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[2012] NSWCA 122
Court of Appeal (NSW)
2012-03-15
Macfarlan JA, Meagher JA, Tamberlin AJ, Mr P, MacFarlan JA
Original judgment source is linked above.
SUMMARY OF CASE AND CONCLUSIONS 2By contract for sale dated 17 October 2000 Mr Roland Foster and his now deceased mother, Ms Heidi Foster, agreed to sell part of the land that they owned at Mount Kembla, New South Wales. The purchasers were Mr Julian and Mrs Emily Hall, the respondents to this appeal, which is brought by Mr Foster in his own right and as executor of the estate of his late mother. 3The contract required the parties to use "their best reasonable endeavours" to have a proposed plan of subdivision of the vendors' land registered within 12 months. Registration did not occur within that period or subsequently, with the result that the vendors purported to rescind the contract. The purchasers believed that the vendors had failed to use their "best reasonable endeavours" to have the plan of subdivision registered and, after initially commencing proceedings for specific performance, they treated the purported rescission and continued refusal to perform as a repudiation of the contract and themselves purported to terminate it. 4By judgment dated 15 April 2011 Tamberlin AJ found that the purchasers had validly terminated the contract for repudiation on the part of the vendors and by formal orders made on 20 April 2011 awarded the purchasers damages of $1,672,166.65, inclusive of interest. 5In his written submissions, Mr P Silver, who appeared for the vendors, stated that the sole point that the vendors made on appeal was that it was not possible to comply with Condition 6 of the development consent for the subdivision issued by Wollongong Council and that compliance with the conditions of the development consent was a necessary pre-condition to obtaining registration of the relevant plan of subdivision ([7] and [8]). Condition 6 required the construction of an accessway to the portion of the vendors' land that was the subject of the contract of sale (Lot 2 in the proposed subdivision). 6Later in his written submissions Mr Silver contended that the "best reasonable endeavours" obligation did not require the vendors to attempt compliance with a condition which was impossible to satisfy, which did not in any event fulfil its intended purpose (of ensuring access for fire appliances) and in relation to which there was "no reasonable possibility that it might have the desired outcome" ([34]). In his oral address, Mr Silver extended his submissions to embrace an argument that even if it had not been impossible to comply with the condition, the vendors reasonably believed it to be so, with the result that they had not breached their "best reasonable endeavours" obligation by not attempting compliance. 7For reasons that I give below, I consider that the vendors' submissions should be rejected and that the appeal should be dismissed with costs.
THE LAND AGREED TO BE SOLD 8The vendors' land comprised 42.59 hectares of rural land off Araluen Avenue, Mount Kembla. It was accessible from Araluen Avenue by use of a right of way over other property, or from Cordeaux Road via the Mount Kembla ring track. The vendors lived in the northern-most of two dwellings situated on the land. The other dwelling sat atop a steep ridge on the land that was the subject of the contract of sale (Lot 2 in the proposed subdivision). 9At the date of the contract for sale (17 October 2000) there was a winding track commencing at Araluen Avenue, proceeding over the right of way, winding close to the northern-most dwelling and travelling past the southern-most dwelling. There were a number of places where the gradient of this track exceeded 1:6, the first of which occurred where the track traversed the right of way, soon after the track's commencement.
THE CONTRACT FOR SALE 10The land the subject of the sale was that part of Lot 1 in the existing Deposited Plan as had an area of approximately 2.59 hectares and was marked as Lot 2 on the proposed plan of subdivision annexed to the contract. 11The contract was expressed to be conditional upon registration of a plan of subdivision substantially according with that annexed to the contract within 12 months of the date of the contract (Special Condition 3(a)). 12Special Condition 4 was relevantly in the following terms: "The parties will each use their best reasonable endeavours to satisfy Special Condition 3 above, and at no expense to the Purchaser. If despite such endeavours Special Condition 3 above is not satisfied then either party may by written notice rescind this contract, whereupon the provisions of clause 19 shall apply, subject however to any following Special Conditions."
THE SEQUENCE OF EVENTS 13I shall confine my description of the events that occurred to those that bear upon the limited issues on appeal. 14On 29 September 2000 the vendors, by their planning agent, Forbes Rigby Pty Ltd ("Forbes"), lodged with Wollongong Council (the "Council") an application for development consent for the proposed subdivision. It was accompanied by a Statement of Environmental Effects prepared by Forbes. The Statement concluded that the existing bushfire threat would not be increased as a result of the subdivision. 15The contract for sale was entered into on 17 October 2000 and on 9 April 2001 the Council issued a conditional development consent to the proposed Subdivision. Condition 6 was couched in the following terms: "ACCESS 6. The developer must construct an all-weather accessway suitable for fire appliances from Araluen Avenue to the southern most dwelling on proposed Lot 2. The accessway must be a minimum of 5 metres wide and where possible a 2 metre strip each side kept clear of shrubs, bushes and long grass. In this regard tree branches must be lopped where they will obstruct a fire appliance. The accessway must be capable of supporting a fully loaded fire appliance (28 tonnes or 8 tonnes per axle). In this regard, the existing concrete strips may be incorporated into the design of the accessway on the provision that written certification is submitted from a suitable qualified Civil and/or Structural Engineer stating that the driveway strips are capable of supporting a fully loaded fire appliance (28 tonnes or 8 tonnes per axle). Details of the accessway, including plan views, long-sections, cross-sections and the effect of adjoining land must be submitted with the Construction Certification Application for approval by the Certifying Authority" (Judgment at [21]). 16On 14 September 2001 Mr McAlister and Mr Davis of the Council met with Mr Bell and Mr Wells of Forbes. The written record of the meeting includes the following: "Track options Two options for the emergency fire access track were presented to Council. The first option related to the track that Roland Foster has already started work on. The second option was to use the track that was originally proposed. Due to excessive grades neither option can adequately meet Council's condition requiring all weather access for a fire appliance. Both options have maximum grades greater than 24%. These grades are dictated by the topographical conditions of the site and cannot be reduced to meet the maximum grade of 16.67% required by the fire brigade. WCC conceded that there were no other suitable alternatives to the two options presented. Gary Mcalister [sic] suggested that [Forbes] submit an application to amend the consent to indicate that the total track width be reduced from 9m (as per condition 6 of the consent) to 4m. [This] figure was arrived at after discussions between Jeff Bell, Gary Mcalister [sic] and Hans Bootsma (NSWFB) at a previous site meeting. Gary Mcalister [sic] said that he would forward the designs to the fire brigade for comment". 17An internal email of Forbes dated 17 September 2001 included the following: "Subsequent to our meeting with Council on Friday, I met with Garry McAlister on Saturday. Garry has now spoken to Allan Doughton. Garry said that we do need to lodge for an amendment to the DA on 2 grounds:
THE JUDGMENT AT FIRST INSTANCE 30It is unnecessary to refer at length to the judgment at first instance as the arguments put to the primary judge by the vendors, then unrepresented, differed substantially from those put by their counsel on the appeal. Counsel for the vendors contended that his clients had submitted to the primary judge that it was impossible for them to comply with Condition 6 of the modified Development Consent. Whilst the transcript confirms this contention and the purchasers did not object to the point being raised on appeal, it is clear that it was by no means the focus of the vendors' arguments at first instance. In these circumstances it is not surprising that the point was not expressly referred to by the primary judge. 31It is sufficient to record the following findings made by the primary judge in response to the arguments raised at first instance. 32The primary judge was satisfied that the vendors did not use their "best reasonable endeavours" up to and after the Notice of Rescission was sent on 17 December 2004 and that by March 2004 they had abandoned their attempts to obtain registration. He found that they failed to take reasonable steps to obtain registration of the proposed plan of subdivision, inter alia, by not seeking "an amendment of the development consent in a timely manner in relation to the access conditions despite having been informed by the Council [that] this was an appropriate way to proceed" ([82]).
THE REQUIREMENT TO USE "BEST REASONABLE ENDEAVOURS" 33The addition of the word "best" to the expression "reasonable endeavours" raises the required standard to a level somewhat higher than that imposed by a simple "reasonable endeavours" obligation. However I do not consider that there is any significant difference, at least for present purposes, between the content of an obligation to use "best reasonable endeavours" and one to use "best endeavours". In Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; 156 CLR 41 Gibbs J explained the meaning of the latter expression as follows: "[A]n obligation to use 'best endeavours' does not require the person who undertakes the obligation to go beyond the bounds of reason; he is required to do all he reasonably can in the circumstances to achieve the contractual object, but no more" (at 64). In the same case Mason J referred to the extent of the obligation of best efforts (or endeavours) as "governed by what is reasonable in the circumstances" (at 91 - 2). Dawson J noted that the obligation does not impose a duty upon a party to disregard his or her own interests (at 143 - 4). 34To those statements may be added the proposition that a party subject to the obligation is bound to take "steps which a prudent, determined and reasonable [party], acting in his own interests and desiring to achieve [the results specified in the contract] would take" (Hawkins v Pender Bros Pty Ltd [1990] 1 Qd R 135 at 151 quoting Buckley LJ in IBM United Kingdom Ltd v Rockware Glass Ltd [1980] FSR 335 at 343).
THE PROPER CONSTRUCTION OF THE MODIFIED DEVELOPMENT CONSENT 35The vendors contended on appeal that the modified Development Consent of 13 December 2001 required construction of a road having no gradient steeper than 1:6, that this was impossible to achieve because of the topography of the land and that the vendors accordingly had not breached their obligation to use "best reasonable endeavours" because that obligation did not require them to attempt to achieve the impossible. Consideration of this argument requires determination of the proper construction of Condition 6 of the modified Development Consent, to which I now turn. 36The vendors contended that the condition must be construed against the background of the Council's Technical Policy 94/27 concerning rural residential development, although the vendors did not submit that it was not open to the Council to depart from this policy in a particular instance, if it thought fit. Under the heading "BUSHFIRE HAZARD MANAGEMENT STRATEGY" that policy stated that roads providing access to individual dwellings and groups of dwellings were required to have a maximum gradient of 1 in 6 (Clause 12.7). 37The vendors submitted that this policy gave effect to the New South Wales Fire Brigade ("NSWFB") Code of Practice which required ramp gradients on straight or curved ramps to have a gradient not exceeding 1 in 8 or 1 in 6, with a transition of 1 in 12 at each end (see [16], [23] above). However the vendors did not satisfactorily explain why the accessway required to be constructed in the present case should be regarded as a "ramp" when in ordinary speech a "ramp" is a short sloping surface connecting two different levels, not a road of considerable length. 38The vendors made the same submission concerning a document entitled "RECOMMENDED PRACTICE: NSWFB VEHICLE REQUIREMENTS (GUIDELINES FOR EMERGENCY VEHICLE ACCESS)" which was to the same effect (see [37] above). However the relevance of that document is similarly doubtful as it relates to "ramp" gradients. 39The vendors submitted that the first paragraph of Condition 6 imposed an obligation on the vendors to construct an accessway from Araluen Avenue to the dwelling on the proposed Lot 2, the entire length of which could be traversed by both emergency evacuation vehicles and fire trucks. The vendors then submitted that because the Council's Bushfire Hazard Management Strategy prohibited gradients exceeding 1 in 6 and the NSWFB policies indicated that fire brigade access required a maximum gradient of 1 in 6, Condition 6 implicitly required the construction of an accessway whose gradient did not at any point exceed 1 in 6. The vendors then asserted that because an accessway could not be built on the vendors' land with gradients that did not exceed 1 in 6, Condition 6 imposed an obligation that was impossible to fulfil, with the result that they did not have to attempt compliance. 40In my view however, the third paragraph of Condition 6 makes it plain that Condition 6 should not be so construed. That paragraph recognises, in the plainest of terms, that there may be stretches of the accessway, perhaps even extensive, that have a gradient steeper than 1 in 6. The requirement to place signs where gradients exceeded 1 in 6 would be nonsensical if such gradients were not permitted. As a result, contrary to the vendors' contention, there was no implicit requirement in the first paragraph of Condition 6 that the accessway not exceed 1 in 6 at any point. Whilst the vendors' construction would be arguable if the first paragraph stood alone, the ambiguity of that paragraph is resolved by the clear words of the third paragraph. 41That conclusion is equally dictated by the restriction as to user that the modified Development Consent required in relation to fire appliances (see [20] above). That provision also recognised, in the clearest of terms, that there may be sections of the accessway that have a gradient steeper than 1 in 6. 42The vendors further submitted that even if Condition 6 did not preclude gradients steeper than 1 in 6, construction of an accessway with such gradients would be pointless because fire appliances could not use it: the existence of a gradient steeper than 1 in 6 near the commencement of the accessway would deny access for fire appliances to all but an insignificant part of the road. Even if this were so, in my view that circumstance would not relieve the vendors of the obligation of complying with the condition as part of their "best reasonable endeavours" to obtain registration of the plan of subdivision. The condition on its proper construction was one with which the vendors were capable of complying. Its usefulness (or otherwise) was prima facie irrelevant and, in any event, a matter for the Council, although it was of course open to the vendors to draw the supposed inutility of the condition to the Council's attention and request a further amendment of the Development Consent. I note that the vendors did not contend, at least on the appeal, that they did not have to comply with Condition 6 because it imposed an unreasonable, uncontemplated financial burden on them. It may have been relevant to such an argument to consider whether, objectively speaking, compliance with Condition 6 would have been likely to serve any useful purpose. 43In any event, for a number of reasons, the evidence did not establish that such an accessway, if constructed, would necessarily have been useless. First, the documentary evidence of the NSWFB's requirements indicated that those requirements were concerned with ramps (see NSWFB Recommended Practice OS-E-98/02-04059 issued March 2003 p 4). The accessway in question here could not reasonably be described as, or as containing, a ramp. Secondly, the NSWFB documents recorded practices rather than inflexible requirements. For all the vendors knew, the NSWFB might have been prepared to depart from these practices in relation to the subject accessway. Thirdly, there is no apparent reason why the NSWFB practices might not have changed as time progressed. Fourthly, there was evidence in the proceedings to suggest that the NSW Rural Fire Service had jurisdiction in respect of the subject property (letter from NSW Rural Fire Service to the Council dated 19 March 2004). There was no evidence as to the NSW Rural Fire Service's access requirements. Whether such jurisdiction would have been exclusive of, or supplementary to, the jurisdiction of the NSWFB was not clear from the evidence. 44The vendors' alternative argument was that, even if Condition 6 was not to be construed in the manner they had proposed, the vendors reasonably understood it to require construction of an accessway with gradients that did not exceed 1 in 6. In my view, however, it is by no means clear that the vendors did adopt this construction. The better view in my opinion is that Mr Foster, on behalf of the vendors, concluded that the condition required construction of a road that would be unfit for its intended purpose, and useless for any other purpose. He expressed this view in his affidavit sworn on 12 May 2010 ([299]), although an answer that he gave in cross-examination (Transcript p 123 - 4) suggested otherwise. In any event, given the clear terms of the third paragraph of Condition 6 concerning signs and the provision of the modified Development Consent concerning a restriction-as-to-user, Mr Foster's alleged view as to the futility of the road was not a reasonable one and is therefore irrelevant for the purposes of considering whether the vendors used "their best reasonable endeavours" to have the plan of subdivision registered.
FAILURE TO SEEK AMENDMENT OF THE MODIFIED DEVELOPMENT CONSENT 45A further and alternative answer to the vendors' submission that they were not obliged to attempt compliance with a condition of the Development Consent with which it was impossible or pointless to comply is that if the vendors had acted reasonably they would have requested the Council to amend Condition 6 of the modified Development Consent. By not doing so, they failed in their obligation to use "best reasonable endeavours" to obtain registration of the proposed plan of subdivision. 46The exercise of reasonable endeavours, or in this case "best reasonable endeavours", does not always require a party to seek amendment of a Development Consent where the relevant contract is directly or indirectly conditional on compliance with the Consent and there is a problem with compliance. As in the case of an appeal against an adverse decision (see IBM United Kingdom Ltd v Rockware Glass Ltd [1980] FSR 335; O'Rourke v P & B Corporation Pty Ltd [2008] WASC 36; 36 WAR 197), whether a failure to seek amendment represents a breach of the obligation to use "best endeavours" will depend upon the circumstances of the case. As noted in Centennial Coal Company Ltd v Xstrata Coal Pty Ltd [2009] NSWCA 341; 76 NSWLR 129, "reasonable endeavours may require action that is not assured of success" (at [37]). 47In this case a number of circumstances suggested that there were good prospects of success for an amendment application. First, by a facsimile dated 19 December 2002, the Council indicated to Forbes that it had been under a misapprehension when it issued the modified Development Consent of 13 December 2001 (see [19] above). Its misapprehension was that the accessway could be built without any gradient exceeding 1 in 6 between Araluen Avenue and the northern-most dwelling. Secondly, the Council indicated to the vendors and Forbes on several occasions that it would be prepared to consider amending Condition 6 of the modified Development Consent. It did so in its email of 6 February 2002 (see [22] above), in its letter of 12 December 2002 (see [24] above), in its facsimile of 19 December 2002 (see in [25] above the reference to the development consent "in its current form") and in the conversation held on 20 December 2002 between Mr Davis and Mr Bell (see [26] above). Thirdly, in the September 2001 meetings referred to in [16] - [17] above, the Council had encouraged Forbes to submit an application for amendment of the Development Consent in its then form, and in the second of those meetings it had referred specifically to the "grades" of the accessway. The Council's issue of the modified Development Consent on 13 December 2001 was a co-operative response to the application for amendment that Forbes submitted after those meetings. However for reasons that were not explained by evidence from Forbes, or elsewhere, that application did not seek an amendment of the requirement concerning gradients said to be implicit in the existing Development Consent. Certainly there was nothing in the Council's response to the application that was submitted that suggested that an application to amend such a requirement would not receive sympathetic consideration. 48In these circumstances the exercise of "best reasonable endeavours" by the vendors required them to seek an amendment to the modified Development Consent.
CONCLUSION AND ORDERS 49For the reasons that I have given, the vendors failed to fulfil their obligation to use "best reasonable endeavours" to have the proposed plan of subdivision registered. As a result they cannot rely upon the absence of registration to terminate the contract. As their purported termination was unjustified, it amounted to a repudiation of the contract, entitling the purchasers to terminate. The primary judge's conclusion on this point was accordingly correct and the appeal must be dismissed with costs. 50MEAGHER JA: I agree for the reasons given by Macfarlan JA that this appeal should be dismissed with costs. 51TOBIAS AJA: I agree with Macfarlan JA.
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Foster
Hall