IDP 971 Richmond Pty Ltd v Xerri

1. [1]

   BELL CJ: This is an appeal from a decision of Pike J (the primary judge) sitting in the Equity Division of this Court: IDP 971 Richmond Pty Ltd v Xerri [2025] NSWSC 1151 (PJ or primary judgment).

2. [2]

   A property developer, IDP 971 Richmond Pty Ltd (the Appellant), entered into a deed on 10 October 2018 (the October Deed) that granted it an option to enter into a contract in a form annexed to the Deed (the Contract) to purchase a property in Marsden Park (the Property) from Mr Jerry Xerri and the late Ms Emanuela Xerri (the Respondents). An earlier option deed (the August Deed) had been terminated on 2 October 2018.

3. [3]

   The option was exercised by the Appellant on 24 March 2025.

4. [4]

   The Property included a strip of land along its southern boundary that had been marked as a potential public transport corridor under the State Environmental Planning Policy (Sydney Region Growth Centres) 2006 (NSW) (2006 SEPP). Clause 6.10 of Appendix 12 to the 2006 SEPP provided:

5. [5]

   Orders were made by the Land and Environment Court on 18 November 2021, granting development consent to SP-20-00002 for a staged development on the Property, including “demolition of existing structures, tree removal, earthworks, road construction, civil and stormwater drainage works and dam dewatering”, in two stages:

6. [6]

   The proposed Lot 3 upon which no development was proposed at any stage included such of the area marked “I” on the Land Zoning Map as overlapped with the Property.

7. [7]

   In November 2020, Transport for New South Wales (TfNSW) had concurred with the development application subject to certain conditions including that its prior approval be granted before any work occurred within the corridor in relation to the Stage 2 development. TfNSW’s concurrence was unsurprising given that no development was proposed within the corridor identified in cl 6.10 of Appendix 12 to the 2006 SEPP.

8. [8]

   As already noted, the option was exercised by the Appellant on 24 March 2025. Subsequent to the commencement of the proceedings before the primary judge, the purchase was completed with the purchase price of $22,000,000 being paid but with some $6,272,662.30 being held in a controlled monies account pending the determination of this appeal.

9. [9]

   Before the primary judge, the Appellant unsuccessfully sought rectification of cll 15.3 and 15.4 of the October Deed. Had rectification of those clauses been made, the Appellant contended that the purchase price under the Contract should also be rectified and have been reduced by the amount currently held in the controlled monies account to $15,727,337.70. The Respondents contended, however, not only that rectification of cll 15.3 and 15.4 ought not be granted but that, even if it were, the rectified cl 15.4 would not be engaged so as to warrant the $6,272,662.30 being deducted from the purchase price and repaid to the Appellant. This last contention is the subject of a Notice of Contention in this Court.

The October Deed

1. [10]

   The key clauses of the October Deed were as follows:

2. [11]

   Schedule 3, referred to in cl 15.2, was the Contract, for the sale and purchase of the Property. It had seven attachments, being: the property certificate for the land; the plan of the land; the s 10.7(2) planning certificate under the Environmental Planning and Assessment Act 1979 (NSW); additional information included in that certificate under s 10.7(5); the sewerage infrastructure location diagram; the sewer lines location diagram; and the land tax certificate.

3. [12]

   Clause 15 of the October Deed contemplated that any of these attachments to the Contract could be updated prior to exercise of the Call Option. None were.

4. [13]

   The Appellant sought rectification of cll 15.3 and 15.4 by insertion of the emboldened words so that they would respectively read:

5. [14]

   The contested sum on completion, namely $6,272,662.30, is a function of the multiplication of the area of proposed Lot 3 referred to in the development consent orders, namely 8106.1m2 by $773.82, being the sum referred to in cl 15.4 of the October Deed.

Negotiation as to cll 15.3 and 15.4

1. [15]

   Both cll 15.3 and 15.4 of the October Deed were the subject of negotiation, albeit limited, by the solicitors for both the Appellant, Ms Kallianiotis, and Respondents, Mr Siderowitz, prior to the execution of the October Deed.

2. [16]

   To understand the evolution of those two clauses it is necessary to start with the August Deed which, it should be noted, did not include a clause equivalent to cl 3 in the October Deed.

3. [17]

   Clause 15 of the August Deed was in the following terms:

4. [18]

   Clause 15.3 was concerned with a circumstance of “significant and detrimental affectation” of the Property by reason of an updated attachment “other than by virtue of a reduction in the area of the property” whereas cl 15.4 was concerned with any affectation of the Property by reason of an updated attachment which reduced the area of the Property. It contained no reference in terms to the creation of “a corridor or buffer area”.

5. [19]

   On 12 September 2018, in the course of undertaking its due diligence as contemplated by the August Deed, the Appellant sought and was provided expeditiously with information regarding the public transport corridor referred to in cl 6.10 of Appendix 12 to the 2006 SEPP. That information contained extracts from the reports of two town planners, prepared in 2015. One of those reports, prepared by Mr Haskew, included the following about the public transport corridor:

6. [20]

   While the August Deed was on foot and due diligence was progressing, various amendments of the Deed were sought by Ms Kallianiotis. Thus, on 21 September 2018, she wrote to Mr Siderowitz as follows:

7. [21]

   On 24 September 2018, she then provided a version of the August Deed with handwritten annotations. The first annotation to cl 15 provided:

8. [22]

   Mr Siderowitz replied on 26 September 2018, conveying his instructions as follows:

9. [23]

   On 27 September 2018, the principal of the Appellant attended a pre-development application meeting with the Council. The proposed development then contemplated including construction of townhouses on the area marked “I” in cl 6.10 of the SEPP. The minutes of this meeting record that:

10. [24]

    On 2 October 2018, Ms Kallianiotis wrote to Mr Siderowitz, stating:

11. [25]

    It was common ground that the August Deed was terminated on 2 October 2018 although it appeared to provide a template at least for what would become the October Deed.

12. [26]

    On 3 October 2018, Mr Siderowitz sent the following email to Ms Kallianiotis at 12:28 pm:

13. [27]

    Ms Kallianiotis replied at 2:48 pm with the following email:

14. [28]

    Mr Siderowitz replied at 3:20 pm with the following email:

15. [29]

    Mr Siderowitz replied again at 5:04 pm with the following email:

16. [30]

    On 8 October 2018, Mr Siderowitz sent the following email to Ms Kallianiotis:

17. [31]

    On 9 October 2018, the solicitors had another conversation over the telephone, the details of which were not in evidence. Mr Siderowitz then sent an email to Ms Kallianiotis to which he attached “amended clauses 15.3 and 15.4” in respect of which he said “I hope [they] get us where we want to go”, presumably reflecting the unknown terms of their earlier conversation. Those amended clauses provided:

18. [32]

    On 10 October 2018, the Appellant and the Respondents entered into the October Deed, which included the versions of cll 15.3 and 15.4 set out in the preceding paragraph.

19. [33]

    The Deed also included in cl 3 obligations on the Grantee (Appellant) in relation to its contemplated development application: see at [10] above. The Deed also contained the attachments to the Contract in Schedule 3 as have been noted at [11] above.

The primary judgment

1. [34]

   It was contended at first instance that the parties held a common intention which was not reflected in the terms of the October Deed and that both parties were mistaken in executing the October Deed in terms which did not reflect that asserted common intention.

2. [35]

   The primary judge identified the common intention contended for by the Appellant as being that “to the extent that the railway corridor adversely affected the use of the Property for residential subdivision, the price would be reduced at the rate of $773.82 per square metre”: PJ [98].

3. [36]

   His Honour’s methodical analysis proceeded as follows:

4. [37]

   This analysis was underpinned by reference to well-established authority in the area including the judgment of Gageler, Nettle and Gordon JJ in Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47 at [103]-[104], where it was held that rectification for common mistake cannot occur unless it is:

5. [38]

   The primary judge, citing Public Trustee v Smith [2008] NSWSC 397 at [71], Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 (Franklins) at [451]-[461] and Newey v Westpac Banking Corporation [2014] NSWCA 319 at [170], had also correctly observed that the party seeking rectification bears a heavy onus requiring “clear and convincing” proof, and that it must be “demonstrated with clarity that the parties had a sufficiently precise intention that the Court can determine both the substance and the detail of the precise variation to be made to the wording of the instrument”. From Franklins, the primary judge quoted the well known observations of Campbell JA at [461] that:

6. [39]

   No issue was taken with the primary judge’s identification of authority and the principles by reference to which rectification suits are to be determined.

Grounds of appeal and consideration

1. [40]

   The Appellant’s grounds of appeal comprise little more than an assertion that the primary judge erred in refusing to grant rectification.

2. [41]

   What is of significance and interest in the Notice of Appeal, however, is the fact that the common intention upon which the Appellant appears to rely for the purposes of the appeal differs in its formulation from that identified by the primary judge in his judgment: see at [35] above. Thus, the Notice of Appeal is in the following language:

3. [42]

   The revised common intention as expressed in the Notice of Appeal differs from the common intention contended for at first instance in that, whereas the latter hinged on the term “adversely affected”, which the primary judge held was “no doubt susceptible to different meanings” and lacked the requisite precision, the revised common intention hinged upon the development consent “not permit[ting] development of … the Railway Corridor”: see PJ [99].

4. [43]

   I reject the submission made by Mr Lynch SC on behalf of the Appellant that there was no practical difference between the two formulations. In my view, they are quite different. The latter looks to an unknown future event and puts the determination of any price reduction in the hands of the relevant consent authority whereas the former may refer to the effect per se of cl 6.10 of the 2006 SEPP (although this was not clear).

5. [44]

   An immediate and simple answer to the Appellant’s appeal is that the Court below could not have erred in the way contended because the common intention as articulated at first instance was expressed in different terms.

6. [45]

   In addition, this change of case was the subject of complaint by the Respondents to the effect that the Appellant should not be permitted to prosecute its appeal on the basis of this revised common intention: see Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438; [1950] HCA 35; Bird v DP [2024] HCA 41; (2024) 98 ALJR 1349 at [39], and that to do so would permit the Appellant to alter its case from the case pleaded below in circumstances where, had the Appellant pleaded the revised common intention at first instance, the Respondents “would have called evidence, the gist of which would have been that nothing was said in any of the conversations between the solicitors to that effect”. There was force in this submission. I do not accept Mr Lynch’s submission to the effect that the Respondents could have called Mr Siderowitz but chose not to do so. The decision not to call Mr Siderowitz before the primary judge was no doubt a carefully considered forensic decision made in the context of the case as propounded by the Appellant at first instance. That case differed from that now propounded. For this additional reason, the Appeal must fail.

7. [46]

   Further, the fact that the Appellant sought to articulate the “common intention” in the different way that it did in the Notice of Appeal tends to highlight the Appellant’s difficulty in articulating what is always a critical part of a rectification suit. This difficulty was only compounded by the request, at the end of the Appellant’s closing oral reply submissions in this Court, to reformulate the form of rectification sought in terms of the words it sought to have introduced into cll 15.3 and 15.4. This application was rejected but, as with the attempted reformulation of the “common intention”, it highlighted the difficulties with the Appellant’s case.

8. [47]

   To the extent that the reasoning of the primary judge was attacked (and there was little attempt to engage with it by the Appellant in any detailed manner), his Honour’s reasoning was compelling. To it or consistently with it I would add the following observations.

9. [48]

   It is appropriate to start by noting the observation of Campbell JA in Franklins at [460], namely that:

10. [49]

    The “agreement” as to proposed changes to cl 15 in Mr Siderowitz’s email of 26 September 2018 relied upon in argument is of little if any moment: it was in the context of a proposed amendment to the August Deed as part of a package of terms which were rejected. In any event, the “agreement” referred to in this email in relation to cl 15 did not disclose a common intention of the kind asserted by the Appellant albeit that it was actuated by the Appellant’s concern that TfNSW may not permit development on the corridor. The perception of that risk was, as the primary judge pointed out at PJ [100] “only the first step, and a small step at that, along the path to rectification”.

11. [50]

    Next, the evidentiary basis relied upon for establishing the common intention and the common mistake was sparse, comprising only the solicitor correspondence set out at [15]-[32] above. This could not be described as “[s]trong evidence” or “especially cogent evidence” (per Leeming JA in Re Jimmy’s Recipe Pty Ltd (No 2) [2020] NSWSC 632 at [153]) or “clear and convincing proof” (per McLelland AJA in Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 at 345). As Lord Sumption has said, “the legal criteria for rectifying a contract are extremely exacting”: J Sumption, “A Question of Taste: The Supreme Court and the Interpretation of Contracts” (2017) 17 OUCLJ 301 at 312, quoted in JD Heydon, Heydon on Contract: The General Part (2019, Thomson Reuters) at [30.190].

12. [51]

    The fact that two solicitors were closely involved in drafting the relevant clauses and that these went through a number of drafts militates strongly against the existence of a common mistake based upon a common intention not reflected in the language of the October Deed. Moreover, if the common intention was as contended (whether at first instance or on appeal), with both parties cognisant of the possibility of TfNSW withholding its concurrence under the 2006 SEPP, it would have been relatively straightforward to draft a clause adjusting the price on that contingency, but this was not done. As Campbell JA observed in the passage from Franklins extracted at [38] above, this also militates against there having been a common intention and consequent common mistake.

13. [52]

    It is not possible to “divine” a common intention of the kind alleged from the sparse solicitor correspondence other than to the extent of agreement as to the drafting of particular clauses in the October Deed, that is to say, the extent of the parties’ agreement is reflected in the words used. Whatever may have been intended or assumed by Ms Kallianiotis (and she did not give evidence), the record does not disclose Mr Siderowitz’s position beyond the text of the clauses that he proffered on 9 October 2018 (see at [31] above). Nor does the record disclose that he was mistaken in what he drafted and mistaken in the same way as Ms Kallianiotis, if indeed either of them was in fact mistaken.

14. [53]

    In this context, on 9 October 2018, just prior to the execution of the October Deed the following day, Mr Siderowitz called on Ms Kallianiotis to confirm his final drafting of cll 15.3 and 15.4 which he said he “hope[d] g[o]t us where we want to go”: see at [31] above. Ms Kallianiotis’ apparent acquiescence in the terms of the draft advanced, which became cll 15.3 and 15.4 in the October Deed, is the best evidence of what the parties’ agreement in fact was given the matter had been expressly adverted to by Mr Siderowitz. That agreement fell far short of the asserted common intention of the parties. The agreement reached was in terms of the actual or proposed reduction in the area proposed to be developed prior to the exercise of the option which could, as was the case, be many years off.

15. [54]

    The failure of both sides to call their solicitors (or to adduce any file notes) rendered it difficult to ascertain the parties’ common intention especially in light of the fact that such sparse correspondence as existed took its context from conversations between the solicitors on 3 October, 8 October and 9 October 2018, the detail of which was unknown. While for forensic reasons a defendant to a rectification suit will often refrain from going into evidence, the failure by the plaintiff to call Ms Kallianiotis was surprising given where the onus to establish a common intention and common mistake lay. The inference is that calling her would not have assisted the Appellant’s case: Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8.

16. [55]

    Furthermore, the existence of any unexpressed and unreflected common intention is undermined by the fact that, on 7 August 2024 (admittedly many years after execution of the October Deed but prior to exercise of the option), Mr Siderowitz conveyed to Ms Kallianiotis after conversations between them on 29 July and 7 August 2024 that “[i]t would seem that we clearly have different interpretations of clause 15.4 of the Call Option Deed”. Evidence of subsequent and subjective conduct is admissible and relevant to the inquiry into the existence of a common intention: Heydon on Contract: The General Part at [30.450].

17. [56]

    In terms of the revised common intention contended for in the Notice of Appeal, neither cll 15.3 nor 15.4 refer to a development consent or the outcome of a development application. To the extent that Mr Lynch sought to emphasise the introduction of cl 3 into the October Deed (see at [10] above), that clause was not obviously or self-evidently tied to cll 15.3 or 15.4. The purpose of the introduction of cl 3 was to expedite the making of a development application and to keep the vendor informed of its progress for obvious commercial reasons.

18. [57]

    Contrary to the Appellant’s submissions, this is not a case where the subject clauses were left without work to do (a circumstance that may be indicative of a common intention not being effectuated or a common mistake having been made). Exercise of the option contained in the October Deed was likely to be many years away and the Deed contemplated, in cl 4, dealing with payment instalments of the call option fee, it not being exercised for more than 48 months after execution of the October Deed. The Appellant had resisted the Respondents’ attempt to insert a time frame by which the option had to be exercised and, as events transpired, almost seven years elapsed between the grant of the option in October 2018 and its exercise. In this context, it was entirely feasible that the Property could have been rezoned and/or that the State could have compulsorily acquired part of the Property for transport corridor purposes. Had that happened, resulting in a consequent update to the attachments to the Contract appended to the October Deed, cl 15.4 of the Deed would have been engaged.

19. [58]

    The unlikelihood of the common intention being as contended for by the Appellant is further undermined by the fact that it would have been commercially disadvantageous to the Respondents in a number of respects. For example, if there was a price reduction because of TfNSW’s lack of concurrence with a development application, a subsequent change of attitude by TfNSW would result in a windfall to the Appellant which would have paid a lower purchase price on the basis of an inability to use the subject land but which would, on this hypothesis, then be able to develop it fully. As put by the Respondents in their written submissions:

20. [59]

    It is not strictly necessary to deal with the Respondents’ Notice of Contention to which reference has been made at [9] above. Had it been necessary to deal with it (and differing in this respect from the primary judge), I would have upheld the decision to dismiss the rectification suit on the grounds set out in the Notice of Contention which were as follows:

21. [60]

    For all of the above reasons, the appeal should be dismissed with costs.

22. [61]

    MITCHELMORE JA: I agree with the orders proposed by the Chief Justice for the reasons his Honour gives, and with the additional reasons of McHugh JA.

23. [62]

    McHUGH JA: I entirely agree with the Chief Justice. I would add only the following.

24. [63]

    As the Chief Justice explains, the Appellant formulated the common intention said to have been operative here in two different ways at trial and on appeal. The first was, as the primary judge said at PJ [90], that set out at par 1.5 of the Appellant’s revised submissions at trial dated 16 October 2025:

25. [64]

    The second was as articulated in the Notice of Appeal:

26. [65]

    Whether either formulation was in truth the parties’ common intention falls to be decided in light of the fact that the operation of cl 6.10 of Appendix 12 to the 2006 SEPP was known to both parties.

    1. (1)

       As to the formulation of the common intention at trial, cl 6.10 itself “adversely affected the use of the Property for residential subdivision”, as Senior Counsel for the appellant accepted.

    2. (2)

       As to the formulation on appeal, in the absence of concurrence by TfNSW, the effect of cl 6.10 was that any development consent must “not permit development of … the Railway Corridor”.

27. [66]

    Nothing in the evidence suggests that the parties intended the default price to be $15,727,337.70.

28. [67]

    Moreover, if, as is submitted, this is a case in which the parties were not mistaken as to the words used in the instrument but rather were mistaken as to the legal effect of those words, it would be highly surprising that any lawyer could mistakenly understand that the language which was used had the legal effect of either formulation of the alleged common intention. The operation of both formulations would reverse the mechanism of the language that the parties actually used for setting the purchase price. On the un-rectified language of cl 15.4, the default price for the whole Property was $22,000,000. It would only be if an event occurred which would reduce the area of land which was to be transferred to the purchaser (i.e., actual or proposed compulsory acquisition) that there would be any reduction in price. By contrast, on the Appellant’s case, the default price for sale of the whole Property would be the “reduced” price of $15,727,337.70. It would only be if an event occurred (concurrence by TfNSW to development in the transport corridor) that the price would be increased to $22,000,000; but in that event there would be no change in the area of land transferred to the purchaser. The Court should not readily find that lawyers who had paid attention, as these had, to the language of cl 15.4 could so misunderstand its legal effect.

29. [68]

    It is also significant that the proposed language of rectification for which the Appellant contends in its prayers for relief in this Court refers to “the operation of the development approval obtained in respect of the development application required under clause 3 [of the October Deed]”. The Appellant puts this language forward on the basis that the parties intended that the making of such a development application would, in effect, resolve the issue of the extent to which TfNSW concurred in the development of the transport corridor. There are two difficulties with that proposition.

30. [69]

    First, cl 3 of the October Deed relevantly required no more than that the Appellant “lodge … a Development Application to approve a proposed subdivision of the property”. The parties’ bargain in cl 3 did not require the purchaser to seek approval for development of the land subject to the transport corridor. Clause 3 effectively left it in the power of the Appellant to determine whether TfNSW’s concurrence to development within the transport corridor was relevantly sought at all. Indeed, the development application that was ultimately submitted did not seek consent for any development in respect of proposed Lot 3 (i.e., the transport corridor). That cannot be reconciled with the proposition that the parties intended by cl 3 that submitting the development application would resolve the issue of the extent to which the transport corridor “adversely affected” the use of the Property.

31. [70]

    Secondly, there was in any event no reason to think that even a development application directed specifically to development on the land subject to the transport corridor would fully resolve the question of TfNSW’s concurrence. It would be open to TfNSW to decline for the time being to give its concurrence to any proposed development within the transport corridor, without committing TfNSW to any future course of action (such as compulsory acquisition). But on the Appellant’s case, as the Chief Justice points out, that would result in the Appellant’s paying $15,727,337.70 in return for the whole Property, leaving open the possibility of a windfall to the Appellant if TfNSW later gave its concurrence to development within the transport corridor.

32. [71]

    That being so, it is highly improbable that the parties shared a common intention that “the operation of the development approval obtained in respect of the development application required under clause 3” would be the criterion determining the purchase price.

33. [72]

    The appeal should be dismissed with costs.