IN THE SUPREME COURT OF VICTORIA	Not Restricted	
AT MELBOURNE
Common Law Division
Property List
S ECI 2022 03785

MERRINDALE PROPERTY PTY LTD (ACN 167 552 356)	Plaintiff	
		
v		
		
AIL C SUB TC PTY LTD (ACN 658 635 173)	Defendant	

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JUDGE:	Forbes J	
WHERE HELD:	Melbourne	
DATES OF HEARING:	18-19 October 2023	
DATE OF JUDGMENT:	20 February 2024	
CASE MAY BE CITED AS:	Merrindale Property Pty Ltd v AIL C Sub TC Pty Ltd	
MEDIUM NEUTRAL CITATION:	[2024] VSC 49	

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PROPERTY – Contract of sale for land – Whether special condition in contract was satisfied by deadline – Where special condition relates to procurement of a bank guarantee as security under lease – Where vendor seeks specific performance – Where purchaser seeks to rescind contract for non-satisfaction of the special condition. 

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APPEARANCES:
	Counsel	Solicitors	
For the Plaintiff	P Santamaria KC
R Peters	HWL Ebsworth	
			
For the Defendant	C Archibald KC
P Thiagarajan	Norton Rose Fulbright	

HER HONOUR:
1	This dispute concerns the sale of land at 130–140 Merrindale Drive, Kilsyth, Victoria (the property). The plaintiff, Merrindale Property Pty Ltd (ACN 167 552 356) is the registered proprietor and vendor of the property (Merrindale, or the vendor). Merrindale is part of the Studco Group of companies, a global corporate organisation. The property was subject to a lease to a related entity within that corporate group, Studco Australia Pty Ltd (Studco). On 27 May 2022, Merrindale entered into a contract of sale for the property (the contract) with the defendant AIL C SUB TC Pty Ltd (ACN 658 635 173) (AIL, or the purchaser). Merrindale seeks specific performance of the contract. AIL defends the action on the basis that it validly rescinded the contract by letter dated 26 August 2022 and by counterclaim seeks recovery of the deposit paid. 
Background
2	When the contract was entered into the lease agreement in force between Merrindale and Studco was a ten-year lease that had commenced on 1 January 2022 (the lease agreement). The lease agreement contained a term that the tenant pay a security deposit to the landlord for an amount equivalent of 12 months’ rent plus the tenant’s proportion of building outgoings. Studco’s obligation was to pay to the landlord a security deposit which could be paid by provision of a bank guarantee in favour of the landlord.
3	Settlement of the contract was dependent upon the satisfaction of various special conditions. One was Special Condition 23 (SC 23) which provided for two Lease Conditions Precedent. Only the Lease Condition Precedent relating to the Studco lease agreement was in issue, as defined by subparagraph (a)(i)(B). This required the vendor to procure the original bank guarantee required under the lease agreement to the reasonable satisfaction of the purchaser by 5:00pm on 25 August 2022 (referred to in the contract as the Sunset Date). 
4	Special Condition 16 (SC 16) required the purchaser to obtain approval of the sale from the Foreign Investment Review Board (FIRB). Settlement was to occur five business days after the later of these two special conditions were completed. A letter confirming FIRB approval was exchanged between the parties’ solicitors on 23 August 2022, so settlement was due on 1 September 2023, five days after the Sunset Date.  
5	If SC 23 was not satisfied (or waived by the purchaser) by the Sunset Date, SC 23.1(f) entitled the purchaser to rescind the contract at any time before later satisfaction of the Lease Conditions Precedent. 
6	The purchaser contends that SC 23 was not satisfied by the Sunset Date and purported to rescind the contract by letter dated 26 August 2022. 
7	The vendor disputed non-compliance and scheduled settlement of the contract for 1 September 2022. The purchaser did not attend settlement.
8	The issues for consideration in Merrindale’s claim are:
(a)	what was Merrindale required to do to satisfy SC 23 in respect of the Studco lease by the Sunset Date; and
(b)	did Merrindale do those things by the deadline?
9	The purchaser’s defence contends that if Merrindale’s claim is made out, its relief is limited under the contract to retention of the deposit paid by operation of SC 23.1(f) and resists specific performance otherwise on the basis that damages as provided for by the contract or otherwise would be an adequate remedy.
Agreed facts
10	The factual matters are largely not in dispute. The construction of the contractual terms is central to the dispute and whether, on the proper construction of the contract, Merrindale complied with SC 23 within the contractual timeframe.  
11	The following facts are agreed between the parties: 
(a)	Merrindale is the registered proprietor of the land known as 130–140 Merrindale Drive, Kilsyth. 
(b)	By a written contract of sale made on 27 May 2022 Merrindale sold the land to AIL for $40 million. 
(c)	Prior to entry into the contract the land was leased by Merrindale to its related company Studco. Both Merrindale and Studco were part of the Studco Group of companies. Because they were related entities, Studco had not been required by Merrindale to provide security for the performance of Studco’s obligations under the lease. 
(d)	Under General Condition 1.1 and Special Condition 7.3 of the contract, the land was sold subject to encumbrances. 
(e)	Incidental to the sale process, a new lease of the land was entered into by Merrindale and Studco for a term of 10 years commencing 1 January 2022. 
(f)	The Studco lease is an encumbrance identified in Schedule 1 of the contract. Studco is a tenant for the purpose of the contract. 
(g)	In Special Condition 1.1 of the contract, ‘securities’ is defined to include ‘lease guarantees’. Those words are in turn defined to mean ‘any bank guarantee given by a tenant’. 
(h)	The day of sale was 27 May 2022. 
(i)	The Lease Conditions Sunset Date was 25 August 2022. 
12	By its solicitors letter dated 26 August 2022, the purchaser purported to elect to terminate the contract pursuant to SC 23.1(f) on the basis that Merrindale had not:
(a)	notified AIL that the Lease Conditions Precedent had been satisfied; and
(b)	procured an original bank guarantee or provided a copy by 5:00pm on 25 August 2022. 
13	Merrindale called for settlement on 1 September 2022 and AIL did not attend. When AIL did not attend settlement, Merrindale commenced this proceeding seeking specific performance of the contract.
14	Reference in the agreed facts is made to Special Condition 22.11, dealing with securities relating to leases; SC 23.1 dealing with Lease Conditions Precedent; and Special Condition 26 (SC 26) dealing with default, which are each set out below. 
15	Reference is also made to the security requirements in the Studco lease in particular Clause 13 and Item 20 of the Schedule which are also set out below. 
The relevant provisions of the contract and lease
The contract of sale
16	The contract consists of a set of general conditions and special conditions, which modify the general conditions. Schedule 1, the Tenancy Schedule of the contract provides details of four tenancies on the property. The lease with Studco was Item 3 of that Schedule.  
17	Special Condition 22.11 of the contract is as follows:
22.11	Lease Securities
(a) 	At Settlement, the Vendor must give the Purchaser all Securities other than Security Deposits.
(b) 	Any Security secured by a Security Deposit will be adjusted in favour of the Purchaser at Settlement.
(c) 	If the Vendor does not have the original of any Security, the Vendor is not required to deliver that Security to the Purchaser.
(d) 	After the Settlement Date, the Vendor assigns all its rights under the Securities to the Purchaser. If any assignment under this Special Condition is not permitted or is ineffective, the Vendor will hold the Vendor's rights under the Security for the benefit of the Purchaser for a period of 12 months from the actual date of Settlement. For the period of 12 months from the date of actual Settlement, the Vendor must do whatever the Purchaser reasonably requires at the Purchaser's expense to enable the Purchaser to enjoy the benefit of those rights.
(e) 	For any of the Securities that are Lease Guarantees, the Vendor must at Settlement deliver to the Purchaser letters to each security provider asking the security provider to redraw the Lease Guarantees in the Purchaser's favour. The Vendor does not warrant that the security providers are obliged to or will comply with a request to give replacement Lease Guarantees in the Purchaser's favour.
18	Special Condition 23.1 of the contract is as follows:
23.1	Lease Conditions Precedent
(a) 	In this Special Condition 23.1:
(i) 	Lease Conditions Precedent means:
(A) 	procuring execution of the Deed of Renewal and Variation of Lease between Merrindale Properties Pty Ltd and Stainless Tanks & Pressure Vessels Pty Ltd for Part 130–140 Merrindale Drive, Kilsyth Victoria 3137 in the form contained in the Vendor’s Statement (Deed of Renewal); and 
(B)	procuring the original bank guarantee as required under the Studco Lease to the reasonable satisfaction of the Purchaser;
(ii) 	Lease Conditions Sunset Date means the date that is 90 days after the Day of Sale; and 
(iii) 	Studco Lease means the lease between Merrindale Properties Pty Ltd and Studco Australia Pty Ltd for Part 130–140 Merrindale Drive, Kilsyth Victoria 3137 in the form contained in the Vendor’s Statement. 
(b)	Settlement is conditional on the Lease Conditions Precedent being: 
(i) 	satisfied; or 
(ii) 	waived by the purchaser, 
on or prior to 5pm, Melbourne time, on or before the Lease Conditions Sunset Date (or such longer time as the parties may agree in writing).
(c) 	The Vendor must use reasonable commercial endeavours to satisfy the Lease Conditions Precedent prior to the Lease Conditions Sunset Date.
(d) 	The Vendor must promptly notify the Purchaser if the Lease Conditions Precedent is satisfied and provide the purchaser with a copy of: 
(A)	the fully executed deed of Renewal; 
(B)	the original bank guarantee required under the Studco Lease. 
…
(f) 	If the Lease Conditions Precedent is not satisfied on or waived before the Lease Conditions Sunset Date, then the Purchaser may elect to rescind the Contract at any time prior to the Lease Conditions Precedent is satisfied by written notice to the Vendor. Upon receipt of such notice, this Contract shall be at an end and the Deposit, as the case may be, shall be refunded to the Purchaser and neither party shall have any further rights against the other except with respect to any antecedent breach of this Contract. 
19	Special Condition 26 is headed ‘Default’ and relevantly provides:
26.1 	If the Purchaser is at any time in breach of an essential term of this Contract, or if it repudiates this Contract, the Vendor may:
(a) 	affirm this contract; or
(b)	subject to Special Condition 26.3, terminate this Contract with immediate effect by giving notice in writing to the Purchaser and do any one or more of the following: 
(i) 	forfeit and retain the Deposit and any interest accrued on the Deposit; 
(ii) 	without further notice to the Purchaser, re-sell the Property in such a manner as the Vendor thinks fit; and 
(iii) 	recover possession of the Property if possession has passed to or been granted to the Purchaser. 
…
26.3	The party may not exercise its rights and remedies under Special Condition 26.1 or Special Condition 26.2 unless it has given the other party a written notice which:
(a) 	specifies the breach complained of; and 
(b) 	requires that the breach (if capable of remedy) be remedied within the period stated in the notice, not being less than 14 days, or if a longer minimum period is required under any law that applies to this contract then that longer minimum period. 
…
26.6	Notwithstanding anything in this contract or at law to the contrary, the right of the Vendor to receive the Deposit and all interest on the Deposit pursuant to this contract shall be and is the Vendor’s sole and exclusive remedy, whether at law or in equity, in contract, in tort or otherwise, for any losses suffered in connections with any fault of the Purchaser or any breach by the Purchaser. 
The Studco lease
20	Clause 13 of the Studco lease provides that:
13.1 	The tenant must pay a security deposit to the landlord of the amount stated in item 20 and must maintain the deposit at that amount.
…
13.5	The tenant may, and if the landlord requires must, provide the security deposit by means of a guarantee by an ADI within the meaning of the Banking Act 1959 (Cth). 
13.6	If the freehold of the premises is transferred;
13.6.1	the tenant must provide a replacement guarantee in exchange for the existing guarantee if requested by the landlord in writing to do so, but the landlord must pay the reasonable fees charged by the ADI for the issue of the replacement guarantee, and 
13.6.2	the landlord must transfer any security deposit held under this lease to the transferee. 
21	Item 20 in the Schedule as referred to in Clause 13 defines terms including:
Security deposit:
An unconditional and irrevocably written undertaking:
(a) 	issued by a bank as defined in the Banking Act 1959 (Cth) or a financial organisation approved by the landlord; 
(b) 	for the amount equivalent to 12 months’ rent plus the tenant’s proportion of building outgoings plus GST;
(c) 	to pay the landlord on demand;
(d) 	with an expiry date of at least 6 months after the expiry date of this lease or after the day of expiry of any further term; and 
(e) 	which specifies the address of the premises,
in favour of and on terms acceptable to the landlord, as security for the performance by the tenant of its obligations under this lease.  
Evidence
22	The plaintiff relied on three witnesses who had sworn or affirmed affidavits. All three attended, adopted their affidavits and were cross examined. Andrew John Meese (Meese) gave evidence. He is the Chief Operating Officer of the Australian and New Zealand members of the Studco group of companies. The other two witnesses were persons employed by the Commonwealth Bank (the bank) who handled financial arrangements of both Merrindale and Studco and in particular issued the Studco bank guarantee required under SC 23. Toan Dinh Dang (Dang) is the relationship executive responsible for the Australian companies that form part of the Studco Group. Dang was assisted by other bank staff in the provision of customer service and arranging the bank guarantee including an account manager, Chipasong (Jimmy) Toumngeun (Toumngeun).
Andrew Meese
23	Meese said that as part of his role with the Studco Group, he acts for Merrindale on all day-to-day operational and accounting matters. In his affidavit Meese described the company structure and explained that Merrindale and Studco share the same ultimate beneficial ownership. The Studco Group manufacture products for the building industry. Studco is the Australian operating company in that global group and Merrindale is the land-owning company. On the property are constructed manufacturing, warehouse and office spaces leased by Merrindale to Studco who conduct its activities from there. Meese reported to Ben Stevens, one of the directors of Merrindale who is actively engaged in the business. Both entities banked with the bank’s Box Hill Commercial Centre. The accounts were managed by Dang who was assisted by Toumngeun.
24	Meese confirmed that he was involved in the negotiation for the sale of the property which commenced in or about February 2022. He said his involvement was mainly giving instruction to Merrindale’s solicitors after having obtained those instructions from Ben Stevens and dealing with the bank arranging financial aspects of the sale. Those financial aspects included a broad financial restructure consequent on a sale, as well as specific aspects arising from obligations under the contract. Meese said that he understood the terms of SC 23, namely that if the bank guarantee of the tenant was not procured by the Sunset Date then the purchaser may elect to rescind the contract upon giving written notice. 
25	Meese said that for the purposes of the sale of the property, Merrindale and Studco entered into a new lease at market rent on 15 May 2022 for a term of 10 years commencing on 1 January 2022. The lease contained two options, each for a further term of 10 years. Meese accepted that this regularised the commercial lease arrangements between tenant and landlord. The new lease provided for security for lease obligations as Meese understood the best purchase price was likely to be achieved with a secure long term lease in place for market rent. 
26	Meese said he was involved in two aspects with respect to obtaining the bank guarantee required under SC 23. First, Meese was the person to deal with the bank to obtain the guarantee. Generally in bank dealings he represented the interests of both Merrindale and Studco. He said he did so when arranging for the guarantee. Meese said that the negotiation with the bank over the bank guarantee was conducted in the context of an overall re-negotiation of the facilities needed by Studco when the property was sold. Re-negotiations of the Studco facilities were concluded, including the bank guarantee facility as required by the contract, in principle on 23 June 2022. The bank’s email of 23 June 2022 confirming the new arrangement advised that a formal application for a bank guarantee was required and included a template of their bank guarantee form needing specific information including the amount yet to be agreed.
27	The template provided by the bank on 23 June 2022 was provided to the purchaser’s representative who was negotiating the calculation of the quantum of the bank guarantee for comment. The purchaser’s solicitor responded by email on 6 July 2022. The response included a copy of the bank’s template listing the purchaser as favouree, Studco as the customer, and included details regarding the purpose of the security – for compliance with Studco’s lease obligations at the property, and listed an amount for the security. This document was returned to the vendor along with comments as to the calculations of the bank guarantee. It appears that the blank template, and not the template as partially completed by the purchaser, was later provided to the bank on 11 August 2022 after the agreed quantum was advised.  
28	Second, Meese was involved in calculating the amount of the bank guarantee and agreeing its quantum with the purchaser – in particular, an amount representing outgoings. The exhibited email exchange indicated that agreement of an amount of $1.7 million was reached by the parties on or around 4 and 5 August 2022. Meese communicated this to the bank by email on 11 August 2022. 
29	Although Meese’s evidence is that he provided ‘the completed template’ to the bank on 11 August 2022, it is not clear on the evidence before me that he did so. The template exhibited to his affidavit that was sent to the bank on this date is the blank template. Meese was taken to the bank’s email of 12 August 2022 in which the bank asked for details to complete the template. At the same time the bank queried whether the bank guarantee needed to be prepared prior to settlement. Meese advised the bank on 12 August 2022 that the bank guarantee needed to be in place prior to settlement because it was a condition precedent under the contract and there was a time limit in place. He confirmed that prior to settlement the favouree listed on the bank guarantee must remain Merrindale and said he assumed it was a simple matter to change the favouree to the purchaser upon settlement. There is no evidence that at that time he advised the bank of the contractual date for compliance.
30	On 16 August 2022 there were further email exchanges between Dang and Meese. Dang advised that changing the favouree on the bank guarantee would involve the return of the original bank guarantee and the issuing of a new one with the new favouree details. Dang said in these emails he had assumed that the purchaser would be happy to receive the bank guarantee at settlement and recommended checking the wording with the purchaser. In response, Meese inquired whether the bank guarantee could be issued by the bank (presumably in the name of the purchaser, though this was not evidence led before me) but not released until settlement. Dang confirmed his earlier advice that a bank guarantee could not be prepared or provided until it was formally approved and documented, and inquired about the time frame. 
31	On 18 August 2022 Meese emailed Dang to say that the bank guarantee needed to be prepared separately to the overall restructure. He instructed that the bank guarantee refer to Merrindale as the favouree and those details would be updated to reflect the new owners upon settlement. As to the timing he wrote:
Under the contract we have a hard deadline of 27 August to have the BG in place. Based on the timeline above [regarding FIRB approval] we can’t wait for settlement therefore need to proceed putting it in place in favour of Merrindale so we can share that this step has been completed. 
In reply later that day, Dang confirmed the aim to have the guarantee and the restructure approved by 27 August 2022 so that the bank ‘can provide written confirmation that the facility is in place’, asking ‘will this suffice?’  
32	Meese replied the same day advising that the proposed timetable was cutting it too fine to achieve both the restructure and the bank guarantee by that date saying: 
I want to put in place the BG now so that it’s in hand before 27 Aug. Can we make this happen?
33	On 22 August 2022, Toumngeun provided the formal request for the new bank guarantee to Meese. Meese arranged for it to be signed on behalf of Studco and returned it the same day. 
34	Meese deposed to a conversation with Dang on the afternoon of 25 August 2022 where he was informed by Dang that the bank had issued the bank guarantee and Dang had now received an electronic copy of it. Meese was advised that the original bank guarantee could not be emailed to him for security reasons but that Dang would email a duplicate bank guarantee as a password protected attachment. At 4.48pm on 25 August 2022, Dang emailed the duplicate of the bank guarantee. It was agreed that Mr Meese would collect the original document in person the following day. 
35	Meese received a letter sent on behalf of the purchaser the following morning. That letter asserted non-compliance with SC 23 by the vendor and gave notice in writing that the vendor elected to rescind the contract under SC 23.1(f). 
36	Meese said he then forwarded a copy of Dang’s email of 25 August 2022 and the attached duplicate bank guarantee to Merrindale’s lawyers, who forwarded the email and attachment to the purchaser’s lawyers, insisting that SC 23 had been complied with. 
37	Meese deposed to a meeting with Dang in the afternoon of 26 August 2022 where he was handed an original bank guarantee dated 25 August 2022. He said he took a scan of the original which he shared with his solicitors despite advice not to transmit original bank guarantees for security reasons. The electronic copy of the original bank guarantee was attached to an email from the vendor to the purchaser’s lawyers on 31 August 2022. 
38	In cross-examination, Meese was asked about the related nature of Merrindale as landowner and Studco as tenant. He agreed that the relationship between the two companies was the reason that no security deposit had been paid in the past by Studco to Merrindale. He said he could not comment on the ultimate ownership of each company without seeing documentation but eventually agreed that the ultimate beneficial owners of Merrindale and Studco were not identical.
39	He agreed that he was responsible for the arrangements by which Studco occupied the Merrindale premises. He said there was a written lease prior to 15 May 2022. He said in that he sought instructions from Ben Stevens both in relation to the position of the landlord and that of the tenant. He agreed that the lease that was entered into on 15 May 2022 was entered into for the purpose of selling the property and that the existence of a long-term lease with a security deposit in place maximised the value of the land.  
40	Meese said around January 2022, when the question of restructuring was first raised with the bank, Merrindale wanted to avoid tying up cash in a security deposit provided by Studco. He said that he knew of the contractual obligation to provide the bank guarantee by the Sunset Date, which fell prior to settlement.  
41	Meese accepted that a confirmation letter from the bank that Studco had facilities in place for a bank guarantee was not sufficient to meet SC 23. He said he understood ‘a bank guarantee needed to be in place’. He confirmed that the amount of the bank guarantee was agreed as between the vendor and the purchaser on 4 August 2022.
42	In cross-examination, Meese could not recall giving instructions to Merrindale’s solicitors that he was waiting until the FIRB approval came through to request the bank guarantee, but did not deny this when taken to an email on 11 August 2022 addressed to the purchaser’s solicitor saying the bank guarantee ‘has not been drawn yet because the contract is still conditional upon your client obtaining FIRB approval’.
43	Meese confirmed the accuracy of contents of the emails between himself and Dang on 11 August 2022 demonstrating that he requested preparation of the bank guarantee on that date. Dang responded on 12 August 2022 that the bank was going to prepare the bank guarantee at the same time as the restructure. Meese notified Dang on 16 August 2022 that the bank guarantee was a pre-condition to contract settlement, and needed to be prepared separately and before other restructuring matters. Meese agreed that final instructions for preparation of the bank guarantee were provided to the bank on 18 August 2022.
44	Meese said that his understanding was that the bank guarantee needed to be in place by the Sunset Date but he only needed to notify the purchaser of the bank guarantee being in place within a reasonable timeframe after the Sunset Date. Meese accepted that he was mistaken in thinking that the Sunset Date was 27 August 2022 when he communicated with Dang on 23 August 2022, and accepted that the Sunset Date was 5:00pm Thursday, 25 August 2022.
Toan Dinh Dang
45	Dang swore an affidavit dated 4 July 2023. He has a commerce degree from Monash University and has worked in the banking sector for 23 years. He has been in the role of ‘relationship manager’ for major corporate clients since 2019. Dang described two steps for the provision to a customer of a bank guarantee payable to a third party beneficiary. First, the customer has to have an appropriate security in place for recovery by the bank if the bank guarantee is called upon. When the security and therefore the facility is in place a formal request is made for a specific guarantee and details are provided of the beneficiary, the reason, the amount and the expiry of the bank guarantee. Once these details have been provided, a central bank team then creates the documentation for the bank guarantee. 
46	Dang described that each bank guarantee is numbered and prepared in original and duplicate. Both are signed and stamped by the bank. Dang says his support team, in this case Toumngeun, are authorised to print, stamp and sign the two versions. Once they are signed and stamped arrangements are made to provide the original to the customer.
47	In relation to the Studco bank guarantee Dang said that a template bank guarantee was provided to Meese by email on 23 June 2022. Dang said that in or around early August 2022 he knew that Merrindale had sold the property and that Studco was required to provide a bank guarantee in favour of Merrindale. On 11 August 2022 Dang was informed that the amount of the bank guarantee was to be $1.7 million. The formal request for a bank guarantee made by Studco was received by the bank on 22 August 2022.
48	Dang said he was informed by Toumngeun on 25 August 2022 that Toumngeun had received, signed and stamped the original and duplicate bank guarantee. Dang then spoke to Meese on the telephone and Meese requested the documents be emailed to him but that for security reasons Dang could not do so. Dang said he agreed to meet Meese the following day at a coffee shop nearby for him to collect the original in person. Dang asked Toumngeun to hold the original until it was to be collected by Meese.  
49	Dang said he did not see the signed and stamped original or duplicate documents on 25 August 2022, he simply forwarded an electronic copy of the duplicate bank guarantee that was password protected to Meese that afternoon. 
50	The next day Dang said he realised that Toumngeun was not at work and that he could not access the locker in which he assumed the documents had been secured overnight. Therefore, Dang said he asked another employee in the support team to create a replacement original bank guarantee dated 25 August 2022 and having the same identifying number (the replacement original). This was done and it was the replacement original handed to Meese on 26 August 2022. Meese was not informed that he had been handed the replacement original. 
51	Dang emailed Meese on 5 September 2022 and 7 October 2022 confirming that ‘both the original Bank Guarantee and the duplicate were produced at the same time, immediately after the facility was put in place, which was prior to 5:00pm on Thursday 25 August 2022’. There was no mention of a replacement original. 
52	In cross examination Dang confirmed he understood the bank guarantee was needed before settlement. By reference to Meese’s email of 18 August 2022, Dang agreed he understood the deadline was 27 August 2022 and worked toward completing the necessary steps by that time. He agreed that Meese instructed the bank guarantee to be prepared separately to the overall restructure because the 27 August 2022 deadline was too tight to complete both. 
53	Dang said he could not say whether Meese wanted the physical copy of the guarantee in his hand or to have the facility and documentation finished but that either way he understood that the transaction had to be completed by 27 August 2022. He agreed that an original bank guarantee is like cash. He said that the bank guarantee in the hand of the customer or favouree may be cancelled by return of the original document.  
54	Dang was asked about the arrangements to collect the original document. He agreed that the arrangement to collect it in person on 26 August 2022 made sense to him given the 27 August 2022 deadline. He agreed that the original had not been collected by Meese by 5:00pm on 25 August 2022.
55	In cross examination Dang confirmed that on 26 August 2022 he realised that Toumngeun was not at work at Box Hill and assumed the original document was in his secure locker. Accordingly he arranged for another member of the support team, Daniel, to create the replacement original. Because the first original was still in the bank’s possession, Dang said he saw no difficulty in creating a replacement document. He said security was maintained by destroying the first original which had remained in the bank’s possession. There was no suggestion that a replacement duplicate was issued. 
Chit Pasong (Jimmy) Toumngeun
56	Toumngeun was an account manager at the relevant time. He is still employed by the bank, now as a relationship manager. His role as account manager was to provide support for relationship managers including Dang in dealings with customers. It was his role to open accounts, prepare loan documentation and other securities and included arranging bank guarantees. He affirmed an affidavit on 7 July 2023 describing the steps he took to obtain the bank guarantee for Studco and the bank’s processes generally regarding the handling of bank guarantees.  
57	He described the first step as being a request to issue a bank guarantee, which is completed and signed by a customer. He said he completed the request form using the information provided by Meese and other information held in the bank’s computer system from the Studco customer profile. He emailed the completed form to Meese on 22 August 2022 to be signed. The signed request form was returned later the same day. The request was scanned and uploaded into the bank’s internal system for secure transmission to the centralised bank guarantee team who create the documentation. He described the creation of an original and a duplicate document by the bank guarantee team together with a set of terms and conditions about the guarantee. His evidence was that each bank guarantee has its own unique number and that number appears on the original and duplicate guarantee. The original is a coloured document with a Commonwealth Bank of Australia watermark, and the duplicate is a black and white version marked ‘Duplicate’. The bank staff send the electronic original and duplicate bank guarantees to the person having requested them – in this case Toumngeun – without being printed, signed or stamped with the bank’s official stamp.  
58	Toumngeun is authorised to sign and stamp the documents. His evidence was that he printed, signed and stamped both the original and duplicate on 25 August 2022.  He said that once the two documents are printed, signed and stamped, the bank’s process is to scan the duplicate and add it to the customer profile while the duplicate document itself, once signed, is returned to the bank guarantee team and the work process completed. He said the signed and stamped original is not scanned or emailed for security reasons. Toumngeun forwarded the electronic copy of the duplicate to Dang.  
59	In cross-examination Toumngeun said when he had signed and stamped the documents:
At this point Toan advised me that they were still in discussions about how Andrew was going to collect it, so since it hasn’t been physically issued, like placed in the hand of the client yet, I didn’t image it.
Q	And by image it do you mean return it to the bank guarantee team? ---
Yep, closing procedures. 
60	Toumngeun said he was told that the original bank guarantee would be collected by Meese the following day. He said he placed the original in his secure locker overnight. Toumngeun said he was not rostered to come into the office on 26 August 2022. When he returned to the centre the following week, Toumngeun said he was informed that a replacement original had to be prepared on 26 August 2022 because the original in his secure locker could not be accessed. The replacement original bore the same unique identifier as the original bank guarantee created on 25 August 2022. Toumngeun destroyed the original bank guarantee dated 25 August 2022, disposing of it securely.  
61	Toumngeun confirmed that he prepared the bank guarantee in accordance with the request by Studco and that on completing the documentation it was held by the bank until it was collected by Meese. Toumngeun agreed that the position changed once an original certificate was collected by the customer, because once the original certificate is provided by the customer to the favouree, the bank guarantee can be presented to the bank for payment. To cancel the bank guarantee, the original document had to be returned to the bank’s possession.  
62	He agreed that it was contrary to good practice to have two original documents bearing the same unique identifier. He said that he did not make a record of destruction of the earlier document but that he did advise Dang, although not Studco, of the destruction of the earlier original certificate.
Other documentary evidence
63	The vendor’s lawyers responded to the purchaser’s Notice of Rescission on 26 August 2022, providing the copy of the duplicate bank guarantee issued by the bank the previous day. The email asserted that the bank guarantee had been procured prior to 5:00pm on the Sunset Date and that the terms of the guarantee had previously been confirmed by the purchaser. It alleged that the purchaser was not entitled to rescind the contract. 
64	By response emailed on 29 August 2022 the purchaser’s lawyers advised that the form of the bank guarantee dated 25 August 2022 was materially different to the form approved by the purchaser on 6 July 2022 which named the purchaser as favouree. The letter observed that this information was not objected to when provided to the vendor. 
Principles – construction of contracts
65	The dispute is to be resolved by the construction of the terms of the contract, in particular what is required to satisfy SC 23. The contract is construed objectively by reference to the text, context and purpose of the document. In construing the terms one asks what a reasonable businessperson would have understood the terms to mean. Generally this is arrived at by reference to the document itself. Where the words are unambiguous or susceptible of only one meaning then surrounding circumstances cannot contradict that meaning. However, where more than one construction is available the commercial purpose of the contract and the background, context and commercial market may assist in determining a constructional choice. 
66	Where a contract requires performance to the ‘reasonable satisfaction’ of a party, there is both a subjective component – whether the party is in fact satisfied – and an objective component – whether the party ought as a reasonable person be satisfied. The party is not the sole judge of satisfaction. Rather it is for the Court to decide whether the party was acting reasonably in all the circumstances. 
Submissions – termination of the contract
67	Whether the contract remained on foot or was validly rescinded turns on the answer to this question:
Did Merrindale procure the original bank guarantee as required by the Studco lease agreement by 5:00pm on 25 August 2022 to the reasonable satisfaction of AIL for the purpose of SC 23.1(a)(i)(B) of the contract?
68	First Merrindale submits that what was required under the lease agreement was that:
(a)	the tenant pay a security deposit to the landlord;
(b)	the security deposit may be satisfied by the tenant providing a bank guarantee to the landlord; and
(c)	the security deposit must be unconditional, irrevocable and in writing stating the details prescribed in Item 20 (b) to (e) issued by a bank, in favour of and on terms acceptable to the landlord.
69	Consequently Merrindale submits that when Studco provided to Merrindale a bank guarantee in these terms, the terms of the lease were satisfied. Merrindale submits the lease requirement that it be on ‘terms acceptable’ dealt with the form and content of the document and that likewise the contract requirement that the original bank guarantee be to the ‘reasonable satisfaction’ of the purchaser qualifies the form and content of the bank guarantee and not the process of procurement. Therefore, Merrindale says the clause permitted rejection of a bank guarantee defective in form or content and the contrary construction, that the purchaser had to be reasonably satisfied with the act of procuring, introduces uncertainty.
70	Merrindale submits that on its face the bank guarantee complies with the requirements imposed by the Studco lease agreement. It was for an amount agreed between present landlord and the landlord on settlement of the contract. No issue was taken with the terms of the pro forma template document. The contrary argument, that identification of the favouree wrongly identified Merrindale and not AIL, was not tenable given the lease agreement required the bank guarantee to be in favour of the landlord. The contract specifically provided for transition of such documents by Special Condition 22.11.  
71	Second, Merrindale submits that it did procure the bank guarantee by the contractual deadline because both the facility for the issue of a bank guarantee was in place and the specific bank guarantee for Studco’s performance of its lease obligations was approved, created, stamped and signed by the bank before the expiry of the deadline.  
72	Merrindale contends that physical possession of the printed original document was not necessary. It submits that had possession been required the language of the contract would have clearly stated this. It compares the use of ‘procured’ in SC 23 with the use of ‘received’ to set the timeline for FIRB approval in SC 16. Alternatively, if physical possession of the bank guarantee was required, Merrindale submits that this requirement was satisfied because the bank held the document on behalf of Merrindale. In that respect it would be futile to distinguish the position of Studco and Merrindale as Meese represented both parties who were in turn both clients of the bank. 
73	In relation to ‘reasonable satisfaction’, the plaintiff submits that form and content the quantum was agreed prior to the deadline and the bank template on its face contained no terms that were unsatisfactory to the purchaser or that did not comply with the lease agreement conditions. 
74	The plaintiff points to the absence of any evidence to prove the purchaser’s dissatisfaction. The plaintiff submits that an argument based upon the incorrect identity of the favouree as identified could not succeed where the lease agreement required the security to be in favour of the landlord. The contract clearly contemplated the transfer of the favouree on settlement at SC 22.11 of the contract.  
75	By contrast, AIL submits that SC 23 is a clause for the benefit of the purchaser. This is expressly provided for in 23.1(e). AIL submits that SC 23 is directed at the situation where Studco had not been required to comply with its obligation under the lease to provide security because of the related nature of the landlord and tenant. SC 23 ensured that this was to be regularised and in place prior to settlement.
76	AIL submits that while the Studco facility was in place in that funds were available to satisfy a bank guarantee for a third party, this was simply the first step in the landlord procuring payment of the security deposit and was not sufficient to satisfy SC 23. 
77	AIL submits that no original bank guarantee was obtained by either Studco or Merrindale by the contract deadline. The original bank guarantee created prior to the deadline remained in the possession of the bank and, on the bank’s evidence, was destroyed subsequently without ever being provided to Studco. The original that was delivered into the possession of Meese was not created until 26 August 2022. 
78	AIL submits that none of the four elements needed to satisfy SC 23 were met by the vendor prior to the recission letter being sent. Those four elements were that: 
(a)	the original bank guarantee and not a duplicate must be procured;
(b)	payment of security was required under the lease agreement and payment was not made until the original bank guarantee is provided to the landlord;
(c)	it was not sufficient that the original document be held by the bank pending collection; and 
(d)	reasonable satisfaction of the purchaser could not be objectively established in the absence of any information being provided to the purchaser as to compliance with SC 23.
79	AIL submits that the evidence of the bank employees demonstrates that a document held by the bank until given to the customer is held as a bank document and not in any capacity as agent or bailee. It remains a bank document until provided to the customer. AIL submits that because a bank guarantee is equivalent to cash in the hands of a favouree, the operative instrument from the point of view of the bank, the customer and the favouree is possession of the physical piece of paper that is the original bank guarantee.  Until in the hands of the favouree the document is not commercially effective. AIL submits that it is not necessary to resolve the competing constructions as to whether the requirement for ‘reasonable satisfaction’ under SC 23 qualifies the form and content of the document or the act of procuring. This is because on either construction there was no communication to the defendant by the Sunset Date. 
Consideration
80	For the reasons that follow the contract is to be construed as requiring Merrindale to have obtained the printed original bank guarantee in its favour by the contract deadline to satisfy SC 23. The evidence is clear that by 5:00pm on 25 August 2022, Meese had possession of an electronic copy of the duplicate bank guarantee but the bank retained possession of the printed original bank guarantee. Meese did not have an original or a copy of the original bank guarantee to provide to the purchaser. It is not clear when Meese understood the Sunset Date was 25 August 2022. I infer from his arrangement to personally collect the original document on 26 August 2022 that it was after 25 August 2022. 
81	It was the evidence of both Dang and Toumngeun that while the bank retained possession of the original document, the transaction was incomplete. Dang said that while he couldn’t interpret what Meese meant when he said he wanted the bank guarantee ‘in hand’, he said:
It could mean as in the facility is completed and in place, or the facility is finished, completed, and he gets the bank guarantee.
82	Dang distinguished the situation before and after the original bank guarantee is produced to the customer. His evidence confirmed that the final step in providing the bank guarantee to the customer who has requested it is to present the original printed document. He agreed that until handed to the customer, the bank’s normal process was followed and that it remained a bank document. 
83	Toumngeun also understood that the bank guarantee was a bank document held by the bank until collected by or posted to the customer. He accepted that if the bank was holding the document on behalf of any third party it would be the customer Studco.
84	I am not persuaded that Merrindale as landlord had procured the bank guarantee upon the bank creating the document in accordance with the Studco request. Toumngeun described the guarantee as being issued by the bank. His evidence confirmed that the bank guarantee had not been physically issued until placed in the hand of the client. Until that occurred, he would not close off the bank’s work process (which occurs by returning the printed duplicate guarantee to the team who created the documents). Dang’s evidence also emphasised the final step was the customer ‘getting’ the original document. 
85	The evidence demonstrates that the bank was holding the original bank guarantee as its own document pending collection by the customer. This is consistent with Dang’s understanding that Meese would collect the original document on 26 August 2022 to meet the purported 27 August 2022 deadline. It may well be that collection by Meese in person satisfied both receipt by Studco and possession by Merrindale because Meese had authority to act for both. If so, the obligation under the lease agreement was not fulfilled until 26 August 2022, after the recission letter was sent. Given the customer requesting the guarantee was Studco, and accepting the evidence of the bank employees that while the bank retained possession of the physical original document there was no risk of presentation by the favouree, I do not accept that the bank was holding the document on behalf of Merrindale at the Sunset Date. 
86	The lease agreement required the tenant to pay a security deposit. This may be satisfied by providing a bank guarantee to the landlord. While the lines of authority may be blurred by the related corporate interests of landlord and tenant, the respective obligations of landlord and tenant remain clear. Merrindale does not have the benefit of securing its tenant’s obligations under the lease until such time as it is in a position to present an instrument giving that security. Its obligation under the contract was to obtain a bank guarantee enforceable by the landlord. 
87	I do not accept the vendor’s argument that procurement does not require possession of the instrument itself. The definition of ‘procure’ as provided by the Macquarie Dictionary is ‘to obtain or get by care, effort, or the use of special means’. Other definitions include to persuade or cause (someone) to do something. The Butterworth’s Australian Legal Dictionary, in a consumer law context, describes ‘procure’ as ‘to set out to see that something happens and to take appropriate steps to produce the outcome’. It seems to me that all these definitions encompass the need to achieve or obtain something. In this case what is to be obtained, or the outcome to be achieved, was the tenant’s payment of a security deposit. This was achieved by providing to the landlord a bank guarantee. That could not occur until the tenant provided a document to the landlord. While the obligation in the lease agreement did not specify provision of an original document to the landlord, the contract clearly did so. I accept the defendant’s submission that the obligation to procure the original bank guarantee required Merrindale to have possession of the original document by 5:00pm on 25 August 2022. In my view a reasonable business person would understand that the obligation to procure a bank guarantee that provides for payment of a security deposit would put in the hands of the landlord the instrument upon which it could act if needed. 
88	The evidence demonstrates that the last communication on behalf of the vendor regarding the bank guarantee was on 12 August 2022. That email from the vendor’s solicitors confirmed renewal of the sublease on the property and foreshadowed sending the Studco bank guarantee once obtained. 
89	On any view nothing was provided prior to the rescission letter of 26 August 2022 to confirm that the bank guarantee had been procured (irrespective of who held it). A copy of the original document was not provided until 31 August 2022. AIL therefore had no information as to the final form of the guarantee or whether it had been issued. Objectively there was nothing upon which AIL could have been satisfied that the Studco Lease Condition Precedent had been met. 
Remedy
90	Given that the vendor has not complied with the Studco Lease Condition Precedent by 5:00pm on 25 August 2022, it is not strictly necessary to consider its claim for specific performance of the contract. However, I will make some observations on the parties’ arguments about the availability of that relief for a breach of contract by the purchaser.
Submissions on specific performance
91	SC 26 and in particular SC 26.6 provides for contractual rights on default and breach. The parties contend there is a constructional choice presented by that condition. The analysis that follows necessarily proceeds on the basis that the vendor is compliant with its obligations and the purchaser in breach by not completing the contract on 1 September 2022. In other words, the analysis proceeds on the basis that the purchaser had no right to rescind under SC 23.1(f) and the vendor’s remedies are governed by SC 26. 
92	The purchaser contends that SC 26 expressly limits any remedy of the vendor to retention of the deposit pursuant to SC 26.6. It submits that:
(a)	the remedy of specific performance in expressly excluded by SC 26 as a whole and in particular SC 26.6; and 
(b)	in the event that the clause does not exclude the relief, then as a matter of discretion it should be refused.  
93	The purchaser accepts that SC 26.1(a) gives the vendor the right to affirm the contract but submits that this right does not extend to a positive right to insist on specific performance. Rather, the purchaser’s remedies are specifically limited by SC 26.6 which, by the words ‘sole and exclusive remedy, whether at law or in equity, in contract, tort or otherwise,’ exclude specific performance. 
94	If not excluded, then in the exercise of discretion the purchaser contends that the contractual agreement of the parties as to damages and the limited quantum of those damages, ought inform the exercise of discretion.  
95	The vendor submits that the contractual right to affirm the contract provides an option to the party not in breach to seek the contract be completed. That contractual right is not subject to agreement from the party in breach and a court may enforce the rights of the party who has elected to affirm the contract.  The vendor submits that SC 26.6 addresses the limitation on recovery of losses suffered and is only applicable where the vendor has terminated the contract under SC 26.1(b). The vendor submits that the words ‘at law or in equity, in contract, in tort or otherwise’ are not construed as words of exclusion but address the situation that damages may be awarded on any of these bases. Therefore specific performance is not precluded and, as a matter of discretion, specific performance ought be granted. 
Observations
96	Different entitlements under the contract exist depending on the party in default under SC 26. SC 26.1 deals with the purchaser’s breach, SC 26.2 with the vendor’s breach.  
26.1 	If the Purchaser is at any time in breach of an essential term of this Contract, or if it repudiates this Contract, the Vendor may:
(a) 	affirm this contract; or 
(b)	subject to Special Condition 26.3, terminate this Contract with immediate effect by giving notice in writing to the Purchaser and do any one or more of the following: 
(i) 	forfeit and retain the Deposit and any interest accrued on the Deposit; 
(ii) 	without further notice to the Purchaser, re-sell the Property in such a manner as the Vendor thinks fit; and 
(iii) 	recover possession of the Property if possession has passed to or been granted to the Purchaser. 
26.2 	If the Vendor is at any time in breach of an essential term or material breach of any other term under this Contract, or if the Vendor repudiates this Contract, then the Purchaser may, in addition to any other rights or remedies it may:
(a) 	affirm this contract; or 
(b)	subject to Special Condition 26.3, terminate this Contract with immediate effect by giving notice in writing to the Vendor (in which case the Deposit and any interest accrued on the Deposit must be returned to the Purchaser) and sue the Vendor for damages. 
97	SC 26.6 is only concerned with prescribing the vendor’s remedy under the contract for losses occasioned by the purchaser’s breach. While both parties may affirm the contract or on written notice elect to terminate, as can be seen, breach by the vendor entitles the purchaser to return of the deposit and an unqualified entitlement to sue for damages under SC 26.2(b). By contrast the steps that may be taken by a vendor for breach by a purchaser under SC 26.1(b) contain no general right to sue for damages. 
98	SC 26.6 says nothing about either party’s entitlement to enforce a decision to affirm the contract in the face of breach by the other. The purchaser’s argument, that a right to affirm does not produce a positive right to specific performance, would have the practical effect of a right exercisable only by agreement with the defaulting party. If the parties each have a contractual right to affirm the contract in my view it follows that a capacity to enforce that contractual right is not excluded by a provision that deals with the remedies available upon termination.  
99	True it is that if parties wish to contract that a failure will sound only in damages, they are at liberty to do so. Where it does limit remedies, a contract must do so in express and unambiguous language. The issue here is whether, in providing a right to affirm the contract, the objective intention of the parties was to deprive them of the right to specific performance upon affirmation. It did not do so in express terms. SC 26.6, is applicable only to the vendor and applies to the circumstance where the vendor exercises its right to receive the deposit and interest, a right that crystallises on termination under SC 26.1(b) and not otherwise. 
100	I also accept that a vendor may suffer losses even if an order for specific performance is made. As the purchaser submits, holding costs beyond the intended settlement date and other losses occasioned by the deferred completion may be incurred. The vendor has not sought damages for such losses and arguably SC 26.6 would preclude a claim for such losses. That issue is distinct from a remedy to compel completion of the contract. 
101	In my view the terms of the contract would not prevent an order for specific performance in favour of the vendor who has affirmed the contract where it is appropriate to do so. As the plaintiff has not made out the basis for any entitlement to specific performance it is not necessary to determine whether, as a matter of discretion, relief would have been granted. 
102	I will hear from the parties as to the form of orders including as to costs.