SAMM Property Holdings Pty Ltd v Shaye Properties Pty Ltd

1. [1]

   I gave judgment in this matter on 4 April 2016: SAMM Property Holdings Pty Ltd v Shaye Properties Pty Ltd [2016] NSWSC 362.

2. [2]

   I shall use the same abbreviations in these reasons as I did in that judgment.

3. [3]

   I found it to be the common intention of the parties that the sale price of the Wetherill Park property was $3,325,000 plus GST and that the contract should be rectified accordingly.

4. [4]

   I have now received submissions as to interest and costs.

Interest

1. [5]

   The Vendor claims interest by reason of cl 41 of the contract.

2. [6]

   Clause 41 is in the following terms:

3. [7]

   The clause is directed to the circumstance of the purchaser not completing the contract:

   1. (1)

      “in accordance with the provisions hereof”; and

   2. (2)

      for reasons “other then [sic: than] the default on the part of the Vendor”.

4. [8]

   At the time that completion was called for, the contract provided that the purchase price was $3.325 million inclusive of GST. That is what the “provisions [t]hereof” then provided.

5. [9]

   However, rectification has retrospective effect. Thus Powell J (as his Honour then was) said in Issa v Berisha [1981] 1 NSWLR 261 at 265:

6. [10]

   I have found that the common intention of the parties was that the purchase price was $3.325 million plus GST (4 April 2016 judgment at [86]). The effect of the order for rectification will be that the document executed by the parties on 19 August 2015 reflects that common intention. The “provisions” of the contract will be taken to have always been to that effect. They will be “the provisions hereof”.

7. [11]

   The Purchaser failed to complete the contract in accordance with those terms. That was not a result of any “default” of the Vendor. It was because the Purchaser insisted on completing only on the terms of a document that I have found does not reflect the parties’ common intention.

8. [12]

   On 19 October 2015, and again on 9 December 2015, the Purchaser offered to settle on the basis of paying $3.325 million to the Vendor and paying $332,500 (the amount of GST on $3.325 million) into a controlled monies account. I do not see what difference those offers make. Neither would amount to completion “in accordance with the provisions” of the contract as rectified.

Clause 41 a penalty?

1. [13]

   Alternatively, Mr George, on behalf of the Purchaser, submitted that cl 41 is void as a penalty.

2. [14]

   In Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30; 247 CLR 205, French CJ, Gummow, Crennan, Keifel and Bell JJ said:

3. [15]

   To be void as a penalty, the provision must impose on the “first party” (here, the Purchaser) a detriment to the benefit of the “second party” (here, the Vendor) that is “out of all proportion” to the loss the second party might suffer on failure of the “primary stipulation” (timely completion on the contract); or if the detriment is “extravagant and unconscionable in amount” or “inordinate or extravagant” or “oppressive” (J D Heydon, M J Leeming and P G Turner, Meagher, Gummow & Lehane’s Equity Doctrines and Remedies, (5th ed 2015, Lexis Nexis) at [18-075] and the authorities cited therein).

4. [16]

   The contract was for the sale of commercial premises. The Vendor was obliged to give the Purchaser vacant possession on completion.

5. [17]

   It must have been in the contemplation of the parties that, but for the sale, the Vendor would have sought to have the premises occupied by a tenant, and that, in contemplation of completion, it would have to procure that any such tenant vacate the premises. It must also have been in the contemplation of the parties that if, as has happened, settlement was delayed, the Vendor may well suffer damage by reason of not being able to have the property tenanted pending resolution of any dispute between the parties.

6. [18]

   Further, the title search annexed to the contract showed there to be a mortgage to Westpac Banking Corporation on the title. The parties must thus have contemplated that, were settlement to be delayed, the Vendor might have to continue to service that mortgage.

7. [19]

   In those circumstances, I am not satisfied that the requirement that the Purchaser pay the Vendor interest at 10 per cent per annum on the outstanding purchase price is “out of all proportion” to the damage that the Vendor was likely to suffer by reason of the delayed settlement, or otherwise such as to constitute it a penalty.

8. [20]

   In coming to that conclusion, I have not had regard to the letter annexed to Mr Cleary’s submissions of 15 April 2016.

9. [21]

   It follows that the Purchaser is liable to pay interest on the purchase price in accordance with cl 41.

10. [22]

    Costs

11. [23]

    As to costs, the Vendor relies upon a Calderbank offer it sent on 4 December 2015 in which it offered to:

12. [24]

    A Calderbank offer may enliven the Court’s jurisdiction to award indemnity costs from its date if it involves an element of compromise and if it was unreasonable for the offeree not to accept it.

13. [25]

    In my opinion, the offer made by the Vendor on 4 December 2015 was, in substance, an invitation to the Purchaser to capitulate. It did not involve any substantial compromise. It was not unreasonable, in my opinion, for the Purchaser not to accept it.

14. [26]

    Accordingly I see no basis to order indemnity costs.

15. [27]

    I propose to order that the Purchaser pay the Vendor’s costs of the proceedings on the ordinary basis.

16. [28]

    The parties should now prepare short minutes to give effect to my reasons.