Sara Investments (NSW) Pty Limited v West Asset Holdings Pty Ltd

MEAGHER JA: I agree with Brereton JA.

BRERETON JA: On 10 October 2019, real estate agents retained by the first appellant Sara Investments (NSW) Pty Limited (“Sara”) issued a document entitled “Heads of Agreement – Subject to Contract” to the first respondent West Asset Holdings Pty Ltd (“West”) in respect of the sale of a warehouse property at 187-189 John Street, Lidcombe, stating the purchase price as $7.5 million with a deposit of 5% payable on exchange, a further 5% six months following exchange, both to be released to the vendor, and a settlement date twelve months following exchange. The special conditions also provided for the purchaser to have the sole use of units 5 and 6 from exchange of contracts, and to be liable for 40% of outgoings from exchange until settlement.

Over the next few days, however, further negotiations resulted in the transaction being restructured to involve the following:

On 18 October 2019 at 4:50 pm, Sara’s then solicitors submitted the licence agreement, put and call option and lease, signed by their client, to West’s solicitors, together with the signed front page of the contract for sale referred to in the option. West’s solicitors returned the licence agreement and put and call option duly signed at 5:22 pm, together with the lease, which had been the subject of an amendment and was unsigned. The option was thereby exchanged, although hard copies were subsequently exchanged on 23 January 2020.

On 4 June 2020, Sara changed solicitors, and on 19 June 2020, their new solicitors asserted that Sara had not entered into any agreement for the grant of a lease over the property to CCS. By another letter of the same date, the new solicitors confirmed that they acted for Sara in respect of the option, and that for the purpose of any exercise of the call option they were Sara’s solicitors.

On 13 July 2020, West exercised the option. On 17 July, Sara’s solicitors asserted that the contract price was $7.5 million and not $7.385 million. As the primary judge recorded, the parties joined issue on the enforceability of the put and call option, the validity of West’s exercise of the call option, and CCS’s entitlement to a lease of the property. [1]

In the proceedings below, West, subsequently joined by CCS, sought specific performance of the contract arising from exercise of the option. Sara and Bulolo cross-claimed, for declaratory relief to the effect that the option had not been exercised and that Sara was entitled to retain the option fee, and for rectification of the option and any consequent contract to provide that the price was $7.5 million. At trial the essential issues were, first, whether the option was valid and enforceable; secondly, whether the price was $7.5 million or $7.385 million; and thirdly, whether the option had been validly exercised.

In the primary judgment, delivered on 27 May 2022, Lindsay J held that the option was valid and binding and had been duly exercised by West, as a result of which the contract in the form annexed to the option (which provided for a price of $7.385 million) was valid and binding and ought to be specifically performed. His Honour also resolved other issues which are not presently relevant. An order for specific performance was made on 9 June 2022, and supplementary and more specific orders on 30 June 2022.

Sara and Bulolo appeal to this Court. Their amended Notice of Appeal of 16 August 2022 asserted the following grounds:

Although those grounds or most of them were canvassed in the appellants’ written submissions, which were answered by the respondents’ written submissions, no reply submissions from the appellants were filed to take issue with the respondents’ submissions. The day before the hearing, counsel for the appellants notified the Court that although he intended to “formally press all grounds”, he would “argue” only Ground 10 and the associated factual challenge at Ground 12(b). When clarification of this was sought at the outset of the hearing, counsel referred to the absence of a reply to the respondents’ submissions, and frankly stated that while instructed not to abandon the other grounds, there was nothing he could say in support or defence of them. In those circumstances I am satisfied those grounds raise no issue of principle and may and ought to be disposed of, as authorised by Supreme Court Act 1970 (NSW), s 45(4) and Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 51.55, “in short form”.

The sole ground argued was that West did not discharge its onus of proving that it was ready, willing and able to complete the contract. On this question, the primary judge said:

Although the appellants’ written submissions asserted that it was necessary for West to aver and prove that it was ready, willing and able to complete, that is incorrect, and the issue was not alive on the pleadings. By UCPR r 14.11, a statement to the effect that the plaintiff is ready and willing or was at all material times ready and willing to perform an obligation is taken to be implied in its pleading, and if not traversed in the defence is taken to be admitted. [2] The defences did not traverse the implied allegation that the plaintiff was ready, willing and able to complete, so readiness, willingness and ability were therefore deemed to be admitted and not in issue at the trial.

In those circumstances, understandably, West did not adduce evidence of its readiness, willingness and ability to perform. The issue was however raised in cross-examination of West’s director Mr Camilleri, who denied the proposition put to him that he did not have the money, [3] asserted that “finances weren’t a problem”, [4] and testified “I’ve got a facility with the banks that at any time, through our property portfolio, there’s not an issue with financing”. [5] When asked, more than once, if he could prove that he had the money available, he said that he would do so if so advised by his solicitors.

The appellants submitted that Mr Camilleri’s evidence in this respect was evasive and dissembling, and insufficient to produce the requisite state of actual satisfaction of readiness etc. [6] It was submitted that the issue having been raised in cross-examination in that way, it was incumbent upon him to adduce further evidence to dispel the question.

In my view no basis whatsoever for disturbing the primary judge’s conclusion in this respect has been demonstrated. First, and foremost, as has been explained, the matter was not in issue on the pleadings. I do not accept that the course of cross-examination was such as to resurrect an issue which was foreclosed on the pleadings. Secondly, there was in any event some evidence, elicited in cross-examination of Mr Camilleri, to the effect that West was ready and able to complete; and there was no evidence to the contrary. The submission that his evidence was evasive and dissembling is one which the primary judge (to whom it was not made) was far better positioned to evaluate than is this Court. The judge was entitled if not bound to accept Mr Camilleri’s evidence, and in all those circumstances it would have been wrong for his Honour to do anything but to accept that West was ready, willing and able to complete.

It follows that in my opinion the primary judge did not err in holding that West was ready, willing and able to complete the contract created upon exercise of its call option.

As has been noted, the other grounds of appeal do not raise any question of general principle, and are not made out. In respect of them the judgment of the primary judge should be upheld, for the reasons given by his Honour.

I propose that the appeal be dismissed, with costs.

MITCHELMORE JA: I agree with Brereton JA.