Lawrence v Ciantar

BATHURST CJ: This is an appeal from a decision of a judge (the primary judge) of the Equity Division of the Court dismissing a claim by Wayne Lawrence (the appellant) for a declaration that he held a one-third interest in the property 5 Angophora Crescent, Forestville (the property). The appellant also sought a declaration that he held an unregistered mortgage or a charge over the property, pursuant to an agreement dated 12 November 2014 (the November Agreement) or pursuant to an agreement dated 26 March 2015 (the March Agreement), between him and the respondents Paul William Ciantar and Alice Sammut (the respondents). The appellant also sought a declaration that these Agreements had not been validly terminated by the respondents and an order for specific performance of the Agreements or, in the alternative, damages. These claims were also dismissed by the primary judge.

The respondents are the registered proprietors of the property. On 4 April 2013 they lodged an application with Warringah Council seeking approval to subdivide the property into three lots. The application estimated the cost of the work at $265,000. The application stated that tree removal would be at the construction certificate stage. The application enclosed a plan indicating the building or parts of the building to be demolished, although the plan itself was not produced on the appeal. A survey plan and site plan were also enclosed with the application.

In compliance with Warringah Council’s Land Subdivision Requirements, the application supplied engineering drawings indicating proposed infrastructure including roads, drainage, sewerage and earthworks, and the proposed method of stormwater disposal including hydrological and hydraulic calculations. These plans were also not available on the appeal.

On 18 July 2013 Warringah Council approved the Development Application, the consent to operate from 25 July 2013. Development was to be carried out in accordance with the approved plans, which included plans showing the location of a drainage pipe, engineering plans and a vegetation and weed eradication management plan.

Various conditions needed to be satisfied prior to the issue of the construction certificate. Engineering plans were required to be submitted to the Certifying Authority for the design and construction of certain matters including the following:

Another condition was as follows:

At the time of the development approval the property had a residential dwelling erected on it. In around early March 2014 the respondents advertised the property for sale, noting in the advertisement that there was development application approval to subdivide the land into three lots whilst retaining the main residence.

The property attracted the interest of the appellant. The appellant was a licensed builder, although in July 2001 a condition had been placed on his licence that the licence extended only to the entry into building contracts not requiring home warranty insurance.

On 3 March 2014, the appellant put a proposal to the respondents’ agent in effect to purchase Lot 3 of the proposed subdivision in consideration of carrying out the works to complete the subdivision. Relevantly, it was worded as follows:

Negotiations proceeded between the appellant and the respondents’ agents canvassing various proposals by which the appellant would purchase the whole of the property or obtain an interest in it. On 6 August 2014 a meeting took place between the appellant and the respondents. In an attachment to an email of 7 August 2014 the appellant sought to summarise the discussions which had occurred on the previous day. It is unnecessary to set out the email or the attachment in any detail. However, the letterhead to the attachment quoted the appellant’s builder licence number. The proposal made in the attachment was that the appellant would become a title holder on the property. The appellant estimated the costs of work to be $434,000, which was described as “part of the ownership and equity in either Lot 2 or Lot 1”. In relation to timing, the attachment to the email stated that the appellant would arrange to finalise the three technical issues that needed to be resolved prior to the commencement of the work. These were described as the retention tanks, the sewer manhole and whether the 150 mm pipe at the rear of the property needed to be replaced or only fixed.

In a further email of 29 August 2014, the appellant suggested to the respondents that they would need to get legal advice on a number of matters for the proposal to move forward. There was then outlined a proposal which included that on finalisation of documentation a one-third interest in the property would be transferred to the appellant. It also stated that the appellant would conduct the subdivision works under a Contract of Works within 12 months. It also stated, “The contract for the said works as agreed $435,000”.

On 22 September 2014 the appellant’s solicitor Mr Hedges wrote to the respondents’ solicitor Mr Walker. Mr Hedges indicated he had received from his client a draft agreement he had prepared himself which he said his client told him “encapsulates the terms of the proposed joint venture”, and that he had been instructed to forward it without any changes to Mr Walker. It is unnecessary to refer to the draft agreement save to point out that the appellant is described as “the Builder”.

Mr Walker responded on 24 September 2014, stating that neither he nor his clients understood the document. On 25 September Mr Hedges responded, stating that the following points (among others) set out the basis of the joint venture:

Mr Walker responded on 8 October 2014. Relevantly, he made the following comment:

On 17 October 2014 Mr Hedges responded in the following terms:

On 24 October 2014, Mr Walker wrote to Mr Hedges seeking to summarise what had been agreed upon and outstanding points. Because of the reliance placed on this letter by the parties and the reference to it in the November and March Agreements, it is necessary to set it out in some detail. The parts in ordinary typescript are matters raised by Mr Hedges, whilst those in bold are Mr Walker’s response.

The letter also enclosed a draft joint venture agreement. However, the parties rejected the proposed joint venture, apparently on the basis that it would involve them carrying on a business for GST purposes. In a handwritten letter dated 29 October 2014 sent by the respondents to their solicitors, it was stated that the parties had “agreed to proceed on the following basis in similarity to what you have set out in your letter” of 24 October 2014.

On 12 November 2014 the parties met and executed the November Agreement, incorporating what was said to have been agreed upon on 29 October 2014. The agreement was in the following terms:

Pursuant to the agreement, the respondents consented to the appellant lodging a caveat against their title to the property. The caveat as lodged claimed the following interest:

On 15 January 2015 a restriction was placed on the appellant’s builder contractor licence, to the effect that he was not able to enter contracts to which the Home Building Act 1989 (NSW) applied in excess of the value of $20,000.

On 26 March 2015 the parties, in effect, re-executed the November Agreement. A Deed of Loan of the same date and a mortgage were also entered into.

The Deed of Loan recited that the lender (the appellant) had agreed to advance the principal sum ($435,000.00) for the performance of works upon the property for the benefit of the borrowers (the respondents). The Deed provided that the loan was to be repaid at the earlier of a period of two years or when the whole or any part of the property was sold.

The mortgage executed by the respondents was said to secure all monies due by them to the appellant.

Neither the Deed of Loan nor the mortgage made any reference to the November or March Agreements. However, at the same time the respondents executed a transfer of a one-third share of the property to the appellant.

Mr Walker forwarded the executed March Agreement, the Deed of Loan, transfer and mortgage to Mr Hedges on 8 April 2015. The letter enclosing the documents sought confirmation of certain other matters said to have been agreed upon at a meeting of 26 March 2015, including that the date for completion of the work and registration of the subdivision was 30 November 2015. No confirmation was provided, although the completion date seemed to be something that was accepted by the parties as being correct.

It should be noted that prior to entering into the March Agreement, the appellant apparently forwarded a Principal Certifying Authority Form to Warringah Council, noting that the subdivision work was to commence on 20 March 2015. The form although incomplete describes the appellant as the builder. The works described in the form were limited to the preliminary works referred to in the November Agreement.

After execution of the March Agreement the appellant corresponded with Warringah Council and other entities concerning the project.

On 13 April 2015 the appellant wrote to a firm of consulting engineers, MJM Consulting Engineers, enclosing plans of the subdivision that the appellant stated he needed “to obtain a Construction Certificate and the Engineering of the driveway and the drainage design for the retention tank”. The letter said that the subdivision was approved and these things were the two outstanding issues.

On 21 April 2015 the appellant made an application for a gas connection to the property. He signed the application as the builder and stated that the respondents were the owners of the property.

On 18 June 2015 the appellant lodged an application with Warringah Council for a Subdivision Construction Certificate. He described himself as the builder and provided his licence number.

On 14 August 2015 Warringah Council wrote to the appellant, indicating that the engineering plans supplied by him were insufficient to address some conditions of the Development Consent and seeking further information.

On 12 October 2015 Mr Hedges wrote to Mr Walker, stating that the due date for completion of the subdivision work to be carried out by his client on the property was 30 November 2015, subject to variation if there were delays. It was contended in the letter that delays had occurred as a result of wet weather, variation applications and council delays. The letter stated that the totality of the delays exceeded 28 weeks, and that the appellant and the respondents had agreed that the time for completion of the subdivision work should be extended by a period of six months such that the date for completion of the works would be 30 May 2016. On 20 October 2015 Mr Hedges again wrote to Mr Walker, stating that the parties had agreed that the time for completion of the building works be further extended to November 2016.

On 27 November 2015 and “[i]n order to consider an extension to May 30th 2016”, Mr Walker sought further information concerning the reasons for the delay. The information was not forthcoming.

On 18 December Mr Hedges again wrote to Mr Walker, stating the parties had now agreed that there be an extension to 30 May 2016.

On 22 December 2015 the appellant was advised by Warringah Council that a Construction Certificate had been issued.

There was apparently a meeting between the parties’ solicitors on 21 January 2016 to discuss variations to the agreement and the extended timetable. Following the meeting, Mr Walker wrote to Mr Hedges on 22 January requesting details and specification of the work to be completed within the extended timeframe.

On 25 February 2016 Mr Hedges wrote to Mr Walker giving some explanation for the delay. He stated that the respondents did not give “the final go ahead” to enter into the agreement until 26 March 2016, and “did not provide the necessary security documents to secure Wayne’s investment of $435,000.00” until Mr Walker’s letter of 8 April 2015. The letter stated that unfortunately due to an oversight, the 12 months period for completion of the work was not extended to take account of that fact. The letter also contained the following further explanations for the delay:

On 7 March 2016 Mr Hedges wrote to Mr Walker stating that the appellant’s contractors were unable to continue the works because of vehicles parked on the site.

On 8 March 2016 a meeting took place between Mr Walker and Mr Hedges. Mr Walker’s file note of 9 March 2016 noted that the Construction Certificate to enable work to commence was issued on 22 December 2015 and it was agreed that the appellant would summarise the work done to date and what work had to be done.

Little appeared to have occurred in the remainder of 2016. On 22 February 2017 new solicitors acting for the respondents, McLean & Associates (Ms McLean) wrote to the appellant expressing concern that the works had been unsatisfactorily protracted and seeking an accounting of all monies expended, together with all council records in relation to the appellant’s attempts to obtain council approval for the subdivision.

On 15 March 2017 Mr Hedges wrote to Ms McLean, stating that all works required to be done, with the exception of the stormwater detention tank and the laying of the concrete driveway, had been completed. The letter asserted that work had not be done because of the respondents’ instructions that the work not be carried out, as they wished to seek an amendment to the terms of the Development Application in an endeavour to have a fourth block approved.

On 20 March 2017 Ms McLean wrote to Mr Hedges, stating that her instructions differed from the instructions he had received “in that all works have not been completed pursuant to the terms of the earlier agreement between our respective clients”. She requested that she be provided with the accounting and supporting documents previously requested, and that this should be done before any negotiations for an alternate contract were progressed.

By letter of 17 May 2017 from Ms McLean to Mr Hedges, Ms McLean stated that the appellant had failed, despite numerous requests, to provide the respondents with information and documentation in respect of the work that he had undertaken. She stated that absent a response, the respondents would infer that the business relationship between them and the appellant had ended, and would require the appellant to comply with the following steps:

The letter stated that upon completion of those steps, the respondents would commence marketing the first block of land, the proceeds of which would be used to pay the appellant in terms of the agreement, upon which the appellant would be required to provide the respondents with a notice of withdrawal of caveat and return any unregistered mortgage and other security which he may have held.

On 18 May 2017 Mr Hedges responded to Ms McLean’s letter. Among other things, he asserted that the agreement comprised the November Agreement, his letters to Mr Walker of 25 September 2015 and 17 October 2014 and Mr Walker’s letters to him of 8 and 24 October 2014. The letter again asserted that the delay was due to the respondents, in particular Ms Sammut, wishing to pursue a four lot subdivision. He stated that the terms of the agreement were clear:

On 28 July 2017 Mr Hedges again wrote to Ms McLean. He stated that the mortgage granted to his client was to secure the agreed value of the works which his client had performed at his own cost and expense. He repeated his contention that his client had completed all works required under the terms of the Development Approval for a three block subdivision, with the exception of construction of the driveway and the stormwater detention tank. The letter stated that his client would require $1,322,500.00 to terminate the agreement.

On 1 September 2017 the respondents purported to rescind the contract pursuant to the provisions of s 7BB of the Home Building Act. The Notice of Rescission dated 1 September 2017 stated that the work required was “Residential Building Work”, and that on 30 August 2017 they became aware that the contract should have contained a cooling off period and that at no time had one been given. A lapsing notice in respect of the caveat was sent on 17 October 2017, and thereafter the proceedings the subject of the present appeal were commenced.

Prior to dealing with the reasoning of the primary judge and the submissions on the appeal, it is convenient to set out the relevant provisions of the Home Building Act.

Section 6 of the Home Building Act applies ss 7-7E to contracts pursuant to which the holder of a contractor licence undertakes to do any residential building work. So far as relevant it is in the following terms:

As at the date of the March Agreement, “residential building work” and “dwelling” were defined in cll 2 and 3 of Sch 1 to the Home Building Act. Those definitions provide as follows:

It should be noted that at the time of the November Agreement, “residential building work” and “dwelling” were defined in s 3 of the Home Building Act. Although there were some differences in the definitions, they are not material for present purposes.

Section 7 deals with forms of contracts for residential building work other than for small jobs. It was not in issue on the appeal that s 7 applies in the present case if the work to be carried out was residential building work. So far as relevant the section provides as follows:

Section 7BA provides for the rights to rescind within a cooling off period. So far as relevant it provides as follows:

Section 7BB provides for a right to rescind if a cooling off warning is not given. So far as relevant it provides as follows:

Section 7D and s 10 deal with interests in land under a residential building contract and the enforceability of such contracts. They are in the following terms so far as it is relevant:

The primary judge stated that the issue before her was whether the agreement entered into by the parties was a contract under which the appellant undertook to do, by himself or others, “residential building work” as defined by the Home Building Act. She said that if the agreement was not caught by the Act (ie a contract for residential building work to which s 7BA applies) the issue for determination was whether it was validly terminated by the respondents.

The primary judge found that the agreement between the parties obliged the appellant to carry out and complete the DA works at the property by himself or under his supervision. She concluded that the agreement was caught by the Home Building Act and that, as a result, the appellant was not entitled to any interest in the property, specific performance or damages under the agreement.

The primary judge summarised the facts to which I have referred above. In relation to the application for an extension of time for completion made in Mr Hedges’ letter of 12 October 2015, she accepted the submission on behalf of the respondents that delays of 28 weeks could not be substantiated, particularly as the time was predicated on an assertion that wet weather affected the property for 22 weeks. She observed that the appellant’s oral evidence on this point “was not convincing” and was also inconsistent with the documentary evidence including a Bureau of Meteorology listing of wet weather over that period.

The primary judge noted that there was evidence at the hearing that the appellant had done some work on the property, including demolishing the breezeway and deck, undertaking some earthworks and preparing to demolish a cabin, but said that “it was not clear” whether those works were commenced prior to or after receiving the Construction Certificate on 22 December 2015.

The primary judge stated that the evidence before her did not indicate that any work had been undertaken at the property by or on behalf of the appellant during the period from 16 June 2016 to 24 January 2017.

The primary judge referred to the letter from Mr Hedges to Ms McLean of 15 March 2017, in which it was asserted that the appellant had completed all work required to be done with the exception of the stormwater detention tank and concrete driveway. She noted that there was a dispute at the hearing as to whether the appellant had completed all the other works. She noted that in cross-examination the appellant conceded that he had not done so. She also noted that there was no evidence which supported the statement in the 15 March letter that the respondents had instructed the appellant not to proceed with the Development Application works as they wished to pursue a four lot subdivision.

The primary judge noted that by the time of the hearing, the works contemplated by the Development Application and approved plans had been completed, with the major works including the construction of the retention tank and drainage works having been undertaken by a third party builder retained by the respondents. She said that Lot 1 of the property had been sold off the plan to a third party purchaser, and that the appellant had not advanced the amount of $435,000 to the respondents pursuant to the Deed of Loan or otherwise.

In dealing with the question of whether the contract obliged the appellant to carry out and complete the Development Application works, her Honour accepted the respondents’ submission that the relevant contract between the parties was partly in writing, comprising the November Agreement and the 24 October letter, and partly oral. She described the appellant’s position that the contract was limited to the terms set out in the November Agreement as “inconsistent with his own evidence”.

The primary judge stated that an objective review of the terms of the November Agreement supported the respondents’ contention that it was a summary of terms, given the poor drafting and the fact that numerous words and concepts were missing. She also stated that the appellant’s submission that the contract was limited to the terms set out in the November and March Agreements was not supported by the contemporaneous documents and the conduct of the parties. In his submissions to this Court, the appellant argued that the November Agreement should be read in conjunction with the 24 October letter, the latter letter being incorporated by reference save where inconsistent with the November Agreement itself.

The primary judge stated that the principles relating to the construction of a contract were set out in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 (“Mount Bruce Mining”) at [46]-[49]. She stated that, applying these principles, the proper interpretation of the contract between the parties was that the appellant was obliged to carry out the Development Application works, either himself or supervising others, in return for an interest in the property. She stated that the appellant’s interpretation that he would obtain a one-third interest where he had not carried out or completed construction of the work and had not advanced the $435,000 to the respondents was not consistent with the terms of the November Agreement when its text, context and purpose was considered.

Her Honour noted that it was accepted that cl 6 of the November Agreement obliged the appellant to carry out the preparatory works. She stated that cl 6 should be read as requiring the appellant to carry out all the Development Application works, with an obligation to carry out the preparatory works prior to carrying out the major works.

Her Honour considered that the terms of the November Agreement (including cl 6) were ambiguous and that evidence of surrounding circumstances could be used to construe the contract. She stated that the correspondence leading up to the November Agreement provided evidence of the communicated negotiating position of the parties, reflected the commercial purpose of the contract and contained information as to the genesis of the transaction. She stated that the appellant held himself out to be a licensed builder who could construct the subdivision and complete the physical works within six to 12 months. She referred to correspondence in which the appellant was referred to as the “builder” and paying for and doing the subdivision works, which she said was “consistent with the aim and purpose of the transaction” in that the appellant would be responsible for carrying out the works to receive a one-third interest in the property. She stated that it was not consistent with the appellant simply having to put up the funds to pay for the Development Application works and only undertaking the preparatory works.

The primary judge noted that the March Agreement “should be construed as a restatement of the parties’ intent to proceed along the lines previously agreed”, being in essence to undertake a three lot subdivision with the appellant contractually obliged to complete the works at the agreed value of $435,000 in return for his one-third share.

The primary judge accepted that post-contractual conduct cannot generally be used to construe the terms of a contract. However, she stated that it may be relevant and admissible to interpreting a contract or finding its terms when the contract is not wholly in writing. She stated that the evidence of the appellant’s conduct and communications subsequent to the March Agreement was admissible to show that the contract obliged the applicant to undertake and complete construction of the Development Application works.

Her Honour stated that if her interpretation was incorrect, she would accept the respondents’ alternative submission that the contract was varied to the effect that the appellant was obliged, by himself or by supervising others, to complete the Development Application works. She stated that a contract may be varied by conduct and that the communications between the parties after 12 November 2014 supported the submission that the parties agreed that the appellant would carry out and complete the Development Application works by himself or by others by 30 May 2016.

The primary judge stated that she was satisfied that the driveway and the drainage works were to be constructed for use in conjunction with a dwelling within the meaning of the Home Building Act. The appellant accepted in the present appeal that if the November Agreement were read as requiring the appellant to carry out the whole of the Development Application works, it would be invalid pursuant to s 7D(1) of the Home Building Act.

The primary judge also accepted the respondents’ submission that even if the appellant was only obliged to carry out the preparatory works, the contract was one which fell within the provisions of the Home Building Act. She stated that works of a preparatory nature may come within the definition of “residential building work” under the Home Building Act if they are works in readiness or preliminary to residential building work.

The primary judge stated that the demolition of the carport and breezeway was specifically excluded from the Home Building Act by virtue of Sch 1 cl 2(3)(j). However she stated that preparatory work consisting of “any other works that would not conflict with the issue of a construction certificate as described under council’s requirements” and to “establish the requirements as to any variations in the manhole and the 150 mm drainpipe” appeared to be in readiness for, and causally connected to, the Development Application works.

Her Honour also rejected the submission that the contract did not fall within s 6 of the Home Building Act because it was open to the appellant to engage someone else to carry out the work under his supervision. She stated that there was a contractual obligation for the appellant to carry out the work, whether by himself or by others under his supervision. She also noted that the evidence indicated that the appellant proposed and accepted that he would be responsible for undertaking the Development Application works.

So far as the validity of the notice of rescission was concerned, the primary judge stated that it was a matter for the respondents to prove that they had become aware that the contract should have included a cooling off warning no later than seven days prior to the issue of the notice of termination. The primary judge stated that she was not satisfied that the notice was issued in accordance with the statutory requirements of the Home Building Act. However, the primary judge accepted the submission that notice was effective because at the time it was issued, the respondents were entitled to terminate due to the appellant’s breach of contract for failing to complete the work on time.

In that context, the primary judge noted that the respondents’ submission was that the appellant’s failure to complete was an intermediate term, breach of which gave rise to a right to terminate due to the appellant’s unreasonable delay in performance. She stated that the unreasonable delay was such that it evinced repudiation by the appellant of his obligations under the contract.

The primary judge noted that as at the date of the notice of rescission the appellant was not in a position to complete the work, as he had not taken any steps to complete the Development Application works by early 2017, had not started work on construction of the driveway or the detention tank as at 15 March 2017, had not demolished the cabin or built the retaining wall, and did not lead any evidence of any contracts for materials or with other contractors to help perform the work. She noted that the appellant did not lead any evidence that “as at 2 September 2017” he was in a position to undertake and complete the Development Application works in any reasonable time (PJ at [201]).

The primary judge stated that if she was wrong about the application of the Home Building Act and the respondents’ entitlement to reply on the notice of rescission, an order for specific performance would not be appropriate. She stated that there was nothing to suggest the appellant was able to perform his obligations and that there was no evidence of the loss the appellant suffered as a result of the rescission. She noted that in any event, the appellant accepted that if the contract was caught by the Home Building Act, his claim for specific performance and damages was unenforceable due to the operation of ss 7D and 10 of the Home Building Act. In those circumstances, the primary judge dismissed the summons.

The following grounds of appeal were relied upon by the appellant.

These grounds are essentially directed to the critical question in the proceedings, namely, whether the agreement between the parties was that the appellant would carry out the whole of the Development Application works either by himself or under his supervision, as distinct from merely providing funds for the project. It was common ground that if her Honour’s finding that the appellant was required to carry out the whole of the Development Application works was correct, then ss 7D and 10 of the Home Building Act had the effect of denying the appellant any interest in the property and rendering the contract void.

Senior counsel for the appellant accepted that the language of the November Agreement presented “a number of difficulties”. However, he submitted that her Honour’s conclusion that an objective review of the document showed it was “a summary of terms, given its poor drafting and the fact that numerous words and concepts are missing” was not justified.

In that context, the appellant submitted that a number of the criticisms made by the primary judge were unfounded. He referred to the primary judge’s criticism that cl 1 did not identify the transferee of the one-third interest, and submitted it was self-evident it was the appellant. He made a similar submission in relation to her Honour’s criticism that cl 2 did not identify the mortgagee.

Senior counsel for the appellant submitted that the parties had adopted the 24 October letter from Mr Walker as part of the contract, although he accepted they had not adopted the draft joint venture agreement. He submitted that the letter was incorporated into the November Agreement, save where inconsistent with the terms of the November Agreement itself.

Senior counsel for the appellant referred to cl 3 of the November Agreement and the expression “to secure any monies by Wayne Lawrence or his nominees”. He submitted that it would have been helpful if the words such as “provided by” or “advanced by” had been inserted, but submitted that what the word “by” showed was that the money was to flow from Mr Lawrence as distinct from flowing to him as consideration for carrying out the building work.

Senior counsel for the appellant placed particular reliance on the 24 October letter. He described it as “gathering past material and setting out and summarising” what had been agreed upon and what was outstanding. He referred in particular to sub-para (d) of the letter, where it was agreed that the appellant would be responsible for the cost of the subdivision works up to an amount of $435,000.00.

Senior counsel for the appellant referred to the comment in sub-para (e) of that letter to the effect that it was the appellant’s obligation to complete the works. He submitted that this did not mean it was the appellant’s obligation to do the works in the sense described in s 6 of the Home Building Act but rather to do what was required which he submitted was the appellant’s payment obligation. He said that a contrary conclusion would lead to the contract being immediately void by virtue of s 7D which could not have been what the parties intended. He submitted that if it was intended that the appellant would be the builder, this would be at the forefront of the agreement. Senior counsel said that the statement made in Mr Hedges’ letter of 17 October 2014 (see [15] above) that his client was offering to undertake performance of the building work was “left behind” by the 24 October letter. He submitted that the expression “responsible for” in that letter meant paying for, not generating. He accepted, however, that the fact the appellant was a builder was relevant “in a background sense”.

Senior counsel for the appellant also submitted that it was open to the appellant to proceed in an orthodox fashion by engaging another licensed builder to perform the work in return for a promise to pay for it. He submitted that where there was ambiguity in the contract a construction which would make the agreement lawful should be preferred.

Senior counsel for the appellant submitted that because the November Agreement was re-executed on 26 March 2015, it was appropriate to have regard to the interest claimed in the caveat, namely “to secure moneys advanced”. He referred in that context to the Recitals in the Deed of Loan to which I have referred at [22] above.

Senior counsel for the appellant submitted that cl 6 of the November Agreement properly read meant that the appellant had to carry out the works described immediately below that clause. He submitted that was made clear by cl 7. He contended that that work was not “residential building work”. He submitted that the obligation to “[e]stablish the requirements as to any variation in the manhole” was not building work but rather “finding out what need[ed] to be done”.

Senior counsel for the appellant submitted that the description of his client as the builder in the Principal Certifying Authority Form, to which I have referred at [26] above, did not affect the appellant’s position as the form only related to the preliminary work which the appellant had agreed to undertake.

Ultimately, senior counsel for the appellant made the submission that all this amounted to was an agreement to go ahead and do the preliminary work, with no commitment by anyone to build anything in relation to what was described as the DA works or the construction works.

In reply submissions, senior counsel for the appellant submitted that the “bottom line” was what a reasonable business person would have understood the contract to mean. He submitted that one thing a reasonable business person would not conclude was that the appellant “then and there” undertook an obligation to do the major works, although he accepted that the appellant had an obligation to start funding. He accepted that a reasonable business person would have regard to the fact that the appellant had held himself out as the builder who would undertake the works, but contended that that did not go anywhere in light of the precise words used in cl 6 and cl 7.

In written submissions filed on behalf of the appellant, it was submitted that her Honour erred in taking into account post-contractual conduct, as the November Agreement in conjunction with the 24 October letter provided a complete record of the agreement between the parties, and thus the post-contractual conduct could not be used as an aid to construction. The submissions also emphasised that as a matter of interpretation, an agreement should be construed so as to preserve the validity of the contract.

Senior counsel for the respondents referred to the background to the agreement to which I have referred at [2]-[7] above. She pointed out that the Development Application had been lodged and approval given before the appellant came onto the scene. She referred to the appellant’s original proposal that he would commence and complete the subdivision, and his statement that he had been conducting subdivisions and developments since 1967 (see [9] above). She referred to similar statements in the appellant’s email of 29 August (see [11] above) and to the description of the appellant as a builder in the draft agreement to which I have referred at [12] above.

Senior counsel for the respondents submitted that whilst cl 6 of the November Agreement was “inelegant”, it was possible to read it in context as obliging the appellant to carry out all the preliminary works immediately. She submitted that the agreement was premised on the appellant being the builder.

In written submissions filed on behalf of the respondents, it was submitted that post-contractual conduct can be used to prove that a contract was formed and its terms, and that the primary judge correctly stated and applied the principles. It was submitted that to construe the contract so as to avoid invalidity would thwart the purpose of the Home Building Act.

It is convenient to deal with these grounds initially on the basis urged by the appellant, namely, that the whole of the contractual arrangement between the parties was contained in the November Agreement (or the March Agreement) into which the terms of the 24 October 2014 letter were incorporated, save to the extent that the terms were inconsistent with those agreements.

The principles surrounding the construction of commercial contracts in this country are well established. In Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35], the plurality (French CJ, Hayne, Crennan and Kiefel JJ) stated that “[t]he meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean” in context. The Court stated that “it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract”: see also Mount Bruce Mining at [46]-[49]; Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47 at [78]; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 at [16]; Victoria v Tatts Group Ltd (2016) 90 ALJR 392; [2016] HCA 5 at [51].

In Mount Bruce Mining it was pointed out at [46] that context includes “the entire text of the contract as well as any contract, document or statutory provision referred in the text of the contract”.

Ultimately, neither party disputed that the November Agreement, whether read alone or in conjunction with the 24 October letter, was ambiguous in the sense of being susceptible to more than one meaning. Although ground 3(a) of the grounds of appeal asserted that the November Agreement unambiguously indicated that the appellant was required to fund, but not required to carry out the Development Application works, senior counsel for the appellant accepted that the language in the November Agreement presented a number of difficulties, including grammatical and spelling errors, and at one stage contended for a further alternative construction that there was only an agreement to do the preliminary works.

In those circumstances, regard can be had to the surrounding circumstances objectively known to the parties consistent with the so-called “true rule” in Codelfa Constructions Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 352; [1982] HCA 24. It is not necessary to consider in the present case whether and to what extent the use of surrounding circumstances as an aid to construction is limited to cases of ambiguity: see, for example, Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184 at [79]; Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295 at [80]-[82].

In my opinion, taking into account both its context and purpose, the November Agreement required the appellant to undertake the subdivision the subject of the Development Application as distinct from funding a third party builder to undertake it up to an amount of $435,000.

There are a number of matters to be noted about the November Agreement. Clauses 1 and 2 provide for an immediate transfer of a one-third interest in the property (wrongly described as a share transfer) and an unregistered second mortgage “as to the works of $435,000 which is applicable to the existing DA approval”. It should be noted that cl 2 does not refer to funds advanced by the appellant, but directly connects the mortgage to the works, implying that it is to secure the value of the works to be carried out.

Similarly, cl 4 refers to handing over the transfer on completion of the works, rather than payment of $435,000. That obligation would seem to arise at the time of completion of the works, irrespective of whether their cost was greater or less than $435,000. Once again that tends to suggest that the consideration for which the appellant was to receive the one-third interest was completion of the works.

As I have set out above, senior counsel for the appellant placed reliance on cl 3 of the November Agreement, in particular the words “to secure any monies by Wayne Lawrence or his nominees”. Senior counsel for the appellant submitted the word “by” meant “advanced by” or “paid by” or “contributed by”, stating that it showed that the agreement was that the appellant was going to pay money rather than receive money for undertaking building work. He suggested that the words “or his nominees” could be referring to a bank or other funder that the appellant introduced into the agreement.

However, the word “by” could equally refer to money expended by the appellant and thus secure money spent by him on construction of the work the subject of the Development Application. In that context, the expression “his nominees” could refer to monies expended by sub-contractors for which the appellant builder was liable.

Clauses 5 and 7 seem to me to be related. The parties evidently contemplated an application to include a fourth block in the subdivision and resolved to reach a decision whether to proceed with such an application within three months. Similarly, they agreed in cl 7 not to commence construction work within that period. It is important to note that the matters in cl 5 were expressly stated to be separate to the matters agreed upon in cll 1 to 4.

It is in that context that cl 6 falls to be considered. Essentially it involves the appellant doing what might be described as preliminary works which could be done prior to the issue of a Construction Certificate. The fact that the appellant was expressly required to carry out the preliminary works supports rather than detracts from the proposition that he was required to carry out the whole of the works the subject of the Development Application.

Thus far I have not referred to the 24 October letter. Whether or not it was incorporated in the way submitted by the appellant (see [83] above) (as to which see Adamastos Shipping Co Ltd v Anglo-Saxon Petroleum Co Ltd (The Saxon Star) [1959] AC 133 at 178, 179; [1958] 1 All ER 725; J D Heydon, Heydon on Contract (2019, Thomson Reuters) at [8.1450]), reference to it in the November Agreement means it can be taken into account as part of the context: Mount Bruce Mining at [46].

The letter, a large part of which I have set out at [16] above, does not support the appellant’s construction. First, the parties seem to have subsequently abandoned the proposed joint venture on which much of the discussion in the letter was based. Second, although Mr Hedges’ comment in sub-para (e) of the letter and Mr Walker’s response both referred to the appellant paying the costs of the works, Mr Walker also expressly stated that his client’s position was that it was the appellant’s obligation to complete the work. Further, although Mr Walker’s response suggested that an agreement needed to be reached on the identity of a number of consultants required for the proposal, it did not suggest that agreement as to the identity of the builder was required. This is consistent with the parties’ intention that the appellant was to be the builder.

The surrounding circumstances that can be taken into account in construing the contract further make it clear that it was the parties’ intention that the appellant perform the construction work. From the outset, the appellant held himself out as the person who could complete the work. In particular, he held himself out as a licensed builder. In his letter of 3 March 2014, he stated that he was prepared to proceed and commence the subdivision, stating that he would be seeking to commence work as soon as possible, that he had been constructing subdivisions since 1967 and was a licensed builder. He stated that he had his own equipment to ensure there were no delays (see [9] above). In his letter of 29 August 2014, he stated he would conduct the subdivision work under a Contract of Works (see [11] above). On 17 October 2014, Mr Hedges made it clear that his client, a licensed builder, was undertaking to conduct the work at his own cost and expense (see [15] above). There was not the slightest suggestion that it was ever in the contemplation of the parties that the appellant would act as a funder rather than a builder.

I do not think that the terms of the caveat or the Deed of Loan alters the position. The Deed of Loan was executed in support of the unregistered mortgage referred to in cl 2 of the agreement which, as I have explained, limits the mortgage to the works, implying that it was to secure the value of the works, not any money advanced by the appellant to fund the development. No funds were advanced to the respondents pursuant to the Deed of Loan or otherwise. The caveat was lodged pursuant to cl 3 of the agreement which, as I have indicated, should be construed as relating to monies expended by the appellant, rather than provided by or advanced by him.

The caveat refers to an oral agreement. It seems to me that the primary judge was correct in characterising the contract as partly oral and partly in writing. The parties declined to enter into a formal joint venture agreement, but rather met and orally reached agreement on 29 October, the terms of which agreement they sought to set out in the November Agreement, stating that they had “agreed to proceed on the following basis in similarity to what was set out” in the 24 October letter. The November Agreement on its face was an attempt to record what had been orally agreed, rather than a formal written instrument incorporating all the contractual terms that the parties had agreed upon.

The November and March Agreements did not state in terms whether the appellant was to undertake or to fund the subdivision. Although generally speaking, evidence of post-contractual conduct cannot be used in aid of construction (see Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57 at [35]), in the case of contracts not exclusively in writing, post-contractual material may be relevant in determining what the terms actually were: County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 at [7]-[27] and [45]; Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 at [325].

Although I think the position is clear without resort to post-contractual conduct, the post-contractual conduct provides further support that it was agreed that the appellant would undertake the work the subject of the Development Application. To the extent that any negotiations with the Council or other utilities were undertaken, it was the appellant who embarked on them in his capacity as builder. He sought an extension of time, sought to provide explanations for the delay in completing the work, and negotiated an extension of time for completion. The post-contractual events are consistent with the appellant acting as builder pursuant to his contractual obligation.

The appellant also submitted that where there was ambiguity in the contract, a construction which would have made the agreement lawful should be preferred. However, the principle only comes into play if ambiguity remains open after the application of the ordinary rules of construction: Butt v Long (1953) 88 CLR 476 at 487; [1953] HCA 76. In the present case such ambiguity does not remain.

I should add that whilst I have dealt with these grounds by reference to the November Agreement, the same conclusion is reached if regard is had to the March Agreement, either alone or in conjunction with the November Agreement.

It follows that these grounds of appeal have not been made out.

As the appellant correctly conceded that the appeal must fail if these grounds are not made out, the remaining grounds can be dealt with shortly.

Senior counsel for the appellant submitted that the fundamental point of this ground was that there was no consideration in respect of any variation, and no occasion identified under which any communication of offer or acceptance or other manner of making an amendment to the contract came about. He said that the purported variation increased the duties on the appellant without any corresponding benefit. He rejected the proposition that the consideration may be the release of the appellant from an obligation to fund the development in return for undertaking to carry out the development himself.

Senior counsel for the respondents referred to the arrangements concerning the extension of time to which I have referred at [32]-[34] above. She submitted that by that time, the parties had reached an agreement that the appellant do the work, and finish it by 30 May 2016.

It may have been theoretically possible for the contract to be varied by conduct such that the appellant’s obligation to act as funder was replaced by an obligation to act as builder: see Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [71]-[77]; Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 534. However, there is nothing to suggest that this occurred in the present case. There was no agreement to vary the contract as the relevant variation was not required since the appellant always had the obligation to act as the builder.

In concluding that part of the preliminary work required by the November Agreement, namely, the establishment of “the requirements as to any variations in the manhole and the 150 mm drainpipe” fell within the definition of “residential building work”, the primary judge placed reliance on what was said by Basten JA in Grygiel v Baine [2005] NSWCA 218 (“Grygiel”) at [57]. As part of a discussion in that case of other definitions in the Home Building Act, Basten JA made the following remarks:

Senior counsel for the appellant submitted that the use of the words “involved in” in the definition of “residential building work” meant that the work was required to be part of the construction of the dwelling. He submitted that although the work the subject of the November Agreement might have a broad connection with the construction work undertaken, it did not form part of it.

Senior counsel for the respondents referred to the width of the definition of “dwelling” in cl 3 of Sch 1 of the Home Building Act. She submitted that establishing the requirements as to the variation of the manhole and the drainage pipe constituted preparatory work for the construction of a dwelling, having regard to the inclusions of things such as driveways and drainage in the definition of “dwelling” in cl 3(2).

In the passage from Grygiel cited by the primary judge, Basten JA was primarily dealing with the definition of “building goods or services” in s 48A of the Home Building Act. These services were relevantly defined in s 48A as “goods or services supplied for or in connection with the carrying out of residential building work …” Section 48A is contained in Pt 3A of the Home Building Act which deals with the resolution of building disputes.

The issue in Grygiel was whether an advice in relation to a building contract fell within the definition of “building goods or services” such as to give the (then) Consumer, Trader and Tenancy Tribunal jurisdiction to resolve a claim for negligence against the solicitor in respect of the advice. The Court was thus concerned with the question of whether the provision of the advice was a service supplied for or in connection with the carrying out of what was admitted to be residential building work. That is clear from the paragraph of the judgment in Grygiel at [58] which immediately follows the passage cited by the primary judge:

By contrast to the definition of “building goods or services”, the definition of “residential building work” uses the expression “work involved in the construction of a dwelling”. That may include preparatory work such as laying foundations or otherwise preparing the site for construction (noting that demolition work is expressly excluded), but it does seem to me to require a closer connection with the construction of a dwelling than that required for a claim to fall within the definition of “building goods or services”.

Whilst the work in question in the present case – “[e]stablish the requirements as to any variations in the manhole and the 150 mm drainpipe” – may be said to be work in connection with the proposed subdivision, in my opinion, such an investigation is too remote to fall within the definition of “residential building work”.

It follows this ground of appeal has been made out.

However, having regard to my conclusion on grounds 1 to 5 this conclusion does not affect the result.

Senior counsel for the appellant submitted that her Honour’s finding that the appellant repudiated the agreement could only arise if the appellant was bound to complete the Development Application works. He submitted that the contract “was a contract to pay, not to do”, and that it was no part of the claim that there was a failure or refusal by the appellant to pay whatever it was which should have been paid.

In written submissions, it was contended that there was evidence which supported the finding that the appellant’s delay in performance of his obligations was attributable to ongoing negotiations, referring to the correspondence between March and August 2017 which I have summarised above. Her Honour rejected this contention and her factual finding was not challenged. It was also submitted that there was evidence that the appellant continued to make payments to the respondents consistent with his obligations. This evidence apparently referred to some payments made in respect of outgoings of the property, including payments to the mortgagee, Suncorp Corporation.

Similarly, senior counsel for the appellant submitted that his client was entitled to an order for specific performance, the respondents’ contention that he was not ready, willing and able to complete the contract being erroneous as he had no obligation to carry out the work. He submitted that the appellant was never unwilling to perform his side of the bargain to pay whatever he was obliged to pay.

Senior counsel for the respondents submitted that even on the appellant’s version of the agreement the respondents were entitled to terminate. She pointed out that he had not provided the account called for. To this might be added that he had taken no steps to obtain and pay for a builder to do the work. She submitted that in the circumstances, specific performance was not an available remedy and that as far as damages were concerned, the appellant had never brought forward any cogent evidence of his alleged loss.

The primary judge, whilst concluding that the respondents were not entitled to terminate pursuant to s 7BB of the Home Building Act, considered that the appellant had repudiated the agreement such that the respondents were entitled to terminate it.

It was accepted that the respondents were entitled to rely on this ground notwithstanding they did not rely on it when terminating: Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 at 370-371, 377-378; [1931] HCA 21.

Her Honour’s findings relevant to the question of repudiation set out in [59]-[62] and [77] above were not disputed. It showed in my opinion a clear intention by the appellant not to be bound by the contract or to perform it in a manner substantially inconsistent with his obligations: Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 633-634, 658-659; [1989] HCA 23; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; [2007] HCA 61 at [44].

The only submission made by the appellant against this proposition was that he was not bound to complete the works as distinct from funding them. As I have concluded that this was incorrect, it follows that the appellant repudiated the agreement and the respondents were entitled to terminate on that ground.

It also follows that the appellant was not entitled to an order for specific performance even if the contract was otherwise enforceable.

In the result I would make the following orders:

MEAGHER JA: I agree for the reasons given by the Chief Justice that this appeal should be dismissed with costs.

GLEESON JA: I agree with Bathurst CJ.