Supreme Court New South Wales Medium Neutral Citation: Michael Williams v ATM & CPA Projects Pty Limited [2014] NSWSC 1451 Hearing dates: 21 October 2014 Decision date: 21 October 2014 Jurisdiction: Equity Division - Commercial List Before: Bergin CJ in Eq Decision: Leave granted to the plaintiffs to amend the Commercial List Statement and the Summons. Catchwords: [PRACTICE AND PROCEDURE] - where contract drafted by parties - whether plaintiffs' claim in proposed amendments untenable Category: Interlocutory applications Parties: Michael Williams (1st Plaintiff) Graham Morison (2nd Plaintiff) Solglen Pty Ltd ACN 002 376 481 (3rd Plaintiff) ATM & CPA Projects Pty Limited ACN 116 458 407 (1st Defendant) Tony Merhi (2nd Defendant) Representation: Counsel: DS Weinberger (Plaintiffs) JD Simpkins SC (Defendants) Solicitors: Gillis Delaney (Plaintiffs) Madison Marcus Law Firm (Defendants) File Number(s): 2014/145135 Publication restriction: Nil Judgment - EX TEMPORE 1There are two applications before the Court. The first is by the plaintiffs to amend their Summons and Commercial List Statement. The second is the defendants' application to strike out aspects of the pleading. 2The general rule in the Commercial List is that the Court does not entertain strike out applications. Paragraph 62 of the Commercial List Practice Note indicates to the parties that they should expect strictness in declining such applications. However, the parties have embarked upon the process of trying to settle the pleadings, unfortunately over a period of some weeks. 3Evidence has been filed by the parties; a Court Book has been prepared and a special fixture was set down today for hearing of the competing motions. Sensibly, Mr Weinberger for the plaintiffs, and Mr Simpkins SC for the defendants, have agreed that the application should proceed on the basis that if leave is not granted to the plaintiffs to amend then the previous pleading would be struck out. This obviated the need for much of the material to be read. 4The only document in evidence is the agreement between the parties which was in the following terms: Dear Tony, As you are aware, we have both been working for some time to bring the James Street project to fruition. Now that the issue by Council of a formal Development Approval has been received, it is appropriate to set out formally the basis under which we have been working together. You are prepared to sell the completed, strata titled project on the following terms: ● Purchase of site with Development Approval $13,780,000 with all fees paid $13,000,000.00 Section 94 and Council contributions $553,190.00 Professional Fees and costs to Construction Certificate and costs of Strata Title $400,000.00 Building construction and handover $26,250,000.00 TOTAL COST $40,203,190.00 $40,983,190.00 Payment of the $40,203,190.00 will be in stages under two separate but interlinked contracts. Purchase of the site will be under one contract and will be paid for at contract commencement. Section 94 and Council contributions and costs to Construction Certificate will be payable under the second contract for building construction and handover at Construction Certificate issue and building and Strata Title costs will be paid by eight progress payments during the construction stage. This contract for building construction and handover is to be a guaranteed fixed maximum price contract with a guaranteed completion date to be agreed. Graham Morison and Michael Williams, through their respective companies, have been working with prospective purchasers on the above basis and have arranged to carry out project management duties for the successful purchaser. We believe that a successful sale is imminent. We therefore wish to confirm the following: ● ATM and CPA Projects Pty Ltd agree to give to Morison and Williams an exclusive right to introduce purchasers and arrange a sale for a period of six months weeks from the date of signature of this letter of agreement. ● ATM and CPA Projects Pty. Ltd. agree that, upon the successful execution of a contract to purchase by a suitable purchaser, ATM and CPA will pay to Morison and Williams (or their respective nominees) a commission of 4% of the total of the two contract prices. Please sign the appended copy of this letter to signify your agreement to the above. We look forward to a happy association on the project. Best Regards Michael P.C. Williams 01/12/2011 Graham Morison 01/12/2011 A.T. Merhi ATM & CPA Projects Pty. Ltd. 01/12/2011 5The proposed amended pleading includes the following: 4. The following were terms and conditions of the Agreement: (a) on execution of a contract for the sale of the Land with a purchaser introduced by the plaintiffs, the defendants would pay the plaintiffs (or their respective nominees) 4% of the sale price of the Land. (b) the first defendant would enter into such a contract for sale of the Land on the condition that the purchaser of the Land enters into a construction contract with the defendants (or any of their related entities) to construct the development the subject of the then existing development approval (construction contract); and (c) on execution of a contract for the sale of the Land with a purchaser introduced by the plaintiffs, the defendants would pay the first and second plaintiffs (or their respective nominees) 4% of the contract price of the construction contract referred to in (b) above; 5. In the alternative to subparagraphs 4(b) and (c), the following were terms and conditions of the Agreement in addition to that pleaded in subparagraph 4(a): (a) in the event that the first defendant entered into a contract for the sale of the Land without entering into a construction contract the defendants would pay the plaintiff 4% of the estimated contract price of such a construction contract; and (b) the estimated contract price referred to in (a) was approximately $26.25 million. 6Mr Simpkins submits that the vice in paragraph 4 is the use of the plural "defendants". It is submitted that Mr Merhi, the second defendant, is included in that expression and that the plaintiffs' claim is not sustainable having regard to the terms of the agreement. There are some tantalising aspects to the agreement, some of which are unnecessary to detail. However, it can be seen that the document is addressed to Mr Merhi and that Mr Williams and Mr Morison say, "we have both been working for some time to bring the James Street project to fruition." 7The matter that apparently triggered the need for the agreement was the stated position in the second paragraph that formal Development Approval had been received. 8The expression "you are prepared to sell" is addressed to "Dear Tony". There is then reference to the completed strata title project. This suggests that the parties agreed that the sale would be of the completed, developed property. 9The document suggests that there were to be two separate but "interlinked" contracts. The first is described as the contract for the purchase of the site under which the purchase price would be paid for "at contract commencement". That, no doubt, will tantalise the trial Judge but it is not clear what that particular expression might mean. It is clear that the s 94 and council contributions and other costs to construction certificate are said to be payable under the second contract, so that the first contract appears to be limited to $13.78 million. The contributions and professional fees of $953,190 appear to be the subject of agreement to be paid in eight progress payments during the construction stage. 10The second contract is referred to as a guaranteed fixed maximum price contract with a guaranteed completion date to be agreed. It is not clear who the parties were to be to the construction contract, whether it was to be Mr Merhi or the company, ATM & CPA Projects Pty Ltd. It was apparently anticipated that the purchaser of the land would enter into a contract with either Mr Merhi and the company, or the company, or alternatively Mr Merhi, to develop the site. There is also a further contract referred to in the document. That is a project management contract that had been arranged by the plaintiffs, Mr Morison and Mr Williams, with the prospective purchasers. 11There is an ambiguity in the bullet points in respect of the confirmation at the end of the document. If the agreement was limited to only the company paying the plaintiffs, one would have expected the word "agree" to be "agrees". The word "agree" appears in both bullet points. It is not clear to me whether such an argument would be successful, and it may be a weak one, but it may be that the surrounding circumstances might suggest that Mr Merhi and the company "agree". As I say, it may present as a very weak argument but it is not one that is totally hopeless on the construction question: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128-129. 12Accordingly, I intend to allow the word "defendants" to remain in paragraph 4. 13Paragraph 5 is an alternative claim to subparagraphs 4 (b) and (c). The pleading that the estimated contract price would be the measure for the 4 per cent is apparently to be teased out of surrounding circumstances and conversations which are not presently before me: Padstow Corporation Pty Ltd v Fleming (No 2) [2011] NSWSC 1572; 86 ACSR 636 at [12]-[13]. However I anticipate this will be the subject of some evidence at trial where Mr Merhi, in conversation with either Mr Morison or Mr Williams, suggested a figure per unit of this development. It may be that this is how the building, construction and hand over figure of $26.25 million was reached. It may be suggested that the commission was only payable if both contracts were entered into, but that is presently not an issue before me. 14The plaintiffs submit that if the defendants did not enter into a building and construction contract then the measure of the 4 per cent would be as against the building, construction and hand over figure of $26.25 million. 15It seems to me that some additional work needs to be done in respect of the pleading in paragraph 5 of this alternative claim. It is not clear that the estimation comes from the contract itself, and indeed Mr Weinberger submitted that there were these conversations in the evidence. 16I intend to allow the pleading in paragraph 5, but I will require the plaintiffs to provide particulars to the defendants in respect of those two sub-paragraphs. 17I grant leave to the plaintiffs to amend the Commercial List Statement and the Summons in accordance with the proposed document initialled by me and dated today. ********** 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: 23 October 2014