The Owners – Strata Plan No 84741 v Nazero Constructions Pty Limited & Ors[2016] NSWSC 832

Significance

In determining the extent of the release, the court will consider the ordinary meaning of the release taking into account the terms of the deed as a whole and by giving the words within it their fair and natural meaning, having regard to context within the deed and all relevant facts.

Read on for more analysis on this decision by Justin Sadikoen.

Commercial insights

Parties negotiating a contract or deed should always be careful to use defined terms consistently.

Facts

Iris Diversified Property Pty Limited (Iris) engaged Nazero Constructions Pty Limited (Nazero) under a construction contract (Contract). Wardy Younan (Guarantor) guaranteed Nazero's obligations under the Contract.  Iris and Nazero fell into a payment dispute in respect of which Iris commenced proceedings that were settled by a deed of variation and release to which Iris, Nazero and the Guarantor were parties (Deed).  In the Deed, Iris and Nazero were defined as 'the Parties' and the Guarantor was defined as 'the Guarantor'. However, throughout the Deed there were many references to ''the parties'.

The Owners – Strata Plan No 84741 (Owners) subsequently commenced proceedings against Nazero and Iris for damages for breaches of warranties under the Home Building Act 1989 (NSW).  Iris filed a cross-claim against the Guarantor. The Guarantor submitted that he was released from all obligations or liability under the Contract pursuant to clause 3.1 of the Deed, which read:

'…the parties release and forgo each other from all Claims against each other under the Contract.'

The Guarantor submitted that he was one of 'the parties' referred to in clause 3.1.

Decision

The court found that it was clear that the term 'the parties' was intended to refer to Iris and Nazero together, but not the Guarantor.

The court considered the provisions relating to the costs of producing the Deed and noted that they specifically referred to 'each Party and the Guarantor [emphasis added]'. Further, the definition of the term 'Execution Date'' was defined as the date that the Deed 'is executed by the parties and the Guarantor [emphasis added]'.

The court also considered clause 3.2 of the Deed, which excluded Nazero's obligations under the defects liability period under the Contract and under the Home Building Act 1989 (NSW) from the scope of the release.  Nazero therefore had continuing obligations under the Contract, in respect of which the Guarantor remained liable as guarantor under the Contract.

The court considered the object of the Deed, the language used and the context in which the expression 'the parties' was used to satisfy itself that the reference to 'the parties' in clause 3.1 meant Iris and Nazero together, but not the Guarantor.