to say, I think the entitlement is to be decided by the architect. Once that entitlement is decided, the vendor may extend time. 34 If the construction were otherwise, then strange results would follow. The vendor could give a notice purporting to extend time without having any basis for so doing. It could thereby impede the purchaser's exercise of its rights under cl 49.2. If the strata plan were thereafter registered during the pendency of a purported extension of time then, as the last sentence of 49.2 makes clear, the purchaser would lose its right to rescind. 35 It would be strange if the vendor's architect thereafter determined that there was no entitlement to extend time. It would be strange if the entitlement to extend time was based upon wholly erroneous assumptions (or no assumptions at all). In either case, the mere act of giving notice would operate to deprive the purchaser of the right given to it by cl 49.2. Those consequences would be avoided if the construction that I prefer is adopted. 36 I therefore conclude that the notice of 22 March 2004 was not effective to extend the Plan Registration Date under cl 49.3 of the contract. It follows from that that this particular plaintiff has made out its case for interlocutory injunctive relief. 37 As I have mentioned, there were a large number of contracts entered into between some or other of the plaintiffs and the defendant for lots in the building. It was agreed that this case would operate, in effect, as a model for the others. It would seem to follow from the way in which the case was fought that each of the plaintiffs would be entitled to injunctive relief in the same manner as the purchaser. 38 Further, because I have decided the question of construction on a final basis, I have effectively dealt with the principal point at issue in the summons. It may be that the vendor would wish to challenge my conclusions on appeal. If that is the case, I will be happy to make an order under Pt 31 r 2 and to express my conclusions in terms of that order so that the vendor's position, in terms of obtaining leave to appeal, is facilitated. 39 Accordingly, at this stage, I will simply stand the matter over so that the parties can agree on orders to give effect to my reasons. Now Mr Lever and Mr Thomas, you can do that now or you can do it overnight. I think you might want a chance to think about how, procedurally, you wish to go from here. LEVER: Yes. We had some discussions earlier. Whilst we want your Honour to express final reasons in relation to the construction of the contract, there are certain factual matrixes about the time for service. So we would want to restrict it to your Honour's decision on the construction of the contract. HIS HONOUR : In that case you may formulate an order pursuant to Pt 31 r 2 and I will stand the matter over to the Registrar's list. In the meantime, you can take whatever course you wish. Is there any need for me to grant injunctive relief in the meantime, because I can do so if you wish? LEVER: Your Honour, there is a regime in place. We have to give seven days' notice in any case. We would have to do that in this particular case, I don't know about the other ones. HIS HONOUR : What about you, Mr Thomas? What I had in mind was that I would ask you to come back at some convenient time in the near future with orders which, as you both see it, give effect to what I have decided. It seems to me at present it would be an order formulated in relation to the construction of cl 49.2. I will stand the balance of the proceedings over to the Registrar's list. If interlocutory injunctive relief is required I will grant it but if Mr Lever wishes, he can apply for leave to appeal on the separate question. THOMAS: Yes. There is the issue of costs of these proceedings which have been brought about by the defendant. If we could have an undertaking by them to continue the undertaking not to deal with the deposits until this particular question has been determined? LEVER: That is not quite the way it is. Of course, there is a regime in place but we would undertake not to do that until this particular question is determined. In my submission this may well be the end of the proceedings, or it might go on in relation to all of the other matters. THOMAS: Perhaps we should reserve that question for determination before his Honour at the same time as the other issue is determined. HIS HONOUR : Very well, I take it 9.30 one day this week would suit everyone? LEVER: Yes, it would. HIS HONOUR : We are not going to need more than half an hour? LEVER: No, your Honour. Next Monday would be convenient, as I am before your Honour on that day. THOMAS: Monday would be convenient. 40 HIS HONOUR: I note that there is an interim regime in place between the parties and that I am not asked today to grant interlocutory relief. On that basis I will stand the proceedings over to 9.30 a.m. on Monday 23 August 2004 to enable the parties to bring in short minutes of order and to put submissions on costs, if they wish. ****** Last Modified: 09/03/2004 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.