Western Mail Securities Pty Ltd v Forrest Plaza Development Pty Ltd [1987] FCA 45

aes 457 8

TRADE PRACTICES - tisleading and deceptive conduct - application

for interlocutory order - option to nurchase commercial development under construclion ~- option to expire on date of certification of practical completion - certification issued - option exercised "under protest" - settlement due 30 days after exercise of option - certification allegedly misleading and deceptive - claim for interlocutory orders including order extending date of settlement - reservations as to power - absence

of causal relationship between conduct alleged and detriment

sulfered.

Trade Practices Act 1974 s.52

WESTERN MAIL SECURITIES PTY LTD v FORREST PLAZA DEVELOPHENTS PTY

LTD AND BJR NOMINEES PTY LTD NO. VAG 8 of 1987

FRENCH J. 23 January 1987

Perth

IN THE FEDERAL COURT

OF AUSTRALIA

WESTERN AUSTRALIA

DISTRICT REGISTRY

GRNERAL DIVISION

ww ww

No. WAG 8 of 1937

BETUWOIE Ns VESTORN MATL SECURITIES PTY UTD Applicant

and

FORREST PLAZA DEVELOPANNTS PTY LTD First Respondent

and

BJR NOMIUGES PTY LTN

Second Respondent

MINUTE OF ORDER

JUDGE HAKING ORDER: FRENCH J.

DATE OF ORDER: 23 January 1937 WHERE MADE: Perth

THE COURT ORDERS THAT:

l. The applicant's claim for interlocutory relief be disnissed.

2. The costs of this application be reserved,

3. There by liberty to the First respondent to apply

for further orders.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

(See also Order 37 rule 2(3).)

IN THE FEDERAL COURT

OF AUSTRALIA

WESTERN AUSTRALIA

DISTRICT REGISTRY

GENERAL DIVISION

No. WAG & of 1987

BETWEEN: WESTERN NAIL SECURITIES PTY LTD Applicant

and

FORREST PLAZA DEVELOPMENTS

PTY LTD

Pirst Respondent and

BJR NONINEES PTY LTD

Second Respondent

CORAII: FRENCI J.

23 January 1987

REASONS FOR JUDGMENT

On 25 November 1986 the Bell Group Limited entered into a written agreement with the first respondent, under which it acquired an option to purchase the land and buildings under construction thereon known as the Forrest Centre at 219-221 St. George's Terrace, Perth. The purchase price specified in the option agreement was $88,000,000.00. The option agreement was made in settlement of litigation in the Supreme Court of Western

Australia, the details of which it is not necessary to explore for

present purposes.

On 22 December 1986, the Bell Group Limited assigned the

benefit of its option agreement to the applicant. Under the

2.

agreement the option granted to it could he exercised at any Lime up to and including midnight on the date certifiod by the Eicst respondent's architect as that on which the huildinys comprising

the Forrest Centre were practically complete and fit for

occupation,

The second respondent is said to be the first respondent's architect and to carry on business under the name: Robert Cann and Associates. The agreement required the first respondent to give to the applicant at least 48 hour's notice of the date he reasonably believed would be the date of practical

completion and at least 24 hour's notice of the actual date of

practical completion.

On 19 December 1986, a telex was sent to the Bell Group Limited from Michael Beaver, the accountant for what 1s known as the Forrest Plaza Joint Venture, the developers of the Forrest Centre. It is not disputed that for present purposes, I can regard this and certain like telexes as sent on behalf of the

first respondent. The telex said:-

"Wwe hereby give notice that we belicve practical completion will be on Tuesday, 22 December 1986."

This was evidently intended to be a reforence to 23 December. On 22 December a revised telex notice was sent, nominating Wednesday, 23 December as the expected practical

completion date. Then on 23 December at 4.40 pm, Beaver advised

Bell Group Limited by telex:-

3.

"I confirn the proposed date of practical completion referrod to in my telex yesterday should be Uednosday 24 December, 1986 as discussed with you today."

A second telex was sent at 4.55 on the same day fron

Beaver to Bell Group Linmited:-

"We hereby confirm that practical completion will be on Yednesday, 24 December 1986."

The building project comprised one 8-storey office towor with three storeys of car-parking, one 27 storey office building and a 2-storey colonial building between the office towers. The 8-storey office tower was commleted in March 1986 and is evidently fully leased. On 24 December 1986 according to Bevan Clyde Johns, an employee of the second respondent and projoct co-ordinator for the Forrest Centre, he signed a notice of practical completion for the whole of the building works. The applicant thereupon exercised the option. It did so by a letter to the first

respondent dated 24 December 1986 and in the following terms inter

alia:-

"In exercise of our rights pursuant to the Option Deed, we hereby give you unconditional notice of acceptance and exercise of the Option (as that term is defined in the Option Deed)."

And further:-

"Please note this notice of exercise of option is served under protest. We are of the view the Date of Practical

4.

Completion has not occurred, in that the Centre (as that term is defined ain the Option Need) is not yet practically complete and fit for occupation. In our opinion the certification by your architect, Robert Cann & Associates 1s not bona fide and reasonable as required by the terms of the Option Ducd."

The terms of the ontion agreement require payment of the full purchase price to be made on the expiration of 30 days from the date of exercise of the option. This means that settloment is due on 23 January 1987, today's date. The apnlicant in these proceedings contends that the Porrest Centre was not practically complete as at 24 Decomber, when 1t was so certified. It alleges that the action of the second respondent in certifying the practical completion constituted conduct by the second respondent in trade or commerce which was misleading or deceptive, or likely

to mislead or deceive contrary to s.52 of the Trade Practices Act.

It further alleges that the first respondent gave a notice to the applicant on 24 December 1986, 1n which 1t said that the second respondent had certified that the forrest Centre was practically complete. There is, it should be pointed out, no evidence before the court that the First respondent ever sent out

a notice of that kind. The telexes referred to earlier are by way

of prediction, not by way of infomnation.

The applicant contends that the conduct of the first respondent in giving its notice constituted: "an adoption and ratification of the second respondent's certification and was

conduct by the first respondent in contravention of 5,52",

5.

On 21 January, the applicant filed an application with statement of claim and affidavits in support of a claim for interlocutory relief. The claim for interlocutory relief cane on for hearing before me on 22 January 1987 and occupied the greater

part of the day.

At the conclusion of argument and in view of the urgency of the matter, I informed the parties that I would give my decision on the claim for interlocutory relice£& and these reasons For decision delivered orally at 9 a.m. on 23 January, and that

the reasons subject to minor corrections, would be published in

writing later.

The statement of claim alleges, as has already beon pointed out, contraventions of s.52 by the respondents in connection with the certification of the Forrest Centre, as having

reached a stage of practical completion.

There 1s evidence before me to indicate a real question

as to whether the Centre had in fact reached that stage.

An architect, Bruce Robinson, was engaged by the Rell Group Limited to evaluate the state of completion of the works., lle inspected the site on 23 and 24 December. On 23 December, according to Robinson, he met on site with Messrs. Hutchinson and

Gavin Cann, both of the second respondent firm. They agreed, he

said, with his view that neither the tall office tower nor the

6.

2-storey colonial tavern were practically complete within the

terms of the building contract.

Gavin Cann in an affidavit filed on behalf of tho respondents, denies that either he or Hutchinson had informed Robinson that the building was not practically complete, Robinson inspected the building, took photographs and prepared a list of defects or incomplete work, which list is in evidence. It 15 undesirable for me to say more on this aspect than that there is a serious question raised as to whether the building was in a slate

of practical completion and could reasonably be said to have been

in such a state.

The definition of that term, which is relevant for present purposes is that set out in the conditions of contract in the standard form of the Najor Building Werks Contract (NBI1)

which on the evidence governed the building contracts for the

centre.

Clause 1,06.09 of NBW1l defines the state of practical

completion in the following terms:~

1.06.09 Practical Completion - The state of being substantially complete and f1t for use and/or

occupation by the Proprietor, all tests required under the provisions of this Agreement having been satisfactorily completed anJU omissions or defects being limited to items:

(a) The immediate making good of which by the Builder is not practicable;

7.

(ob) the existence of which and/or the making good of which by the Builder will not significantly

inconvenience the Proprietor, taking into account the use or intended use of the items

concerned and of the areas in which they occur; and

(c) which do not cause any leyal imneciment to the Proprictor's use and/or occupation."

It is necessary to set out some of the relevant provisions of the option ayreement. Clause 1 contains a number of definitions, but the central definition is of the term: "date of

practical completion" :-

"Dale of Practical Completion" neans the date certified by the Grantor's architect, Robert Cann & Associates, to be the date the Centre (or the date the last part or portion of the Centre, as the case may be) is practically complete and Fit Cor occupation, Provided such certification 1s bona fide and reasonable."

The "settlement date" is defined as:-

"Settlement Date" means the date occurring upon the expiration of thirty (30) days from the date of exercise of the Option by (or on behalf) of the Grantee."

The key clauses in relation to the oxercise of the

option are those numbered 2.01 to 2.03, which provide:-

"2.01 The Grantor Hereby Grants to the Grantee the Option to purchase the Land, free of all Encumbrances (other than the Permitted Encumbrances), and otherwise upon and subject to the following terms and conditions,

2.0

2.03

Option Term

The Grantee shall be entitled to exercise the Option at any time up to and including midnight on the Date of Practical Completion.

Manner of Exercise of Option The Grantee is entitled to exercise the Option by giving unconditional notice of accentance in writing or by telex, telegram or Facsimile communication, served upon the Grantor at its address set out in this Deed."

The payment of the purchase price is provided for in

clause 3, which in the material parts provides:-

(a)

(d)

In the event of exercise of the Option:

the Purchase Price shall be tendered, and if accepted, paid by the Grantee to or at the direction of the Grantor) unon the Settienent Date;

In the event the Purchase Price is not tendered and 1f accepted, paid in Full by the Grantee to the Grantor on the Settlement Date then the Grantce's Option to purchase the Land as recorded in this Deed shall terminate without nrejudice to the parties rights to sue for breach of contract, and the Grantee shall forthwith remove all caveats Eron the Land protecting its rights and interests in respect to the Option but not in respect to the Leases and Licences. To enable the Grantor to withdraw theo Grantee's caveat 1n respect to the Option (in the event the Grantee fails or refuses to withdraw the same) the Grantee jlereby Anpoints the Grantor the attorney of the Grantee for the purposes of executing a withdrewal of caveat form."

The latter provision is curiously worded as, in the

circumstances 1t addresses, the option no longer subsists.

is a concluded contract to purchase the land,

There

9.

The grantor's obligations are set out in clause 6 anid

include the following:

"(a) The Grantor Covenants and Aqrees with the Grantee that on and from the dale of execution hereof 1t shall:

(i) promptly answer the Grantee's reasonable enquiries as to the progress of construction and fitting out of the Centre;

(ii) allow the Grantee (and its employees and authorised representatives) reasonable access to the Land and the Contre so as to ecnable the Grantee to personally monitor the state of progress old construction and Fitting out of the Centre, Provided the Grantee gives to the

Grantor reasonable notice of its intention to inspect, the Grant2e (and its employees and personal

representatives) are acconpanied on each such inspection by a representative of the Grantor and such inspection does not interfere with the construction = and

fitting out of the Centre;

(ii1t)forthwith deliver to the Grantoe copios of aljJ Third Party Contracts an? continuo to supply copies of all new Third Party Contracts to the Grantee up to the Date of Practical Completion; and

(iv) give the Grantee at least forty eight (48) hours notice of the _ date it reasonably believes will be the Date of Practical Completion and at least twenty four (24) hours notice of the actual Nate of Practical Completion, Provided that if for any reason the expocted date for Date of Practical Completion is not the actual Date of Practical Completion the Grantor shall not be relieved of its obligations hereunder to serve such nolrens on. the Grantce but shall continue to be bound by the provisions hereof until the Late of Practical Completion actually occurs."

10.

The 1985 Joint Form of General Conditions for the Sale of Land are incorporated in the contract in a truncated form, excluding usual default notice provisions by clause 7.01, which

provides"~

"In the event of the Grantee exercising the Option the contract Formed upon exercise of the Ontion between the Grantor and the Grantee shall be deemed to incorporate the 1985 Joint Form of General Conditions for the Sale of Land (a copy of which are annexed hereto and marked with the letter "A") so far as the same are not

unconsistent with the terms hereof and excepting conditions 2, 3, 4, 5, 6, 8, 9, 11, 12, 13, 14, 16 and 17."

The general effect of the terns seem to be that the contract will terminate in the event that payment of the purchase price is not made on the settlement date. It is evident from the materials before the Court that at the time it exercised its option on 24 December 1986 the applicant did not accept that

practical completion had been achieved and that the notice issued by the second respondent was, in the terns of the option agreement

"bona fide and reasonable".

Why did it choose to exercise the ontion at that time? For, if the view held by the applicant were correct, the certificate of practical completion was inefEective and the time limited for exercising the option would not have expired at

midnight on 24 December. As put by counsel for the applicant, it

exercised the option as a matter of prudence to protect its

position. It is for these reasons that one finds in the letter

ll.

from the applicant to the first resnondent of 24 December 19345, a

reference to exercising its option under protest.

The term is one with which I have some difficulty in this context, The option 1s ecither exercised or it 15 not exercised. There can be no half way house except perhans if it were a conditional exercise but this was expressed to he unconditional. But whatever the true significance of the words: "under protest", the applicant accepts, as T understand it, that it has exercised the option and that there is e subsisting

contract for the purchase of the Centre.

In paragraph 7 of the statement of claim, the applicant

alleges:-

"By reason of the certification and notification

referred to in paragraph 6 hereof by a notice in writing dated and given 24 December 1986 Nail exercised the Option reserving its right to protest, inter alia, the

validity of the certification of practical completion of the Forrest Centre by the Architect, Developments or

otherwise."

It should be noted that in the statement of claim the terms "itail", "Developments" and "Architect" are used to refer to the applicant and the first and seconc) respondents respectively.

Paragraph 8 pleads that the Centre was not practically complete at 24 December 1986 and gives extensive prirticulars of

work remaining to be performed. The statement of claim then

continues:-

12.

"9. By reason of the matters referred to in paragraph 8 hereof the certification of practical completion referred to in parayraph G(a) hereof was neither bona Fide nor reasonable.

10. By reason of the matters referred to in paragraphs 7 and 8 hereof the certification reierred to in paragraph 6(a) hereol vas and is void and of no effect.

ll, The certification of practical completion referred to in paragraph 6(a) hereof constituted conduct by the Architect in trade or commerce within the meaning of those expressions in section 52 of the Trade Practices Act 1974.

12. By reason of the matters referred' to in paragraphs 8 and 9 hereof the certification referred to in paragraph 6(a) hereof was anid is false = and misleading or liable to mislead or deceive and 1s thereby conduct in breach of section 52 of the

Trade Practices Act 1974.

13. The notification by Developments referred to in paragraph 6(b) hereof constituted an adoption and ratification of this certification and was conduct by Developments in trade or commerce within the meaning of those expressions in section 5? of the

Trade Practices Act 1974.

14. By reason of the matters referred to in paragraphs 8 and 9 hereof the notification referred to in paragraph 6(b) hereof was and is false and misleading and likely to mislead or deceive in breach of the Trade Practices Act 1974."

There is then a pleading of negligence and the statenent

of claim continues:-

"16. By reason of the matters referred to in paragraphs 6 and 7 hereof Mail has suffered loss and damage.

PARTICULARS

Full particulars of loss and damage will be provided prior to trial.

17. Further and in the alternative it was and is an implied term of the Option that Developments would

13.

not give notice to tail of the certification of practical completion where:

(a)

(Db)

the Forrest Centre was not practically complete; and

the certification by the Architect was not reasonable or bona fide.

PARTICULARS

The term 1s to be implied:

(a) (b)

as a matter of law;

by reason of the fact that: (i) the term ic obvious; (iz) the term 1s reasonable;

(iii)the term is not inconsistent with the express terms of the Ootion;

(iv) the term is necessary so as to give business efficacy to the Option."

The interlocutory relief sought by the applicant is

the following terms:-

"12, Pursuant to section 87(1A) of the Trade Practices Act that until trial of the within action or until further order of this Honourable Court the Dood of Option dated 25 November 19286:

(a)

be varied by substituting for the definition of "Settlement Date" therein appearing the following words, namely "within 48 hours

from the date upon which the order of this Honourable Court is discharged or otherwise lapses";

take effect as varied."

in

14.

A sub-paragraph (c) which was inserted by Jeave

yesterday claims:-

"Upon the Applicant undertaking to this Wonourable Court that it waives any claim or rights of rescission as against the First Peospondent for breach of the contract formed by the exercise of the Option the First Respondent Le restrained and an injunction be granted restraining tho First Respondent until trial or until furthee order, fron:

(a) calling on or holding any setthloment in respect of the said contract; or

(b) receiving from the Anplicant tke sum of said $88,000,000.00 pursuant to the said contract."

Alternative relief is sought under varagqraph 13 of the

application in the following terms:-

"13. Alternatively to the relief sought in pacagraph 12 herocof, an order that until trial of the within action or until further order of this Honourable Court:

(a) the Pirst Respondent be ordered and an injunction be granted requiring the Pirst Respondent to pay so much of the sum of $88,000,000.00 to be recoived by the First Respondent from the Applicant as remains after discharge of all encumbrances registered against the Land referred to in paragraph 1(d) of the Statement of Claim Filed herewith;

(i) into an account in the joint names of the Applicant and First Respondent with such financial institution as may be agreed between the Applicant and the First Respondent; and

15.

(ii) fa1ling agreement into this Honourable Court;

(b) ain the alternative the First Respondent be restrained and an injunction be granted restraining the First Pespondent from paying distributing or otherwise disposing of or granting any interest in or otherwise transferring any tille interest or contro] to so much of the sum of $88,000,000.00 to be receivai by the First Respondent from the Applicant as renains after discharged of all

encumbrances registered ayainst the Land referred to in naragranh 1(d) of the Statement of Claim filed herewith."

A real question arises as to the pover of the court to

make an order of the kind sought under subparagraph 12(a).

The ,argument is that an interim variation of the term of the contract is possible under s.?3 of the federal Court Act, having regard to the nature of Lire final relief Lhat the court may award under s.87. I must oxpress serious reservations about the propriety of effecting, as it were, a holding position by varying

the terms of the contract to extend time limits prescribed by it.

In any event, the applicant, by its counsel], indicated

that the restraints sought under subparagraph 12(c) would meet its objectives, Whether it would or rot is immaterial in the end for,

in my opinion, this is not a case in which interlocutory relief

should be granted,

One can assume for the sake of aryument that in some

sense the issue of the certificate by the second respondent can be

16.

characterised as conduct in contravention of s.52 of the Trade

Practices Act, Indeed, there may be a serious question in that

regard,

One can assume that the first respondent has somehow participated in that conduct or, by its adoption and ratification of the certificate, of which there is no direct evidence has in its own right contravened s.52. These assumptions, of course, gloss over the difficulties that arise where $.52 conduct 1s said to be constituted by what 1s an evaluative judyment on facts which

are plain for all to see.

But even making those assumptions, there 1S on the materials presently before mo no evidence of the lind of causal relationship between the conduct complained of and the exercise of the option necessary to establish a cause of action and an entitlement to relief under either ss, 82 or 87 of the Trade

Practices Act.

One can accept that it is not necessary in an action based on a contravention of s.52 to show that any person was actually misled. One can accept that 1t is not necessary to show that the person who claims to have suffered the damage was misled, A clear example of the latter situation 1s in those cases where the conduct in contravention of s.52 is analogous to passing off. There is in such cases a direct causal connection hetween the

conduct complained of and the loss suffered,

17.

in this case I am not presently persuaded that it can be shown that there is any serious question to bm tried, of a causal colationship between the conduct caiplained of and the sxosition of disadvantage that the applicant now complains of, in the sense

necessary to establish a cause of action unler either ¢5.82 or 87.

The position of disalvantaye arises in essence from tho fact that the applicant has, as a matler of prudence, felt obliged to exercise the option carlier than it won] have had the notice of practical completion not issucd, J othink 12t 1s undesirable that I should say more about that matter at this interlocutory stage. It may be that at trial the materials and the benefit of argument in a less hurried context will persuade me, or some other judge, to take a different viow. 'The views T express now are expressed solely for the purposes of the claim for interlocutory relicf, And I am satisfied, on the basis that I have set out,

that that claim should be dismissed.

Iocertify that this and the preceding sixteen (16) pages aie a true copy of the Reasons for Judgment herein of

His Honour tir Justice French,

pated: 6" Cane (aT

18.

Counsel For the Applicant Mr "1. Bennett

instructed by Messrs. Keall Brinsden

Counsel for the Pirst Respondent Ir 2. Ainslie

instructed by Nallesons Stephen Jaques