DISPOSITION OF THE APPEAL
Appellants' case
32 The appellants submitted that clause 9.1 dealt essentially with quality issues requiring the vendor to "use its best endeavours" to cause the specified construction work to be done "in a proper and workmanlike manner" and "generally in accordance with the draft strata plan", "the requirements of all relevant authorities" and the schedule of finishes. That "best endeavours" obligation had to be read with clause 10.7, since clause 9.1 is "without prejudice to any other express or implied condition of this contract". On the other hand clause 10.7 did not use the language of best endeavours but was said to be expressed in absolute terms.
33 In the appellants' submission although the clause contained no express time limit, it imposed an absolute obligation upon the vendor "with all due expedition" to "complete the subdivision" and "comply with all Council's conditions of approval in respect of the subdivision". That absolute obligation was said to involve completing construction in sufficient time to enable the plan of subdivision to be registered within the twenty-four month period in clause 10.8.
34 As this did not occur, the appellants' contention is that the vendor was in breach of clause 10.7 and therefore not entitled to rescind under clause 10.8.
35 The principle invoked was that stated in Plumor Pty Ltd v Handley (1996) 41 NSWLR 30 by McLelland CJ in Eq at 34:
"… that a party to a contract is not entitled, as against the other party, to rely on an event resulting from the first party's wrongful act."
36 Pursuant to the Notice of Contention the respondent submitted that clause 9.1 defined the vendor's obligations with respect to "the work" and Clause 10.7 did not deal with construction work at all but operated only as regards "Registration of the Strata Plan" and compliance with the Council's three conditions in the subdivision approval [para 8]. Clause 9.1 only required the vendor to "use its best endeavours" to cause the work to be done. Since the judge found that the vendor had complied with its "best endeavours" obligations under clause 9.1 it was entitled to rescind the contracts under clause 10.8.
37 On the respondent's construction, clause 10.7, appearing as it does in a clause headed "Registration of Strata Plan", is directed not to the vendor's construction obligations with respect to "the works". Rather it is directed to what is entailed by "registration of the strata plan". That, argues the respondent, entails no more than, post-construction, completing the subdivision and complying with Council's conditions of approval in respect of the subdivision; that is to say, carrying out the post-construction steps for that purpose.
38 Thus the respondent seeks to meet the appellants' contention that clause 10.7 imposes a strict or absolute obligation upon the vendor with respect to the matters to be carried out under clause 10.7. It seeks to confess that result but avoid its consequence excluding from the ambit of clause 10.7 the relevant construction work, contending that it is governed wholly by clause 9.1. The respondent argues that as it clearly did use best endeavours to construct, including the shoring and stabilising, as required by clause 9.1, the more stringent provisions of clause 10.7 have no separate application to that construction work.
39 The trial judge, though not dealing in terms with this argument, observed that "completing the subdivision required completion of the development in accordance with clause 9.1 and registration of the strata plan of subdivision"; see Red, 96 at [11]. I agree. More precisely I consider that clause 9.1 is directed substantially at quality requirements of construction connoted by the reference to "cause the work to be done in a proper and workmanlike manner", embracing a definition of the work which comprises "construction of a building generally in accordance with the draft strata plan … the requirements of all relevant authorities and the schedule of finishes …". The reference to "generally" in that context supports the interpretation that clause 9.1 does not cover those aspects of construction dealt with under clause 10.7. Clearly, when clause 10.7 refers to the obligation to "complete the subdivision and comply with the conditions in respect of the subdivision" that necessarily entails constructing the home unit development, doing so in conformity with the strata plan and the development conditions generally. The expression "conditions in respect of the subdivision" is in my view wider than the narrow concept of the three specific conditions of the subdivision. Thus shoring and stabilising are an essential part of the work contemplated by clause 10.7, referable to the conditions of approval, though subject also to any quality or related obligations derived from clause 9.1.
40 The respondent's contention is that it is only those three earlier quoted conditions which appear under the heading "Strata Subdivision Conditions" which constitute "Council's Conditions of Approval in respect of the subdivision" within clause 10.7. Whereas the appellants correctly contend that in clause 10.7, to "complete the subdivision" comprehends completion of the development thereby entailed. This embraces all building and related conditions necessary to build the development, on the basis that these are all "conditions of approval in respect of the subdivision", in the broader sense connoted by the emphasised words. That still leaves in addition the predominantly quality requirements of clause 9.1. I agree with this construction of the two clauses, and their relationship.
41 However, while that disposes of the Notice of Contention, the question still remains whether clause 10.7 has the strict and absolute effect contended for by the appellants. An immediate difficulty with that construction is that it has such a harsh and oppressive operation. If it were correct, the vendor would be disentitled to invoke clause 10.8, even if the reason for the failure to comply with clause 10.7 was by reason of acts of the builder, even events of force majeure, totally outside any possible control by the vendor.
42 The appellants sought to answer this difficulty by treating the relevant clause as a risk allocation clause, which recognised that the vendor alone was in a contractual relationship with the builder. Thus the appellants argue that the risk of failure to complete in time, be it for whatever reason, should fall on the vendor. If correct, that would entail some harsh and anomalous consequences. First, even the vendor who had done everything reasonably possible to comply with clause 10.7 could be sued for damages, should the 24 month time table not be met. Second, the asymmetric result would be that the purchaser could rescind under clause 10.8 but not the vendor, since on this construction only the vendor would be relying on its wrongful act.
43 The appellants rely upon the decision of Bryson J in Hardy v Wardy (2001) 10 BPR 19,055; [2002] ANZ ConvR 261 and the decision on appeal upholding the trial judge sub nom in Wardy v Hardy (2002) 11 BPR 20,227; (2003) NSW ConvR 56-034.
44 In that case, the relevant contract was in distinctly different terms, which I quote below with particular attention to clause 28.2 and 28.3:
" 28 Unregistered plan
28.1 This clause applies only if some of the land is described as a lot in an unregistered plan
28.2 The vendor must do everything reasonable to have the plan registered within 6 months after the contract date, with or without any minor alteration to the plan or any document to be lodged with the plan validly required or made under legislation.
28.3 If the plan is not registered within that time and in that manner -
28.3.1 the purchaser can rescind ; and
28.3.2 the vendor can rescind, but only if the vendor has complied with clause 28.2
28.4 Either party can serve notice of the registration of the plan and every relevant lot and plan number.
28.5 The completion date becomes the later of the completion date and 21 days after service of the notice.
28.6 Clauses 28.2 and 28.3 apply to a plan that is to be registered before the plan is registered."
45 It will be appreciated that that clause 28 is expressed in the imperative with the word "must" and qualified only by the word "reasonable".
46 That wording lead Bryson J to conclude as follows:
"[8] It will be seen that under cl 28.2 it is a contractual obligation of the vendor, expressed in imperative terms, to do everything reasonable to have the plan registered within six months. The effect of this is that if some step is reasonable and is necessary for registration within six months the vendor must take that step; the obligation is not that the vendor must do everything reasonable to take the step. The vendor's personal circumstances, knowledge of or ignorance of what is required, reliance on servants, agents or independent contractors, and the skill, knowledge and assiduity of any such agents are all irrelevant to the vendor's obligations; if a step is reasonable, the vendor must take it. My view of the meaning of cl 28.2 is produced by the express terms of the clause, and is reinforced by the consideration that if cl 28.2 is complied with, compliance can work adversely to the purchaser, who has no control over or influence on what the vendor does, or on the vendor's selection of courses to follow or selection of servants agents or contractors, and has no control over the conduct or effectiveness of any such agents, but is bound by the vendor's decision if the vendor rescinds after compliance. The only protection the purchaser has against rescission is the stringency of the condition which the vendor must fulfil if he is to have a right to rescind. It would be inconsistent not only with the express terms of cl 28.2 but also with the purpose of cl 28 as a whole if inefficient or ineffective measures by the vendor or someone by whom the vendor acted could contribute to the vendor's gaining a right to rescind."
47 Bryson J then referred to a contrary decision of Hodgson CJ in Eq in Masters v Belpate Pty Ltd (2001) 10 BPR 18,527 where he expressed disagreement with an earlier decision of Bryson J in relation to a similar clause in Hawes v Cuzeno Pty Ltd (1999) 10 BPR 18,011.
48 In Masters v Belpate (supra) the relevant obligation was expressed in essentially similar terms: "A6.1 The Vendor must do everything reasonably necessary to have the plan registered within the plan registration time".
49 In Masters v Belpate at [64]-[65] Hodgson CJ in Eq made these observations:
[64] However, there are other matters which may be considered matters of specialist expertise, which a developer would normally leave to an architect, engineer or builder: to an architect, the drawing of plans and supervision of building works, to an engineer, similar tasks; and to a builder, actual execution of the work. In those matters, in my opinion the independent contractors should not be regarded as agents of the developer in carrying out the developer's role in obtaining registration of the strata plan. Accordingly, delays attributable to independent contractors in carrying out those tasks would not ipso facto involve a breach of the vendor's obligation. Thus, where a builder caused delay by walking off the site because of problems the builder had which were unrelated to the job, that was not considered a breach of the vendor's obligation: Woodcock v Parlby Investments Pty Ltd (1998) 4 BPR 9568.
[65] However, even where delay arises from the conduct of independent contractors in carrying out matters of specialist expertise, there may be associated breaches by the vendor/developer itself, for example in selection of the contractors, in provision of instruction and information, in monitoring progress, and/or in failing to replace the specialist expert when this should have been done."
50 The case cited by Hodgson CJ in Eq, Woodcock v Parlby Investments Pty Ltd (1988) 4 BPR 9568 was one in which the vendor gave no express contractual promise that the plan would be registered or that all things necessary for registration would be done. Nor was the vendor's right of rescission expressly made conditional on performance of any such promise. Accordingly, the contract, as Bryson J pointed out, was significantly different in its terms from contracts incorporating a version of clause 28. In Woodcock Young J said at 9571: "special conditions like clause 26 are usually construed as subject to the circumstance that only a party who is not at fault can rely on the condition".
51 I have earlier referred to Plumor Pty Ltd v Handley (supra) where McLelland CJ in Eq stated the principle as being "… that a party to a contract is not entitled as against the other party, to rely on an event resulting from the first party's wrongful act".
52 In Wardy v Hardy (supra) in the Court of Appeal Mason P found it unnecessary to resolve the differences of opinion which are to be found in what Mason P described as "obiter discussion in the three cases". This was because "Masters and the discussion in it of the then Chief Judge in Equity did not involve Cl 28.2 or any similar provision". I have earlier quoted the two clauses. I consider that it is unnecessary to enter into the debate as to whether A6.1 was indeed indistinguishable from clause 28.2 or whether a distinction can be drawn by the addition of the word "necessary" in A6.1. Certainly, were the clauses indistinguishable, Mason P's agreement with the construction Bryson J made of clause 28.2 would in actuality mean that there was a binding decision of the Court of Appeal preferring the view of Bryson J to Hodgson CJ in Eq. However, given the clear caveat that Mason P expressed and the fact that the clause in the present case is distinct again from clauses in Masters and Hardy, that is an issue for another day.
53 It is necessary now to turn attention to the actual words of clauses 10.7 and 10.8. Proceeding on the basis that clause 10.7 does apply to building works, it is expressed in imperative terms, namely that "the vendor shall proceed with all due expedition to complete the subdivision and comply with all Council's conditions of approval in respect of the subdivision ….". However, there is no stipulated time for these matters to be carried out, but rather the reference is to all due expedition. That is a significant difference between the respective clauses in Masters and Hardy. There in each case the time was precisely specified by which the relevant things had to be done, namely the plan registration time in the first case and six months after the contract date in the second case. Moreover, the verbal expression "shall proceed" is not expressed with the imperative emphasis of "must do" in the other two cases.
54 Taking then the language of clause 10.7, I start with the meaning of the word "proceed". It is defined in the Macquarie Dictionary as being "to move or go forwards" or "to go on with or carry on any action or process" or simply "to go on to do something". These shades of meaning share the common notion of deliberate progress. But they do not suggest an absolute and unqualified requirement that falls upon a vendor to bring about the completion of the subdivision in compliance with the Council's conditions of approval, come what may, or beyond what is within the power of the vendor to accomplish. The word "shall" in contrast to the stronger word "must" supports that interpretation.
55 Then turning to the time period within which this is to be accomplished, there is as I have said no precisely defined time limit and certainly not one referable to the twenty-four months in clause 10.8. Moreover, the word "due" qualifies the "expedition" required. The word "due" in this context clearly means in the words of the Macquarie Dictionary, "rightful; proper; fitting as in the expression 'due care' or 'in due time'". The alternative shade of meaning of "adequate" or "sufficient" as in "a due margin for delay" is similarly language falling short of the unqualified and absolute character of clause 28.2 in Hardy.
56 There is a further difference. Clause 10.8 does not, as was common ground, contain the equivalent to clause 28.3 in Hardy, namely making compliance with clause 10.7 an express condition precedent to the right of rescission in clause 10.8. It was common ground between appellants and respondent on appeal, that this was a case where no choice was required to be made between Bryson J's view in Hardy and Hodgson CJ in Eq's view in Masters. Rather this was a case where, as in Woodcock v Parlby Investments Pty Limited what brought clause 10.7 into play was the general law principle that a party is not entitled to rely on an event resulting from that party's wrongful act.
57 Given the findings of the trial judge as to the absence of fault on the part of the vendor in the failure to have the plan registered within two years, such failure being attributable to the respondent's builder's failure to proceed diligently and not to any failure on the part of the vendor to follow up the builder or to substitute another, I consider that clause 10.7 was not breached by the vendor even assuming clause 10.7 covers the construction phase. I would adopt what was said by Windeyer J on these matters at 28-9 (Red, 102-3):
"[28] ……… While the matter is not easily resolved it seems to me that there are different obligations in different factual situations. What is clear is that the contract wording is of paramount importance. A vendor has obligations in selecting contractors; a vendor who can see that delays are occurring must overcome them if they can be overcome: for instance, a surveyor who delays should be replaced by a surveyor undertaking to perform within a fixed time; a project manager not following matters through should be replaced. If a builder in default can be replaced so as to fulfil the contractual obligations that should be done.
[29] The particular contract terms 10.7 and 10.8 do not require the vendor to proceed with all due expedition to complete the subdivision within two years, although of course the expectation is that will be done. Failure to complete within two years triggered the right to rescind if the vendor was not in default of its obligations under cl10.7 and the default was the cause of the failure to complete within time. The requirement for causal connection was discussed by Powell JA in Mitchell v Pattern Holdings Pty Ltd [2002] NSWCA 212 in reasoning which, although obiter there, I consider convincing and which I follow. Proceeding with all due expedition could not have required the vendor to do the building work itself. Apart from anything else it would not have had the licence to do so. The clause requires the vendor to do what it can do. While the decisions are difficult to reconcile I do not consider the Court of Appeal decision in Hardy requires a finding that fault on the part of any contractor must be laid at the feet of the vendor under the contractual provisions I am considering. I have come to the view that there is no absolute obligation."
58 I would adopt also what was said by Helman J in Hawkins & Anor v Pender Bros Pty Limited & Anor (Supreme Court of Queensland Court of Appeal, 29 August 1995, unreported), though by way of dicta. This was in relation to a covenant to use best endeavours to obtain and retain certain approvals to erect a nursing home and retirement village and to proceed with "all due expedition" in the construction thereof.
"Para (a) of CL 4 requires the first defendant to use its "best endeavours". The proper construction to be put upon those words was considered by the Full court on the appeal in the previous proceedings. Shepherdson J, with whose reasons Thomas and Williams JJ. Agreed, concluded that they imposed upon the first defendant the obligation to do all that it reasonably could in the circumstances to achieve the contractual object, but no more. It was not required to go beyond the bounds of reason, and was not required to act in such a way as to bring ruin upon itself - see Hawkins v Pender Bros Pty Ltd [1990] 1 Qd R 135, at 151-152.
A similar construction should, I think be put upon para (b): the obligation was to proceed with all due expedition, but not beyond the bounds of reason, and not to the point of ruin."