Churnin v Pilot Developments, Glover v Pilot Developments, Pearson v Pilot... [2003] NSWSC 592 | Case summary

Particulars Special Condition 10.7 5. There was an implied term of the contract that the Defendant would use all reasonable endeavours to ensure that the strata plan was registered within 24 months. 6A The Defendant admitted that if the work for the development, including construction work, proceeded with all due expedition, it was quite feasible to complete the work and register the strata plan before 16 March 2001, as was the fact. Particulars The admission is to be inferred from contract special condition 10.7 and 10.8. 7. The strata plan for the development was not registered within 24 months of the contract. 8. By letter dated 20 March 2001, the Defendant purported to rescind the contract on the grounds that the strata plan had not been registered within 24 months of the date of the contract. 9. The purported rescission of the contract by the Defendant was ineffective as a rescission of the contract in that the failure to complete the works and register the strata plan before 16 March 2001, resulted from the Defendant's failure to perform its contractual obligations. Particulars (i) The Defendant had not proceeded with all due expedition or used all reasonable endeavours to ensure that the strata plan was registered within 24 months of the contract. (ii) The Defendant was in breach of the terms referred to in paragraphs 4A and 5 above, and this arises as a matter of implication and conclusion from the admissions referred to in paragraph 6A above and from the Expert Reports of Malcolm Paul Woods dated 4 April 2003, Andrew Peter Box dated 4 April 2003, John Frederick Poiner dated 2 April 2003 and Robert Bendeich (Evans and Peck) dated 4 April 2003, filed and served on behalf of the Plaintiffs in these proceedings. 13. If the Defendant had proceeded with all due expedition and used all reasonable endeavours to construct the development and obtain registration of the strata plan, the strata plan would have been registered within 24 months of the contract and the Defendant would not have been entitled to rely on Special Condition 10.8 of the contract. 14. The failure of the defendant to proceed with all due expedition and use all reasonable endeavours to construct the development and obtain registration of the strata plan was a breach of the defendant's obligations under the contract, and caused the plaintiffs to suffer loss, which is continuing. Particulars The plaintiffs will give particulars of the loss prior to the hearing 9 The plaintiffs seeking specific performance claim by way of relief specific performance on the ground that there was no right to rescind or in the pleading on the alternative ground that it was unconscionable to rely on the rescission clause. Comment 10 The express term pleaded in paragraph 4A of the further amended statement of claim is not a term of the contract. Clause 10.7 is quite clear. It was the obligation of vendor and purchaser to so act so far as possible as to enable the other to have the benefit of the agreement. The pleaded implied term in paragraph 5 "to take all reasonable endeavours to ensure the registration of the plan within 24 months" is not a necessary implication and is not made out. Special conditions 10.7 and 10.8 do not amount to some sort of admission as pleaded by the plaintiffs. Completion within a two year period was expected, not admitted, whatever is meant by that. 11 In the long run no reliance was placed on special condition 9.1 of the contract. The case of the plaintiffs was based on special condition 10.7. If the vendor had not performed its obligations under that clause it was in breach. If it was in breach, and the breach brought about failure to obtain registration within 24 months, it was not entitled to rely upon the right given by 10.8. This was not in dispute. What was in dispute was whether or not Pilot had "proceeded with all due expedition to complete the sub-division (meaning the strata sub-division) and comply with council conditions of approval in respect of the sub-division". Completing the sub-division required completion of the development in accordance with clause 9.1 and registration of the strata plan of sub-division. Further facts 12 Pilot appointed Melocco and Moore as architects for the project in April 1998. It also obtained a geo-technical report on the site from SMEC Testing Services at that time. The site was a difficult one as it consisted of fine sand to a considerable depth, which it was agreed would require stabilisation and shoring, both to enable the building in accordance with the proposed plans to be constructed and to protect properties above the property from damage from movement caused as the result of excavation of the site. Conditions 26 and 53 of the Development Approval are as follows: 26. There shall be no loss of support to the Council's footpath area as a result of the excavation within the site. Details of how this support will be maintained during construction shall be submitted for approval with the Local Approval Application. 53. A report shall be prepared by a professional engineer and submitted to Council with the Local Approval application, detailing the proposed methods of excavation, shoring or pile construction, including details of vibration emissions and possible damage to adjoining premises. 13 On 6 May 1999 Pilot entered into a building contract with G & N Developments Pty Limited, trading as RMA Design and Constructions (RMA) for the construction of the building. The contract provided for completion within forty-six weeks of the commencement date of the work, the date of commencement being determined in a way defined by the contract and in fact being 9 June 1999. The contract provided the normal provisions for extension of time upon certain events. Had all gone well the date for practical completion was 26 April 2000 subject to this being extended by accepted extension of time claims. The evidence establishes an occupation certificate was not issued until 4 September 2002 and the strata plan was registered on 19 November 2002. Building contracts seem to assume that it will never rain. But even allowing for claims dealt with as at April 2002 the agreed extended date for practical completion was 5 February 2001. 14 There had been other builders tender for construction work, but the RMA tender was the lowest. Pilot asked Mr Melocco to make some checks about the builder and its work, which he did, reporting that two projects at Strathfield built by RMA were of a high standard of construction. 15 It was I think accepted that an efficient builder would have completed the project within the two year period. However Pilot was not the builder and it is necessary to give some attention to the periods of delay and to the actions of Pilot during the period of construction up to termination. 16 Apart from the architect and builder, Pilot engaged the services of a qualified geo-technical engineer, civil and construction engineers, mechanical engineers, hydraulic engineers and acoustic engineers. It is not suggested these people were not competent. 17 The first problem in construction arose during shoring. Messrs James Taylor and Associates were originally engaged as structural engineers, although they were later replaced. They were consulted by the architect about conditions 26 and 53 of the development consent. They said contiguous piling was proposed which would support the footpath along Melrose Street and that temporary shoring along Walker Street could be achieved by contiguous steel shoring. So far as condition 53 was concerned they said that the perimeter would be supported by contiguous piling and anchoring as required. 18 There is some confusion about the shoring. The building contract included some details of the builder's quotation. Under item 3 - Excavation, - piling and shoring is not mentioned. Under item 6 - Piers to depth of 8 metres, - there is reference to sheet piling at a cost of $123,675. Engineering drawings of Ibrahim Consulting Group, who took over from James Taylor and Associates as consulting structural engineer for the project, refer to a sheet retention system, but this was otherwise unexplained. The specifications relating to excavation appear at page 2167 of Exhibit B and item 306 refers to shoring and includes the following:- All shoring to be designed and certified by the supplier's engineer. These certificates to be supplied to the structural engineer prior to any further work. 19 The shoring and excavation work was sub-contracted by the builder to a company Emanon Pty Limited, which did engage its own engineers to design the work. Considerable difficulties were encountered with the excavation and the shoring. Some of the problems were caused because the sheet shoring was not sufficiently strong to resist the pressures, some seem to have been caused by the amount of sand above the rock requiring removal, and some by vibration and movement during excavation causing damage to adjoining buildings. Threats of legal proceedings by adjoining property owners and risk of injury to workers on the property from collapse caused the building site to be closed for some time. It was necessary to redesign the shoring works, more contiguous piling was required, and this required some redesign of the building. Numerous consultants were engaged during this period including the original geo-technical engineer, the consulting engineer for RMA and various engineers engaged by Emanon. Eventually shoring designed by Dr Ring, an engineer engaged by Emanon, was installed. The excavation and shoring were commenced early in July 1999. The first collapse occurred a few weeks later and the first damage to the adjoining property before the end of July 1999. There was some spasmodic starting and stopping, and the shoring and piling as designed by Dr Ring was not completed until March 2000. While it was possible to proceed with some construction on the southern end of the property, about thirty-eight weeks of the forty-six weeks contract period had been taken up by the time the site was properly stabilised. 20 Mr Hansen was a director of Pilot as was a Mr Whitten. They controlled the project although Mr Hansen seems to have taken the lead role so far as Pilot was concerned. Pilot appointed various project managers for this development, namely Mr Bernasconi from early 1998 for about 12 months, then a Miss Lewis for about 15 months with an assistant, Mr Cusack for some of that time and in April 2000 a Mr Bonus who was both an architect and project manager. It was not suggested that these people were not well qualified nor that they did not work diligently towards progression of building works. Shortly after Mr Bonus was appointed consideration was given to termination of the contract with the builder. It was decided to do so for a number of reasons, including a question of whether there was ground for termination and the possibility of legal proceedings arising from this, the very busy pre-Olympic Games building period, during which there was great difficulty obtaining builders and tradesmen, and the fact that, according to the evidence, there would be a delay of about six months in engaging a new builder to take over the works and a considerable increase in the costs of the works. 21 Mr Bonus reported to Pilot that he thought RMA needed planning and organisational assistance to progress the works more satisfactorily. Pilot agreed and a company Solid Support Pty Limited was engaged to provide a programme which if adhered to would have resulted in the project being completed by December 2000. In fact RMA immediately slipped behind in performance under that programme. In October 2000, Solid Support provided a further programme which if adhered to would have resulted in practical completion by the end of February 2001. 22 Regular meetings were held on site, usually attended by Mr Hansen, Mr Melocco, Mr Rahme, the builder, Mr Bonus and from time to time other consultants. At the commencement these were held each fortnight and later, when the construction was obviously falling behind schedule, every week. I am satisfied that great effort was made to push the project forward and that whatever pressure could be exerted on the builders was exerted. To assist the builder in the funding and obtaining the necessary materials, progress payments were made each fortnight rather than each month. Arrangements were made for the work to be carried on Saturdays, during the Olympic period, and over the Christmas period. 23 In September, October and November 2000 substantial delays were incurred as a result of acoustic requirements and plumbing or hydraulic problems. So far as the hydraulic problems were concerned this, for the most part appears to have arisen from deficient work undertaken by the plumber sub-contracted to the project by RMA. In November the hydraulics engineer resigned and a new hydraulics engineer was appointed. In spite of all this even in early January 2001, RMA advised that practical completion would be achieved by the end of January, although I do not understand how that could have been thought possible. 24 There is little purpose in setting out the events which took place after the rescission. There is also little purpose in going into the correspondence with the builder alleging breach of contract in February 2001. There were ongoing problems with the project right up to the end. Pilot and RMA finally entered into an agreement on 6 June 2002 which brought their association to an end. The fact that Pilot continued to press the builder after rescission without much success is only relevant to show that it did not obviously slow down the project to bring about the right to rescind and then speed it up thereafter. 25 I have not set out a complete history of the events as this is unnecessary. The history is recounted in some detail in the evidence of Mr Hansen, Mr Bonus and Mr Melocco to which there was no serious challenge. The minutes of the project site meetings support their evidence. Plaintiffs' contentions 26 The main argument of the plaintiffs was based on special condition 10.7 of the contract for sale. I have already dealt with the implied terms. It is of course apparent that clause 10.7 is tied to clause 9.1 as delay in 9.1 obligations would run over to 10.7 obligations. There is no doubt the builder was slow even taking into account the site difficulties. To a large extent the evidence of the plaintiffs' expert witnesses can be discounted because they were dealing with the project in an abstract manner without having regard to the particular difficulties involved with this contract or with the site. That was accepted by counsel for the plaintiffs. At May 2000 Mr Bonus thought progress was unsatisfactory and the site minutes confirm this. Limited extensions of time granted against the claimed extensions also show delay on the part of the builder. Mr Hansen agreed with this. The question though is whether or not this can be sheeted home to the vendor so as to be a breach of special condition 10.7. The purchaser plaintiffs knew that Pilot was not the builder. They knew that pursuant to clause 9.1 that Pilot was to cause the building work to be done. 27 The question is whether clause 10.7 places some absolute non-delegable obligation on the vendor. I do not consider that could be so. It was not suggested or argued that Pilot did not take proper steps in selecting RMA as a builder. It was not suggested that it did not engage the appropriate engineering specialists. It could not be and was not suggested that it should have continued working on the project site at times when the safety of adjoining buildings or of persons working on the site was not assured or when a stop work order was placed on the project. 28 Provisions of contract clauses similar to those at issue here have been considered in a number of cases by judges in the Equity Division of this Court and by the Court of Appeal. There is some conflict in those decisions. In question is the view of Hodgson CJ in Eq (as his Honour then was) in Masters v Belpate Pty Limited [2001] NSWSC 169 that while a vendor required by contract to do everything reasonably necessary to bring about registration of a plan within a certain time is responsible for work done by agents the responsibility does not extend to work which a developer would reasonably leave to independent contractors such as architects, engineers or builders. Bryson J in Hawes & Ors v Cuzeno Pty Limited [1999] NSWSC 1167 was of a different view to which he adhered in Hardy v Wardy [2001] NSWSC 1141. In those cases he was considering wording of contracts which required the vendor to do everything required to have the plan registered within a certain period. He considered that the vendor was responsible for deficiency of his contractors. The Court of Appeal in Hardy v Wardy [2002] NSWCA 215 on appeal from Bryson J did not really resolve this difference of opinion but upheld the decision of Bryson J on the basis of the wording of the particular clause under decision. 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 sub-division 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 clause 10.7 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 Limited [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. 30 The question then is whether Pilot was in breach of its obligations under clause 10.7. I have already set out relevant matters as to the action taken by Pilot to try to keep the project moving. In the long run counsel for the plaintiffs really relied on two matters. First he said that the builder should have been removed in about June 2000 and a new builder appointed. I accept the evidence of Mr Bonus and Mr Hansen as to the difficulties with this and reasons why it was not done, if in fact Pilot would have been entitled to do so under the contract. It is to be remembered that Mr Bonus, the builder and Solid Support all thought that the programme of works produced by Solid Support was one which could be adhered to and which could result in completion within the two year period. Counsel for the plaintiffs also argued that Pilot could have done more to force the project forward and to monitor it more closely. In essence he argued that there should be daily monitoring and daily presence on the site. The evidence of Mr Hansen was that this would have been unproductive and that it was necessary to agree with the builder prior to entry upon the site. While that is not quite correct on the contract terms, I am not satisfied that constant interference and chivvying of the builder would have produced a better result. There was very regular contact and there was very regular monitoring. Although counsel for the plaintiff argued that Pilot should have done so it is important to understand Pilot had no right to have a day by day and trade by trade monitoring role if that involved real interference with the builder. The strongest argument for the plaintiff was that the builder should have been dismissed by the end of June with all the risks that entailed; that it was in breach not doing so. For the reasons given I do not consider this correct. And even had it been correct the necessary causal connection would not have been established because dismissal would not have brought about completion within the 2 year period. I should add that although the arguments put forward for the plaintiffs do not necessarily accept the requirement for cause paragraph 13 of the statement of claim appears to do so. 31 It follows from this the plaintiffs' claims fail based on breach of contract. No separate argument was addressed to the claim based on unconscionability. 32 It is necessary to deal with the claim of Mr Glover based on estoppel. Mr Glover claimed 3 representations as to completion date. Neither the first nor the second turned out to be in accordance with the facts. But as to the third he claimed that Hansen said to him at a meeting at the offices of the architects on 17 October 2000, "I give you my assurance that the development will be completed in January 2001." He said he relied on this, sold his house at Newtown and paid $330 to install special wiring for a sound system in the unit he was purchasing. 33 Mr Hansen denied the words. He said he had said the builder expected to complete in January or February. Mr Melocco did not remember the words claimed by Mr Glover. Mr Glover asked the agent to confirm that "completion and therefore settlement, is expected for the end of January 2001." It thus seems unlikely he relied upon the representation if it were made as it was alleged. I am not satisfied it was. But if it were there are other problems for the plaintiff. The house that was sold was not in his name. Despite the evidence of joint ownership far more convincing evidence of the way ownership was dealt with including evidence of taxation returns would be needed. In any event no loss was established as a result of the sale. Mr Glover and Mr Hanbidge were successful dealers in real estate. If there was a loss it was limited to $330. On no basis could it be thought that equity required the representation be made good so as to make it unconscionable to exercise the right of rescission. In the long run the claim for damages was limited to the $330, but that was not made out. 34 These cases are unfortunate. There was no fault on the part of the plaintiffs who are entitled to feel dissatisfied that they will not get the unit they reasonably expected would be theirs. On the other hand Pilot may have suffered loss as a result of the delay. In a case where neither vendor nor purchaser is in breach, reliance upon a contractual provision giving a right of rescission is neither unreasonable nor unconscionable. Orders in each case 35 The plaintiff's or plaintiffs' claim be dismissed. 36 The plaintiffs pay the costs of the defendant. 37 The exhibits may be returned. **********

Churnin v Pilot Developments, Glover v Pilot Developments, Pearson v Pilot Developments, Blackman v Pilot Developments, Blackman v Pilot Developments, Mason v Pilot Developments, Cheetham v Pilot Developments, Fitzsimons v Pilot Developments

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