Hardy v Wardy

Supreme Court of NSW|2005-06-14|Before: Palmer J

CITATION : [1] Kierzkowski & Anor v. Goldsbrough; [2] Pinches & Anor v. Goldsbrough; [3] Tucker & Anor v. Goldsbrough [2005] NSWSC 597

CATCHWORDS : CONTRACT - RESCISSION - Whether vendor had done everything reasonable to procure registration of plan of subdivision within stipulated time.

[1] Peter Roman Kierzkowski - First Plaintiff [1] Roslyn Marie Kierzkowski - Second Plaintiff [2] Paul Pinches - First Plaintiff PARTIES : [2] Kylee Pinches - Second Plaintiff [3] Ian Tucker - First Plaintiff [3] Lee Tucker - Second Plaintiff [1], [2] & [3] Brettnall Thomas Goldsbrough - Defendant

FILE NUMBER(S) : SC [1] 1498/04; [2] 1516/04; [3] 1887/04

G.A. Sirtes, Ms S. Mason - Plaintiffs [1], [2] & [3] COUNSEL : J. White - Defendant [1], [2] & [3]

Morton & Harris - Plaintiffs [1], [2] & [3] SOLICITORS : Colin Biggers & Paisley - Defendant [1], [2] & [3]

1 The Defendant in each of these three proceedings is the registered proprietor of a substantial parcel of vacant land, being Lots 4 and 6 in Deposited Plan 1025204 located on the Pacific Highway at Conjola in New South Wales ("the Land"). The Plaintiff in each of the proceedings entered into a contract with the Defendant to purchase a lot in an unregistered plan of subdivision of the land. Save for the date of the contract, each of those contracts is in the same terms so far as is presently relevant. 2 Clause 28.2 of the contracts provides: "The vendor must do everything reasonable to have the plan [granting of subdivision creating title to the separate lots the subject of the contracts for sale] registered within 9 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." 3 Clause 28.3 relevantly provides that if the plan of subdivision is not registered within nine months the vendor can rescind, but only if he has complied with his obligations under clause 28.2. 4 The contracts for sale had been entered into in March and April 2003. On 27 October 2003 the Defendant's solicitor wrote to the solicitors for each of the Plaintiffs in terms which are identical so far as is presently relevant. The letters stated "Messrs Rygate and West as the engineering surveyors acting on behalf of our client originally contacted Integral Energy on 7 March 2003 in relation to the supply of electricity to the subdivision and a copy of the letter of instruction of 7 March 2003 is enclosed. Since that date, Messrs Rygate and West have made numerous phone calls to Integral Energy in an endeavour to obtain a design and construction plan and a quote for the cost of same in respect of the required electricity extension to the land the area of the subdivision.

A letter dated 29 September 2003 was finally received by Rygate and West on 13 October 2003 and a photocopy of this letter is enclosed which now indicates that Integral Energy will not be undertaking any further work in respect of the subdivision of our client.

This means that after a period of seven months our client is no further advanced in respect of the electricity supply to the subdivision and our client is now required to locate another company or authority who would be available to design and construct the electricity extension to the subdivision. Our client has always been of the belief that it was only Integral Energy that could carry out this work and it was only upon receipt of the letter dated 29 September 2003 from Integral Energy that our client has been advised by Rygate and West that the work is classified as contestable work in which Integral Energy previously competed in an open market.

This news is extremely disappointing to our client who must virtually start again in respect of this aspect of the subdivision and it will not be possible for the work to be commissioned and completed for registration of the subdivision within the time frame contained in the Contract.

In the circumstances, our client has now made the decision not to proceed with the subdivision at this point of time until he can reassess his financial position when he is able to determine the extent and cost of the work that will now be required for the extension of the electricity supply. Our client has decided to take no further action for a period of at least 12 months from this date having regard to his position in respect of the inactivity that has taken place over the past several months.

Accordingly, our client has no alternative but to rescind the Contract with your client and rather than wait until 25 December 2003 being the date referred to in clause 28 of the Contract, our client would prefer to rescind the Contract by mutual agreement at this point of time and to authorise an immediate refund of the deposit to your client.

We would be pleased to receive your advices at your earliest convenience." 5 On 2 February 2004 the Defendant issued notices of rescission to all Plaintiffs in the same terms. Each of the Plaintiffs seeks a declaration that the notice of rescission is invalid and an order for specific performance of the relevant contract. The Plaintiffs say that the Defendant failed to comply with his obligation under clause 28.2 to do everything reasonable to have the plan of subdivision registered within nine months from the date of contract so that he is not entitled to rescind under clause 28.3. 6 The Defendant says that he did everything reasonable as required by clause 28.2 so that he was entitled to rescind by 27 October 2003, when it had become obvious that it was impossible to have the plan registered within the nine month period prescribed by the contracts. 7 The Defendant also says that it is in issue whether the Plaintiffs are ready, willing and able to perform their respective contracts. The Plaintiffs have averred that they are ready and willing and able to perform their contracts. They have so asserted in their affidavits. They have not been cross examined on this evidence, nor has any evidence been adduced by the Defendant to suggest that the Plaintiffs' evidence in this regard should not be accepted. 8 Counsel nevertheless submits that the Plaintiffs must prove strictly in their cases in chief their financial ability to pay the purchase price so that their failure to do so leaves a critical gap in their cases. With respect to Counsel, I do not think that there is any substance in this point. In a vendor and purchaser suit for specific performance, the plaintiff purchaser usually alleges only that he is presently ready, willing and able to perform the contract and offers to pay the purchase price. It is not necessary for the purchaser to go further unless his ability to perform is specifically challenged by the vendor on the basis of some evidence: see Mehmet v Benson (1965) 113 CLR 295, at 315 per Windeyer J. 9 Finally, the Defendant says that the Court will in its discretion refuse specific performance of these contracts because enforcement of the decree would require constant supervision by the Court. I will return to that submission shortly. The facts

10 The facts are not in dispute and may be stated quite briefly. The Defendant acquired the Land in about 1983. It was then known as Lot 164 D.P. 755923, Portion 614 Parish of Conjola. 11 In about 1990 the Defendant formed the intention to subdivide the Land for sale and consulted a registered land surveyor, Mr Beasley, who drew up a proposed plan of subdivision. On 7 December 1990, Shoalhaven Council granted consent to the proposed subdivision. Nothing significant seems to have happened until 29 March 2001 when a plan of subdivision of the land was registered creating Lots 4 and 6 in Deposited Plan 1025204. The Defendant proposed to re-subdivide the Land for sale and in early 2003 he instructed Mr Beasley to act as Project Manager. 12 The Defendant is a businessman, but he himself has no experience in land subdivision. His evidence made it clear that he left virtually all of the management of the subdivision project to Mr Beasley, and became involved only in a minor way in August and September 2003. 13 On 7 March 2003 Mr Beasley, on behalf of the Defendant, lodged an application with Integral Energy for provision of an electricity network for the proposed subdivision. The application, which had been prepared by Mr Beasley himself, stipulated 30 June 2003 as the required date for the supply of electricity to the subdivision. The supply involved two stages: first, the design of the services and next the construction of the services on the Land. Mr Beasley applied to Integral Energy for it to carry out both stages. 14 On 18 March 2003 Mr Beasley advised the Defendant's solicitor, who was then in the process of preparing contracts for sale of lots in the proposed subdivision, that he expected that completion of the registration process would occur within six months. He continued: "… however a longer period, if obtainable, should be sought, say nine months to protect our mutual client against possible delays." 15 Both Mr Beasley and the Plaintiffs' expert on subdivision procedure, Mr Watkinson, said that to achieve final registration of the proposed plan of subdivision within nine months from the date of the first contract entered into by the Plaintiffs was feasible. 16 On 25 March 2003, the Defendant exchanged contracts for sale of Lot 4 in the proposed subdivision to Mr and Mrs Kierzkowski. On 17 April, the Defendant exchanged contracts for sale with Mr and Mrs Pinches in respect of Lot 4. On 23 April 2003, the Defendant exchanged contracts for sale with Mr and Mrs Tucker in respect of Lot 2. 17 At the time that he lodged the application dated 7 March 2003 with Integral Energy, Mr Beasley was aware that the electricity supply industry had been de-regulated so that neither Integral Energy nor any other supplier had a monopoly of the supply of the electrical services required to be provided prior to registration of the subdivision. In other words, there was a competitive market for the supply of the services which Integral Energy was being approached to supply. 18 As will have been seen from the letter from the Defendant's solicitor to the Plaintiffs' solicitors of 27 October 2003, the only basis upon which the Defendant stated that registration within the nine month period was impossible was the inability to procure electricity supply services within the contractually stipulated time. The sole issue in the case has really come down to this: whether the Defendant, by himself and through his agent Mr Beasley, has done everything reasonable to procure the supply of electricity services for the subdivision to enable the subdivision to be registered within nine months from the date of contract. 19 The evidence is that, after lodgement of the application for supply of electricity services with Integral Energy on 7 March 2003, there was no further correspondence between Mr Beasley or the Defendant and Integral Energy until 14 August 2003. 20 However, during that time Mr Beasley had a number of telephone conversations with a Mr Austin at Integral Energy, in which Mr Beasley inquired about the progress of the design work which Integral Energy was supposed to be doing for the subdivision. He says the first such telephone conversation occurred about four weeks after he lodged the application for services, that is, about early April. In that conversation Mr Beasley says he asked Mr Austin: "Where are the projects up to?" He asked Mr Austin not only about the Defendant's subdivision projects but about a number of other projects in which Mr Beasley was engaged. Mr Austin told Mr Beasley that, in relation to the Defendant's project, he had had a site inspection and was trying to find a suitable route for supply of the services. 21 Mr Beasley says that his next inquiry to Mr Austin was about four weeks later, in about early May. In that conversation Mr Beasley says that he asked Mr Austin, "Where is the design?", referring to the electricity design for the Defendant's subdivision. Mr Austin responded that the site was difficult and he was having trouble finding a route for supply. 22 Mr Beasley says that about three or four weeks later, which would be about early June or late May, he had another conversation with Mr Austin when he asked in relation to the Defendant's subdivision, "Where are you up to?" Mr Austin told him that Integral Energy had not progressed much further. 23 Mr Beasley says that about two weeks later he had another conversation with Mr Austin, in which he again asked Mr Austin, "Where are you up to?" Mr Austin responded that Integral Energy had not progressed any further. Mr Beasley said something to the effect that he needed a design fairly soon. This conversation would probably have occurred about late June. 24 Mr Austin says that about two weeks afterwards, probably mid-July, he again spoke to Mr Austin about the progress of work on the design for the Defendant's subdivision. He says Mr Austin told him that he had the project on his pile of things to do but had not yet got to it. Mr Beasley says that it probably would have been about two weeks later, that is, around early August, that he had another conversation with Mr Austin in which he sought an update regarding progress of the design. Mr Austin told him that Integral Energy had not got to it yet. Mr Beasley told him that the matter was getting urgent. 25 It was apparently only in September that Mr Beasley had a conversation with Mr Austin in which Mr Beasley said that he was extremely disappointed with the failure of Integral Energy to perform the design services, not only for the subdivision of the Defendant, but also for other subdivision projects on which Mr Beasley was advising. 26 On 17 September 2003 Mr Beasley sent by facsimile to Integral Energy a letter dated 15 September 2003. In that letter Mr Beasley sought clarification as to which existing projects Integral Energy would continue to undertake for Mr Beasley's various clients. Among those clients, numbering some eight, was the Defendant. In that letter Mr Beasley concludes: "We trust you will continue to complete these projects otherwise substantial delays with resulting cost implications will occur for our clients as it is not possible to engage other level 3 service providers at present." 27 On 29 September 2003 Integral Energy responded to that facsimile confirming that it would complete the electrical designs for six projects, amongst the eight specified by Mr Beasley in his facsimile of 17 September. Integral Energy concluded by saying that it would not be undertaking any further design work on the Defendant's subdivision. 28 Having received that letter, the Defendant came to the conclusion that he would, in effect, have to start again with another electricity supplier to procure a design for the subdivision and that it was impossible for that design work to be done and the construction of the consequent electrical works to be carried out in sufficient time to enable compliance with the nine months' deadline contained in clause 28.2 of the contract. The Defendant, in consultation with his solicitors, came to the conclusion that he ought therefore to rescind the contracts with the Plaintiffs pursuant to clause 28.3. 29 On 13 October 2003 the Defendant sent a facsimile to Mr Beasley seeking confirmation that: "… Integral Energy, at the time we entered the contracts (with the Plaintiffs) , was the sole utility able to supply the service and copies of letters, facsimiles and list of diary dates from the first instance you attempted to get pricing from Integral." 30 Mr Beasley responded by facsimile on 14 October 2003: "Integral Energy were not the only persons available to design and construct the electricity extension to the subdivision. This work is classed as contestable works in which Integral Energy were competing in an open market." And continued: "We had always continued to use Integral Energy as we have found them to be reliable and competitive and had no knowledge that they were contemplating leaving the contestable marketplace until September." 31 This evidence confirms the evidence which Mr Beasley gave in cross examination that, at all material times and certainly by the time he submitted an application to Integral Energy on 7 March 2003, he was aware that Integral Energy was but one of a number of possible competitors in the market for the supply of electrical services to the subdivision. Whether Defendant satisfied clause 28.2

32 As I have said, the Defendant left the management of this project almost exclusively to Mr Beasley. However, on 21 August 2003 the Defendant sent a facsimile to Mr Austin at Integral Energy. In that facsimile the Defendant referred to a number of conversations between Mr Beasley and Mr Austin regarding the supply of power to the subdivision. The letter continued: "In March this year Graham again contacted your office, as we believe that you are the only utility able to supply this service, and requested a formal quotation as we were to commence work shortly after that date.

We have regular correspondence with the office of Rygate & West and as late as yesterday they inform us that you are still not able to supply a quotation or give any indication as to your ability to erect and supply power to the subdivision.

We find this delay most extraordinary and ask your written reply as a matter of urgency." 33 It is clear from the evidence of Mr Beasley that at no time during his conversations with Mr Austin from April until September 2003 did Mr Beasley ask Mr Austin for a precise date or time frame within which the design work would be carried out by Integral Energy. At no time did he ask Mr Austin to give any form of guarantee or assurance that the design work would be done by a certain date, and at no time did he tell Mr Austin that if the design work was not done by a certain date, then the Defendant would have to seek electrical design and construction services elsewhere in the competitive market. 34 I turn now to the principles of law which are applicable. 35 Clause 28.2 of the standard form of contract has received consideration both at first instance by Bryson J in Hardy v Wardy ((2001) 10 BPR 19,055) and, on appeal, by the Court of Appeal in Wardy v Hardy (2002) 11 BPR 20,227. 36 In the Court of Appeal the learned President adopted the reasons of Bryson J (as he then was) at first instance as to the construction and effects of clause 28.2. At paragraph 8 of Bryson J's judgment his Honour said: "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."

At paragraph 14 of the judgment his Honour said: "The qualification relating to delays attributable to independent contractors was treated by Young J and by McLelland CJ in Eq as available where the obligation of the vendor which it qualified rested on general principle: in my opinion there is no room for the general principle or the qualification to operate where the parties' agreement expressly and explicitly states what the vendor's obligation is. Cl.28.2 is in very similar terms, although not identical with printed cl.A6.1 under consideration in Hawes v Cuzeno . In my respectful opinion it is even clearer in relation to cl.28 including cl.28.3.2 than it was in relation to cl.A.6 of the earlier standard form that it is the vendor's obligation to do everything reasonable to have the plan registered, and if that obligation is not complied with the vendor is not excused by showing that the non-compliance arises from some failure of an independent contractor. The principle in Woodcock v Parlby Investments has been regarded as involving an exemption in respect of failure of some person other than the vendor himself. It is not that principle which applies in the present case but the plainly expressed meaning of cl.28; doing everything reasonable to have the plan registered is something which the vendor has expressly promised to do and must do, and he must do it whether he does it himself or by the agency of someone else."

At paragraph 63 of his judgment the learned President agreed with the remarks of Bryson J. Giles JA and Ipp AJA agreed with the President. 37 It seems to me that when one considers the facts of this case in light of the principles enunciated in Wardy v Hardy the result must be clear. 38 It is not sufficient for the Defendant to say that he had entrusted the progress of the subdivision to a competent project manager, Mr Beasley, and that that is where his responsibility to do everything reasonable to procure subdivision ends. As is made clear in Hardy v Hardy, the onus is on a vendor under clause 28.2 to take a step which is recognised as reasonable to procure registration, and it does not matter that that step is to be taken, not by the vendor personally, but the vendor's agent. 39 In this case, the evidence of Mr Watkinson, which I accept, was that a period of three months maximum would have been regarded as reasonable for Integral Energy to have prepared the design work requested of it. He said that two months would be a normal period for such design work to be completed, but he was aware in early 2003 that Integral Energy was experiencing some delay and he would have regarded a further four weeks as sufficient to allow Integral Energy to do its work. After that, Mr Watkinson said, he would expect a developer to urge very strenuously on Integral Energy the necessity for the work to be done quickly, or else to take steps to procure the work to be done by someone else. 40 That proposition is self evident bearing in mind that the Defendant here was bound by clause 28.2 to do everything reasonable to procure registration within a tight but reasonable time frame of nine months. 41 The repeated inquiries which Mr Beasley made of Mr Austin and the lack of any satisfactory response should, if anything, have caused disquiet and prompted action; on the contrary, they seem to have elicited only complacent acceptance. The fact that, for example, by late June Mr Beasley was told by Mr Austin that Integral Energy had not progressed any further, despite three earlier telephone enquiries, ought to have prompted Mr Beasley either to have required a deadline from Mr Austin for the work to be done or to have recommended to the Defendant that the work be taken elsewhere because it was too risky to continue to rely upon Integral Energy. 42 It seems to me there has been a significant failure on the part of the Defendant through his agent, Mr Beasley, to urge on the progress of electrical design work when there were steps which could reasonably have been taken to achieve that end. It does not seem to me, therefore, that the Defendant has demonstrated that he has, either himself or by his agent, done everything reasonable to procure registration of the plan of the subdivision within the period provided in clause 28.2 of the contract. Accordingly, the Defendant was not entitled to rescind the Plaintiffs' contracts under clause 28.3. Relief

43 I come now to the question whether or not specific performance should be ordered. Mr J White of Counsel, who appears for the Defendant, says that this is the kind of contract performance of which would require the continuous supervision of the Court. A decree of specific performance, he says, would require the Court to supervise, for example, the completion of roadworks and the completion of electrical work. Mr White says that the Court, in its discretion, should refuse specific performance, leaving the Plaintiffs to their remedy in damages. 44 I am unable to accept that submission. What a decree of specific performance requires of a vendor is to do everything practicable to bring about the successful conveyance of the property to the purchaser in accordance with the terms of the contract. It may sometimes be the case that, despite best endeavours, the vendor is unable to procure the conveyance. In such case the vendor is not in breach of the Court's order and the Court is approached to determine what is the appropriate relief in the circumstances. 45 An order for specific performance in this case will require the Defendant to use his best endeavours to procure registration of the plan in accordance with his obligation under the contract. It does not require the Court to scrutinise for itself the plans for construction of roadworks or the plans for supply of electricity services. It requires the Defendant to do whatever is necessary in procuring and implementing such plans. 46 If, despite the Defendant's endeavours, the relevant authorities reject the plans or the designs provided for the subdivision, the matter can be re-visited if the Plaintiffs wish to maintain that specific performance is still possible. Alternatively, they may then elect for a remedy in damages. However, I do not see that at this stage there is any discretionary basis for not ordering specific performance of these contracts in the usual way. 47 Accordingly, there will be a declaration in the terms sought in paragraph A of the Plaintiffs' respective Statements of Claim, and an order for specific performance in terms of paragraph B of the Prayers.

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