CONTRACT - Sale of land - Specific performance - Units on proposed plan of subdivision - Contract subject to express and implied conditions to use best endeavours to register plan of subdivision - Whether vendors used best endeavours - Whether vendors entitled to rescind - Subdivision Act 1988, Parts 1, 2, 3 and 4; Planning and Environment Act 1987, Part 9 Division 2.

1 This appeal relates to a contract for the sale of a home unit 'off the plan'. There were numerous issues at the trial but the only real issue remaining is whether the respondent vendors, who were also the developers, complied with their obligation to the purchaser under the contract to use their 'best endeavours' to procure the registration of the relevant plan of subdivision in a timely way. The critical question is whether the vendors breached the contract of sale by not seeking to enter into a certain kind of statutory agreement with the local council with a view to expediting the registration of the plan. If so, they were not entitled to rescind the contract as they purported to do, and they were liable to the purchaser for specific performance or alternative relief. In our view, the vendors were in breach of the contract in that way, and this appeal should be allowed accordingly.

2 The factual history is set out in detail in the judgment of the learned trial judge.[1] As far as presently relevant, it is not in dispute. It will only be necessary to refer to limited aspects of the history.

3 On 18 September 2005 the second appellant, Mr Jonathon O'Dwyer, contracted with the first and second respondents, Mr Khay Tek Tan and his wife Gwek Lieng ('the vendors'), to purchase the home unit in question for $370,000 'off the plan'. A partial deposit was paid on that day. Issues arose at the trial about the payment of the balance of the deposit but those issues have been resolved. The balance of the purchase price was payable at the 'expiration of 14 days after registration of the Plan of Subdivision or issue of the Certificate of Occupancy, whichever shall be the later'. The unit was to be built on land in Mitcham owned by the vendors. It was to be one of six in the proposed development, and was designated 'Unit 6'. Later on, Mr O'Dwyer nominated his wife, the third appellant, as a co-purchaser. Later again, they nominated the first appellant, a company controlled by them, as a substitute purchaser. There were issues at the trial about the validity and effect of the nominations. Nothing of substance turns on those issues now. The appellants now accept that the only party entitled to enforce a contract for the sale of land is the original purchaser, not the original purchaser's nominee or any later nominee.[2]

4 The contract of sale was expressed to be 'subject to the Plan of Subdivision being registered'.[3] Further, special condition 7 of the contract, which was entitled 'Registration of the Plan of Subdivision', read as follows:

7.1 This Contract of Sale is conditional upon the Plan of Subdivision being approved by the Registrar of Titles within fifteen (15) calendar months from the Day of Sale.

7.2 If the Plan of Subdivision is not approved within fifteen (15) calendar months from the Day of Sale then either party shall have the right, prior to the Plan of Subdivision being approved as aforesaid by giving notice in writing to that effect to the other party, to rescind this Contract of Sale and thereupon all monies paid hereunder shall be refunded to the Purchaser without deduction and subject as aforesaid thereafter neither party shall have any action, right, claim or demand against the other hereunder or arising from or out of the rescission hereof or the failure of the Vendor to procure approval of the Plan of Subdivision.

7.3 The Vendor at its own expense and with all reasonable expedition will use its best endeavours to procure that the Plan of Subdivision is approved by the Registrar of Title [sic] within six (6) months from the Day of Sale.

It is common ground that the reference to the plan being 'approved' by the Registrar of Titles should be taken to be a reference to the plan being registered under s 22 of the Subdivision Act 1988. It is also agreed that the expression 'six (6) months' in special condition 7.3 was included in error and that the special condition should be read as though the expression 'fifteen (15) months' were substituted. The period of fifteen months from the day of sale expired on 18 December 2006. So, in relation to that period, the obligation to use 'best endeavours' arose by virtue of an express term of the contract.

5 It is also common ground that, by virtue of an implied term of the contract,[4] the vendors remained obliged after 18 December 2006 (at their own expense and with all reasonable expedition) to use their best endeavours to procure the registration of the plan of subdivision; and this obligation continued up until either party rescinded the contract or the plan of subdivision was registered.

6 The learned trial judge proceeded on the basis that the vendors' continuing (express and implied) obligation to use their best endeavours to secure registration of the plan of subdivision was discrete and was not affected by other obligations which the vendors may have had under the contract.[5] At trial the vendors themselves had referred to their obligation to use best endeavours as a 'discrete' obligation.[6] However, in their written outline of submissions on appeal, the respondent vendors contended that, although the obligation is 'discrete', it is to be read subject to a certain special condition[7] which, they say, 'stipulates the same time for the completion of building works (15 months)'.[8] This special condition entitled the purchaser, but not the vendors, to terminate the contract if the building works were not completed within 15 months of the day of sale.

7 At the hearing of the appeal the Court suggested to senior counsel for the vendors that neither this special condition nor any other term or condition of the contract qualified or reduced the vendors' best endeavours obligation. Senior counsel conceded this and expressly abandoned reliance on the point. Despite this, the vendors seem to assert, in a post-hearing written submission,[9] that the best endeavours obligation was tied to the progress of the building works on the unit and, in particular, to the special condition relating to completion within 15 months. If that is indeed what the vendors intend to assert in their post-hearing submission, it lies outside the relevant grant of leave. In any event, it has no support in the language of the contract or otherwise. It is not required in order to give the contract a 'businesslike' interpretation.[10] Under this particular contract,[11] the respondents' continuing (express and implied) best endeavours obligation was a discrete obligation.

8 The period of 15 months from the day of sale expired on 18 December 1986. As at that day, the plan of subdivision had not been registered. The vendors were experiencing problems with their appointed builder, Gumleaf Pty Ltd. It was not until nine months later (on 19 September 2007) that the vendors purported to rescind the contract pursuant to special condition 7.2. The plan of subdivision was ultimately registered on 1 April 2008. The plaintiffs' writ was issued one month later.

9 The appellants say that by 19 September 2007, and for a considerable period before that date, the vendors were in breach of their 'best endeavours' obligation. If that be so, then, subject to certain belated contentions of the vendors,[12] the vendors were not entitled to rescind under special condition 7.2.[13] Subject to any discretionary considerations, by the time of trial the purchaser would have become entitled to an order for specific performance of the contract of sale or alternative relief.

10 The appellants contend that in order to achieve timely registration of the plan of subdivision, the vendors (being also the developers) could and should have sought to enter into an agreement with the local council under s 173 of the Planning and Environment Act 1987 (a 'section 173 agreement').[14] They contend that by entering into such an agreement the vendors would have been able to obtain from the Council a statement of compliance under the Subdivision Act considerably sooner than they did; and that the vendors could thus have expedited the registration of the plan of subdivision. The appellants say that this became particularly appropriate - indeed vital - once the vendors began to encounter building delays, as they did from October 2006 onwards. It is common ground that the vendors made no attempt to enter into a section 173 agreement at any stage. According to the appellants, the trial judge should have held this to be a breach of special condition 7.3.

11 In denying that they were in breach of special condition 7.3, the vendors rely principally on a finding by the trial judge that a section 173 agreement was inappropriate for a building development (as distinct from a 'greenfields' subdivision, ie a subdivision not involving the construction of buildings); and on a related finding that if the vendors had sought advice on this matter from the solicitor who was acting for them at the time (which they did not), he would have given them advice along those lines.[15]

12 We turn first to the relevant statutory provisions. Nothing appearing on the face of the relevant provisions indicates that a section 173 agreement is inappropriate for a building development as distinct from a greenfields subdivision. Nor did the learned trial judge aver that any of the relevant provisions contained on its face any such indication.

13 During the two year period between the day of sale (18 September 2005) and the day of the purported rescission (19 September 2007), and for some years before that period, the legislative requirements for obtaining registration of a plan of subdivision were contained principally in the provisions of Parts 1, 2, 3 and 4 of the Subdivision Act 1988 as they then stood.[16] However, those provisions were complemented by the then provisions of Division 2 ('Agreements') of Part 9 of the Planning and Environment Act 1987, including, in particular, s 173 thereof.

14 By virtue of Part 1 of the Subdivision Act 1988 - in particular, s 5(1) - the subdivision of the land in question was required to be done in accordance with the provisions of that Act. So far as presently relevant, s 5(3) of the Act provided:

(3) A person who wishes to have a plan registered must-

(a) prepare a plan in accordance with this Act and the regulations; and

...

(c) submit the plan to the Council for certification together with an application in the prescribed form; and

(d) obtain a statement of compliance from the Council;

(e) lodge the certified plan at the Office of Titles for registration together with an application in the prescribed form; and

(f) in addition to any other fee payable under this Act, pay to the Registrar the fee, if any, prescribed under the Survey

Co-ordination Act 1958 for the maintenance of the survey control network.

15 In the present case, the principal requirements were, in effect, preparing the plan of subdivision, getting it certified by the Council, obtaining a statement of compliance from the Council, and then lodging the certified plan and the statement of compliance with the Registrar of Titles together with an application for registration. These requirements were elaborated in Parts 2, 3 and 4 of the Subdivision Act and in the regulations.

16 Turning to the provisions contained in Part 2 of the Subdivision Act, s 6 provided, so far as relevant, that the Council was required to certify a plan within the prescribed time (usually 21 days from receipt of the plan[17]) if:

a) the plan complied with the Subdivision Act and the regulations;

b) the plan complied with those requirements of the planning scheme and of any permit that related to the boundaries of roads, lots, common property and reserves and to the form and content of the plan; and

Generally speaking, certification was conclusive evidence that the provisions of the Subdivision Act relating to certification, including any preliminary requirements, had been complied with.[18]

17 Part 3 of the Subdivision Act contained various provisions relating to plans, including provisions expressly linked to Division 2 ('Agreements') of Part 9 of the Planning and Environment Act 1987 which, as already indicated, included s 173 of that Act. In particular, in relation to cases where works were required by or for a Council or relevant authority in order to provide roads or public utility services that were in due course to become the responsibility of the Council or a referral authority, s 17(2)(c) of the Subdivision Act provided that the Council or referral authority might enter into an agreement with an owner or applicant under which works or other things required by the planning scheme or permit might be completed after registration, or might enter into an agreement with an owner or applicant securing compliance with the requirements of s 20A of the Act (which related to surveyors' markings), or might do both. Subsection 17(3) provided in effect that, subject to s 17 as a whole, Division 2 of Part 9 of the Planning and Environment Act 1987 (which included s 173 of that Act) applied to an agreement under s 17(2)(c) of the Subdivision Act.

18 It may be that, in relation to the particular subdivision proposed by the vendors, there was no occasion to provide public roads or public utility services of the kind envisaged by s 17 of the Subdivision Act. However, s 17 was not the only section in Part 3 of the Subdivision Act that made explicit provision for developers to enter into agreements with the local Council concerning plans of subdivision. After certification of the plan (which in this case occurred on 2 November 2006), the next step for a developer to take with a view to registration was to obtain a statement of compliance from the Council. For that purpose, an applicant needed to pay any applicable[19] open space contribution.[20] Otherwise, the relevant requirements were dealt with by ss 21 and 21A of the Act. So far as relevant, s 21(1) provided that:

... a Council must issue a statement of compliance to the applicant in the prescribed form as soon as possible after -

(a) the applicant has given it the prescribed information; and

(b) it is satisfied that -

(i) all requirements of and under this Part and the Planning and Environment Act 1987 that relate to public works have been met; or

(ii) there is an agreement to secure compliance with those requirements.

No information was prescribed for the purposes of s 21(1)(a). The expression 'public works' in s 21(1)(b) had a meaning defined by s 3 of the Act as follows:

public works means -

(a) the provision of roads, reserves, open spaces or services within a subdivision; or

(b) fencing, landscaping, and road works outside the subdivision for roads, reserves or public open space related to the subdivision; or

(c) works for sewerage, drainage, water supply, power, gas or telephone to connect the subdivision to the system serving properties outside it, excluding works to connect any particular property to the system for the subdivision; or

(d) prescribed works;

No works were prescribed for the purposes of para (d) of the definition of 'public works'. Subsection 21(3) provided in effect that a Council could not refuse to issue a statement of compliance because a requirement made by or under the Building Act 1993 remained outstanding. Section 21A provided for the enforcement of agreements made under s 21(1)(b)(ii). For that purpose it expressly incorporated Division 2 of Part 9 of the Planning and Environment Act 1987 (which included s 173 of that Act), subject only to certain immaterial exceptions.

19 Turning to Part 4 of the Subdivision Act, s 22 provided, so far as relevant, that the Registrar might register a plan if it appeared to the Registrar that the plan had been certified by the Council and the certification remained valid, and the applicant provided a statement of compliance.

20 Although the Subdivision Act 1988 was not enacted at precisely the same time as the Planning and Environment Act 1987 they were enacted as interrelated pieces of legislation in many respects and they became increasingly intertwined as amendments were made to them.[21] As already mentioned, Part 3 of the Subdivision Act twice expressly picked up and applied Division 2 of Part 9 of the Planning and Environment Act, which included s 173 of the latter Act. Section 173 itself provided:

173 Responsible authority may enter into agreements

(1) A responsible authority may enter into an agreement with an owner of land in the area covered by a planning scheme for which it is a responsible authority.

(2) A responsible authority may enter into the agreement on its own behalf or jointly with any other person or body.

(3) A responsible authority may enter into an agreement under subsection (1) with a person in anticipation of that person becoming the owner of the land.

(4) Despite anything in this Division, if an agreement entered into with a purchaser in anticipation of the purchaser becoming owner is registered by the Registrar of Titles, it does not bind the vendor unless the vendor assumes the purchaser's rights and obligations under the agreement.

The agreement-making power conferred by this section was regulated by the succeeding provisions of Division 2 of Part 9 of the Planning and Environment Act, namely ss 174-184 (inclusive). There was nothing in those provisions (or in any other relevant statutory provisions) to suggest that the apparently broad power conferred by s 173 and picked up by the Subdivision Act was intended to be confined to 'greenfields' subdivisions which did not involve the construction of buildings or that the power was otherwise inapplicable or inappropriate to be exercised in relation to a development of the kind pursued by the vendors. Indeed, as the appellants submit, there were numerous express references within Division 2 of Part 9 of the Planning and Environment Act to the s 173 power being applicable in relation to the proposed 'development' of land.[22] The Act defined 'development' to include not only the subdivision of land but also the construction and alteration of buildings, the demolition of buildings and the placing of buildings on land, among other things.[23]

21 On the face of the legislation, then, a potential method of expediting the registration of a plan of subdivision for a development of the present kind was to enter into a section 173 agreement with the local council. The relevant statutory

21 provisions were not obscure or difficult to find. Indeed they were centrally placed in the principally relevant legislation.

22 In their statement of claim,[24] the appellants (the plaintiffs below) gave no particulars of the vendors' alleged failure to use their best endeavours to procure the timely approval of the plan of subdivision. However, witness statements filed on behalf of the plaintiffs prior to the trial made it clear that they would be relying on the vendors' omission to pursue a s 173 agreement with the Council as a failure to use their best endeavours. This assertion was especially clear from the two expert witness statements of Peter John Tyrell, a licensed surveyor, dated 27 July 2009 and 3 March 2010 respectively. It could also be discerned from the expert report of Ian Johnson, a building consultant, dated 1 March 2010. Counsel for the plaintiffs emphasised the matter in his opening.[25] He asserted that it was apparent from the vendors' witness statements that they had known about the availability of section 173 agreements during the relevant period.[26] He further asserted that the defendants had not said why the pursuit of a section 173 agreement could not reasonably have been expected of them.[27] As the trial judge later said: 'The reality is that the plaintiffs chose to issue the proceeding relying essentially upon the failure of the defendants to enter into a s 173 agreement.' [28]

23 The vendor defendants had plenty of time to consider and respond to the plaintiffs' assertions concerning the matter of a section 173 agreement. The plaintiffs' opening had been heard on 11 March 2010. On the next day the further hearing of the proceeding was adjourned for three months as a result of an application by the vendors to amend their defence in an unrelated respect.

24 The defendants did not at any stage file any expert witness statement dealing with the question of the appropriateness, applicability or effectiveness, in the circumstances, of a section 173 agreement, much less an expert witness statement expressing the opinion that such an agreement would have been inappropriate, inapplicable or ineffective in the circumstances.

25 The plaintiffs called Mr Tyrell, a licensed surveyor, to give evidence on this topic and other topics. He adopted his second expert report as true and correct, saying that it included some 'additions' to his earlier report.[29] In his oral evidence in chief he said that entering into a section 173 agreement was an option that the vendors could have exercised.[30] He said that he himself had been involved in obtaining the registration of 'thousands' of plans of subdivision.[31] He gave detailed descriptions of the section 173 agreement process and its relationship with the building process.[32] He said that the use of section 173 agreements was common and was, indeed, preferred by the relevant local council, namely the Whitehorse Local Council.[33] His evidence in these respects was not challenged in cross-examination. Nevertheless his Honour placed little or no weight on Mr Tyrell's evidence, for reasons to which we will return.

26 Evidence relating to section 173 agreements was also given by one Geoffrey Green, the Manager of City Planning for the City of Whitehorse. Mr Green had been called by the vendors themselves. It seems that, in part at least, the vendors called him with a view to dispelling an impression that may have been conveyed by a provision of the planning permit for the development which expressly referred to the matter of a section 173 agreement. It read:

Prior to certification of the Plan of Subdivision, the owner of the land shall enter into a s 173 agreement with the responsible authority which covenants that:

(a) the land will be developed in accordance with the plans and the conditions of the development permit;

(b) prior to occupation of any new dwelling proposed for the site, the common property driveway and drainage infrastructure (internal to the site) shall be fully constructed;

(c) all costs associated with the preparation and registration of the agreement shall be borne by the owner.

Should a s 173 Agreement be entered into for the development of this site, all construction works, tree retention and drainage works will be covered by the Agreement. This requirement will only be necessary if separate titles are required prior to completion of the development.

Whereas the purchasers had contended that this provision of the permit made it mandatory for the vendors (as the permit holder) to enter into a section 173 agreement with the Council, the vendors led evidence from Mr Green that the intent was merely to provide an option to the permit holder, and that it was not the Council's practice to insist that permit holders enter into section 173 agreements.[34] Nevertheless, in answer to questions asked variously by the vendors' counsel, the purchasers' counsel and the learned trial judge, Mr Green gave evidence, which his Honour accepted and recounted, along the following lines:

(a) The statement of compliance could be issued by the Council on two separate bases, namely -

(i) with Council approval, a section 173 agreement and accompanying agreements with service providers; or

(ii) actual compliance with the conditions of the planning permit;[35]

(b) A section 173 agreement has benefits for both the developer and the Council. From the Council's point of view the benefit is that the section 173 agreement ensures that the subdivision is directly linked to the development permit and that the subdivision only occurs in accordance with the permit;[36]

(c) A section 173 agreement gives the Council's planning conditions 'bite' because the agreement is registered on the title and therefore, as Morris J pointed out in Solid Investments Australia Pty Ltd v Greater Geelong City Council,[37] the agreement attaches to each allotment thus imposing a separate obligation on each purchaser;[38]

(d) The benefit to a developer is that a section 173 agreement enables the Council to issue a statement of compliance prior to the completion of the units. Sub-divided lots can be sold with the section 173 agreement, with a covenant attached, to purchasers before construction has commenced - in some cases 'before a sod is turned'.[39]

(e) The Council itself is prepared to draw up a section 173 agreement. It is in a standard template which enables the conditions of the planning permit to be inserted within the agreement. The agreement runs for some 7-10 pages on average and can be issued at any time after the issue of the development permit or the planning permit;[40]

(f) A statement of compliance would not be issued unless there was approval from the service providers identified in the planning permit. However this does not require the actual works to be performed. Rather the developer is required to have an agreement or undertaking with each particular provider that satisfies the Council;[41]

(g) Agreements with the relevant service providers are a regular occurrence and are entered into so that, in combination with the section 173 agreement, the Council would issue a statement of compliance;[42]

(h) Compliance with the conditions of the planning permit is routine and in this case there appeared to be no impediment to the vendors entering into an agreement with the service providers.[43]

27 Immediately after referring to these aspects of Mr Green's evidence, the learned trial judge said:

1. No contradictory evidence was led on this issue and Mr Green is experienced in dealing with such applications. I accept his evidence on this point and have concluded that it would have been possible for the vendors to conclude a s 173 agreement with the Council and that appropriate agreements or undertakings could have been entered into with the various providers which would have satisfied the Council in relation to the issuing of a statement of compliance.
2. Although there was no specific evidence on this issue (apart from that of Mr Tyrrell), I am prepared to infer that it would have taken a number of months to sort out a s 173 agreement with the Council and also to obtain the necessary agreements or consents from the service providers. It may be that this could have been carried out prior to the measuring up in October, but in any event I accept that it would have been possible for a s 173 agreement and accompanying agreements with service providers to have been entered into by approximately January 2007, well before rescission of the contract.

28 In other words, his Honour was satisfied that the vendors could have entered into a section 173 agreement with the Council and that, had they done so, a statement of compliance would have been issued and registration of the plan of subdivision would have been achieved by about January 2007 or shortly thereafter. That point of time fell outside the initial 15 month period but well inside the

28 extended period that arose by reason of the vendors' implied best endeavours obligation.

29 Nevertheless the learned trial judge held that this conclusion was not determinative of the issue. He reasoned that whether the vendors were in breach of their best endeavours obligation depended on whether they should have considered entering into a section 173 agreement; and, assuming that they should have considered it, whether the vendors acting reasonably should then have entered into such an agreement.[44]

30 His Honour stated that the true issue was an objective one and was not resolved by an analysis of Mr Tan's state of mind.[45] His Honour rejected Mr Tan's evidence that he did not know about section 173 agreements at the relevant time, but accepted that Mr Tan focused solely on completing the works before obtaining a certificate of compliance.[46] 'Wrongly', his Honour said,[47] Mr Tan regarded his only obligation as being to complete the construction works as rapidly as he could. The judge accepted that the vendors should have considered the possibility of entering into a section 173 agreement. His Honour said:

I think that a reasonable developer in the vendors' position, turning his or her mind, to the obligation under the contract was obliged to seek professional advice. Given the conditions of the permit, it should have been realised that s 173 was a possible alternative route to obtaining registration of the plan and the vendors should have sought professional advice about its application to the project. I also accept the submission put by [counsel for the plaintiffs] that as the contract with Gumleaf had been extended to 500 days, then there was a further reason to consider whether a s 173 agreement was a reasonable alternative to awaiting the completion of the construction of the unit.[48]

31 His Honour then asked himself what would a developer in the position of the vendors have done after receiving professional advice. His Honour asked: 'Would a

31 developer, acting reasonably, have entered into a section 173 agreement?'[49] His Honour then turned to some of the evidence which had addressed this point.

32 First, his Honour noted that Mr Tyrell had said that it was appropriate for a developer in the vendors' position to enter into a section 173 agreement.[50] However, for reasons which had been set out earlier in his Honour's judgment[51] and which had culminated in the rejection of Mr Tyrell's credibility as a witness, his Honour ruled that Mr Tyrell's opinion could be put to one side. Before us, counsel for the appellants said that they would not try to restore the general credibility of Mr Tyrell. However, it is noteworthy that the learned trial judge's criticisms of Mr Tyrell did not focus on what Mr Tyrell had said about the matter of a section 173 agreement. Rather, they related to what Mr Tyrell had said in his second report about the dilatoriness of the vendors generally, being comments that departed from his first report. His Honour was highly critical of Mr Tyrell for failing to disclose that the change had been made as a result of a conversation between Mr Tyrell and the purchasers' solicitor. However, as the appellants point out, the fact remains that counsel for the vendors did not challenge by cross-examination anything said by Mr Tyrell as to the appropriateness of a section 173 agreement. That very omission, itself, is eloquent.

33 Next, his Honour referred again to the evidence of Mr Green (having already said that he accepted Mr Green's evidence). His Honour said this:

Secondly, Mr Green explained that the Council was highly receptive to the use of section 173 agreements. He also agreed that he had seen examples of developers entering into a section 173 agreement where there had been delays in construction in a situation where the contract required approval by the Registrar within a certain period. As he put it "that's an option they have".[52]

34 Crucially, his Honour then turned to the evidence of a solicitor, Mr Fraser, who had been the principal of the firm that had been acting for the vendors at the relevant time. Mr Fraser himself had not been actively involved in the matter. He had not personally taken part in the drafting of the contract of sale.[53] Indeed he had not handled the file at all except in relation to the vendors' dispute with their builder, Gumleaf Pty Ltd.[54] Mr Fraser had delegated the relevant work to others employed by the firm, namely Mrs D'Amico and Mr Tomatsu.[55] Both still lived in Melbourne but neither was called by the vendors.[56] The vendors had not consulted with Mr Fraser or anyone else at his firm about the prospect of a section 173 agreement at any time.[57] No Order 44 (expert opinion) statement was filed with respect to the evidence of Mr Fraser. The vendors professed to be calling Mr Fraser as a witness of fact only. Although Mr Fraser had been a conveyancing solicitor for some 40 years, he acknowledged that he had only done 'some' subdivisions, and 'not so many in recent years because I work specifically in the aged care area in relation to aged care facilities, but previously I acted for a lot of builders, yes'.[58] Nevertheless his Honour said that he regarded the evidence of Mr Fraser as being 'highly significant given his expertise as a conveyancing solicitor for many years in the Box Hill area'.

35 The learned trial judge set out some lengthy passages from Mr Fraser's evidence.[59] His Honour took Mr Fraser to be expressing the view that the use of a section 173 agreement in the context of a development of the relevant kind would have been extraordinary.[60] His Honour continued:

1. The clear thrust of Mr Fraser's evidence was twofold. Firstly, that a s 173 agreement was inappropriate for this type of development and, secondly, that he maintained this view notwithstanding the obligation to exercise reasonable endeavours to secure registration of the plan of subdivision.
2. I accept the evidence of Mr Fraser as to the limited use of a s 173 agreement in a development such as this. Whilst in recent years he has not been involved in advising as to developments, he was an expert conveyancing solicitor whom the vendors, acting reasonably, had chosen to act on their behalf. Moreover, he is an experienced solicitor in this area, his knowledge of the subject and his familiarity with the vendors' position placed him in a particularly advantageous position to form an overview of what was and was not appropriate in the circumstances. In summary, Mr Fraser's opinion is to be preferred over that of any other witness, including Mr Green, who gave evidence from the perspective of a representative of the Council not from a solicitor vastly experienced in conveyancing, and providing advice to clients day in, day out. Indeed, I did not take Mr Green's evidence to be advocating that in this particular case a s 173 agreement was desirable. Rather, it was an option.
3. Mr Fraser's evidence, in my view, disposes of the criticism made by counsel for Mr O'Dwyer of the vendors' failure to enter into a s 173 agreement. Whilst I accept that the vendors failed to consider this option, as they should have, it was inevitable that if Mr Tan had discussed his matter with his solicitor, Mr Fraser would have told him, initially, to continue with the works and upon the default of Gumleaf to continue to try and obtain a new builder and complete the construction of the units as quickly as possible. It was clear that he would not have given him advice to enter into a s 173 agreement at any time (either prior to the default of Gumleaf or afterwards).
4. Accordingly, I conclude that the vendors' failure to enter into a s 173 agreement was not unreasonable and was not in breach of either the express or implied term.

36 With respect, we do not think that his Honour's conclusion that the vendors' failure to enter into a section 173 agreement did not breach the contract of sale can be upheld by reference to Mr Fraser's evidence or otherwise. As we have already mentioned, Mr Fraser acknowledged that his experience in relation to subdivisions was limited, especially in recent times. Mr Fraser made a number of other significant concessions. He had not seen the relevant planning permit (with its reference to a section 173 agreement) at the time in question.[61] Indeed he had not considered the permit before coming to court to give evidence.[62] A possible explanation for the fact that there was no indication on the file that anyone at his firm had spoken to Mr Tan about a section 173 agreement was that 'there would be a surveyor involved in that side of it';[63] and the matter of a section 173 agreement would 'normally be handled' by the surveyor or planner.[64] In Mr Fraser's experience, the permit would be obtained by a surveyor or other consultant; and the permit was something 'which they would be concerned with' (including explaining its effect to the client).[65] 'Sometimes solicitors do it, sometimes they don't'.[66] Mr Tan had sought no advice from Mr Fraser about Mr Tan's best endeavours obligations under clause 7.3 of the contract. Had Mr Tan done so, Mr Fraser would like to think that he would have researched the matter.[67] The proposition that obtaining earlier approval of the plan of subdivision would satisfy Mr Tan's obligations under clause 7.3 'wasn't a matter that was in my thoughts'.[68] Had Mr Fraser been asked the legal question, he would certainly have researched the matter 'and I believe I would have come to a somewhat similar view to your own namely that that's a discrete obligation'.[69] As to the practical aspects, 'very often the solicitor is not in fact involved in this side of it'.[70] It is possible that Mr Fraser would have consulted with Mr Simpson, the surveyor retained by the vendors, to get an answer to the planning aspect.[71] The reference in the planning permit to a section 173 agreement was 'staring you in the face'.[72] If a 'very legalistic question' had been asked of Mr Fraser, the correct response would have been that one means by which Mr Tan could satisfy his obligations under clause 7.3 would be by exploring a s 173 agreement.[73] The firm may have checked with the surveyor, but more likely would have looked up the relevant legislation.[74]

37 Ultimately Mr Fraser made the following further concessions which were not referred to by the learned trial judge but which we think are so significant that they should be set out verbatim, viz-

I suggest to you that it is very usual for developers to enter into 173 agreements. Is that a question you're able or qualified to answer? - - - Well, in my experience it's very common but, again, it's most common in areas where you are subdividing vacant land. You almost invariably have a section 173 agreement when you're subdividing vacant land.

But if I were to tell you that Mr Green gave evidence that developers of actual building routinely enter into these agreements you wouldn't have any cause to doubt ... ? - - - Well, I'm not in a position to dispute the figures now and I've already given evidence that I don't deal in subdivisions myself as much now as I used to.

38 In the light of all these concessions, we think that his Honour should not have used Mr Fraser's evidence to discount, as he did,[75] the clear evidence of Mr Green[76] to the effect that the Whitehorse Council routinely entered into section 173 agreements in relation to building developments. We note that Mr Green said that a section 173 agreement was not merely an 'option' for a developer in the position of the respondents, but was a 'logical option'.[77]

39 Further, his Honour made no reference to the pertinent evidence of the vendors' own surveyor, Mr Simpson, given under cross-examination, to the effect that some councils, including the City of Whitehorse and the City of Maroondah, automatically included a condition relating to a section 173 agreement in planning permits;[78] that 'it's almost a standard condition';[79] and that sometimes the permit imposed a mandatory requirement for a section 173 agreement.[80] It is tolerably clear that Mr Simpson was not confining his remarks to greenfields developments. Greenfields developments would have been few and far between in the City of Whitehorse. And Mr Simpson had said that 'a lot of our clients are builders'.[81] Counsel for the vendors did not re-examine Mr Simpson with a view to eliciting evidence that his remarks were intended to be confined to greenfields developments. Indeed counsel did not re-examine Mr Simpson at all.

40 As the learned trial judge initially recognised, the question whether the vendors complied with their best endeavours obligation is to be determined on an objective basis. It would be no defence for them to say that they relied on legal advice in not pursuing a section 173 agreement if that legal advice were objectively wrong.[82] The situation is a fortiori where the putative erroneous advice was not sought or given at all. Indeed we would accept the appellants' submission that his Honour's conclusion that the incorrect advice would have been given by Mr Fraser was against the evidence and the weight of the evidence. As we have mentioned, Mr Fraser accepted in cross-examination that the obligation to procure the Registrar's approval was a discrete obligation; and that had he been consulted by the vendors he would have looked closely at the special condition and might have obtained advice from others.

The vendors were in breach of their obligation to use best endeavours

41 On the proper analysis of the evidence, the vendors were in breach of their obligation to use best endeavours. An obligation to use best endeavours to achieve a contractual object requires the obligor to do all he or she reasonably can do in the circumstances to achieve that contractual object.[83] The words 'best endeavours' mean what they say - best endeavours, not second-best endeavours; and so, within reasonable limits, they require the obligor, broadly speaking, to leave no stone unturned to achieve the object in view.[84]

42 In IBM United Kingdom Ltd v Rockware Glass Ltd,[85] in the context of a covenant to use best endeavours to obtain planning permission, Buckley LJ described the obligation as requiring a vendor to do what an owner who is anxious to obtain permission would do to achieve it:

What would an owner of the property with which we are concerned in this case, who was anxious to obtain planning permission, do to achieve that end. The formula which has been suggested and which would commend itself to me is that the plaintiffs as covenantors are bound to take all those steps in their power which are capable of producing the desired results, namely, the obtaining of planning permission, being steps which a prudent, determined and reasonable owner, acting in his own interests and desiring to achieve that result, would take.[86]

On that basis, his Lordship held that the obligation would include an obligation to appeal from an initial refusal of permission so long as the circumstances were such as to indicate that there was a reasonable chance of success.

43 Similarly, in Western Australia, in Paltara Pty Ltd v Dempster,[87] Malcolm CJ and Pigeon J held that an obligation to use best endeavours to obtain subdivisional approval in a contract for the sale of land required the obligor company to do what reasonably could be done in the circumstances, and that what could reasonably be done was whatever a reasonable and prudent board of directors acting properly in the interests of their company would do in the circumstances of the case.

44 To the same effect, in Hawkins v Pender Bros Pty Ltd,[88] the Full Court of the Supreme Court of Queensland approved the formulation that a covenant to use best endeavours to obtain building and town planning approvals required the obligor conscientiously to apply itself to the task of securing approval with the vigour to be expected of it if it were prudently attempting to secure its own interests, and to continue so to do until it should reasonably judge in the circumstances that further efforts would have such remote prospects of success as to be likely to be wasted.

45 In a similar context, both IBM and Hawkins were recently referred to with approval by the New South Wales Court of Appeal in Foster v Hall.[89]

46 In Western Australia in O'Rourke v P & B Corp Ltd,[90] Martin CJ sitting at first instance concluded after a thorough and careful consideration of relevant authority that the scope of the obligation to use best endeavours to achieve a planning approval is to be assessed in accordance with what had been said in Paltara, with the result that:

if a prudent and reasonable person, acting in his or her own interests and determined to obtain approval, would have pursued an appeal, the obligation to use best endeavours would extend to an obligation to appeal. Construed in this way, there does not appear to me to be any tension between the decision in IBM United Kingdom Ltd and the decisions in Paltara and Ross in this court.

47 It is well established that a party wishing to rescind cannot take advantage of its own ineffective or inefficient measures to comply with its contractual obligations, and that where a vendor's default has deprived the purchaser of a 'substantial chance' that the condition would have been fulfilled, the vendor cannot exercise the right of recission.[91]

48 Judged according to these tests, we consider that it is plain that by failing to pursue a section 173 agreement with the Council, the vendors did not use their best endeavours to obtain registration of the plan of subdivision during the relevant period.

49 It therefore becomes unnecessary to consider whether the learned trial judge was correct in his determination that the vendors otherwise took all reasonable steps to obtain registration of the plan of subdivision prior to the rescission of the contract.[92] On the other hand, whilst his Honour determined that the vendors did not act unreasonably in taking the steps they took to achieve completion of the development, it is plain that the vendors were at all times advancing their own interests without regard to the interests of the purchasers the protection of which was the object of special condition 7.3. For example, as the appellants submit,[93] the vendors adopted a commercial strategy of terminating contracts in order to obtain higher prices.[94] This illustrates the vendors' focus on their own commercial interests in a way which was quite inconsistent with the requirement to use best endeavours as explained by Martin CJ in O'Rourke.[95] As the appellants submit, this is an obligation to take the steps which a prudent and reasonable owner acting in his or her own interests and determined to obtain approval would take.

50 The vendors submit[96] that to enter into a section 173 agreement just for the sake of obtaining individual title where settlement could not be effected because the building works were not completed does not make sense in business terms, especially in the circumstances of this case where the builder, Gumleaf, was slow in its building works and apparently having difficulties. However, once again, that is to look at the matter from the point of view of the vendors' interests only. It ignores the vendors' discrete obligation to the purchaser under special condition 7.3 and the purchaser's interest in having the option to insist on contractual performance.

51 The same observations apply to the vendors' reference[97] to his Honour's findings about the financial difficulties faced by the respondents as a result of Gumleaf's failure. In that respect the vendors complain that they would have had to pay $35,000 for an open space contribution and also a bond to the local council to ensure fulfilment of the section 173 agreement. However, as the appellants point out, the respondents were going to be required to pay the open space contribution of $35,000 sooner or later in any event. The vendors in fact made the payment soon after their purported termination of the contract of sale.[98] Further, the vendors' reference to the payment of a bond is contrary to Mr Green's evidence. Mr Green gave evidence that the council had no practice of asking for a bond.[99] Section 175 of the Planning and Environment Act 1987 permits a council to require the payment of a bond as a condition of a section 173 agreement but it does not require the council to impose such a condition. As the appellants submit, there was no evidence to justify the vendors' submission and it propounds a different basis for upholding the judgment than the reasoning of the trial judge. It ought to have been the subject of a notice of contention. In any event it has no merit. In Pacifico (Timber) Pty Ltd v Berlian Timbers Pty Ltd,[100] a New South Wales case, Windeyer J observed that a bond procedure was a 'well known' method of obtaining registration of subdivision plans for building projects and could and should have been used in that case by the vendors; and that their failure to do so precluded them from rescinding the contract of sale in reliance on a condition requiring registration by a specified time.[101]

52 For corresponding reasons, there is no merit in the vendors' further contention that, if they were in breach of their best endeavours obligation, it was an immaterial breach because of the delay in the completion of the building works.[102] It is irrelevant whether the delay was the vendors' fault or not. The vendors' best endeavours obligation was independent of these matters.

53 Nor, contrary to the vendors' belated submissions,[103] was their breach immaterial such that equity would relieve against the failure. As the appellants submit,[104] the vendors' best endeavours obligation was of considerable importance to the purchasers. If it had been obeyed by entering into the section 173 agreement then, as the trial judge found, the Registrar would have approved the plan of subdivision within time. The vendors' submission ignores the principle in Etna v Arif[105] (further illuminated by the review of authorities in the reasons for judgment of Davies J in CSS Investments Pty Ltd v Lopiron Pty Ltd[106]) that the right to rescind is lost in circumstances where such an obligation is breached. There is no merit in the vendors' submission that the relevant special condition had become a non-essential term.

54 Towards the very end of the vendors' oral submissions before this Court, their counsel stated that the appellants had raised no objection for some five weeks after receiving the notice of rescission. Counsel submitted that, as a result, the appellants should be denied relief on the ground of laches, acquiescence or delay.

55 We reject the submission. No such point was raised by the vendors before the learned trial judge. It is a point that could have been met by evidence if it had been raised. The point was not even foreshadowed in the respondents' written submissions before this Court. It would be quite inappropriate to entertain it now. In any event, there is no evidence of prejudice having been suffered by the vendors as a result of the passing of the five week period. The point appears to be completely without merit.

56 We consider that, by failing to enter into a section 173 agreement, the vendors breached their obligation to use best endeavours to obtain registration of the plan of subdivision in a timely fashion. By that breach they have disentitled themselves from rescinding the contract.[107] It follows, in our view, that the judge was in error in declining the relief which the appellants sought.

57 We would, therefore, allow the appeal, set aside the judgment below and, in lieu thereof, give judgment for the plaintiffs for specific performance of the contract of sale of land. We would hear the parties on the question of costs.

[1] Joseph Street Pty Ltd & Anor v Tan & Anor [2010] VSC 586, [11]-[50].

[2] See 428 Little Bourke Street Pty Ltd v Lonsdale Street Café Pty Ltd [2009] VSC 133; Rise Homes Loans Pty Ltd v Dickenson & Anor [2010] VSC 29.

[4] See Etna v Arif [1999] VSCA 99; [1999] 2 VR 353, 356-357 [5]-[6] and 369-375 [41]-[56].

[5] [2010] VSC 586, [79].

[6] Defendants' written closing submissions dated 9 August 2010, [115].

[7] Confusingly, this special condition is also numbered 7.

[8] Outline of submissions dated 23 September 2011, [26]-[27].

[9] Dated 13 February 2012, paras [6], [7] and [16(d)].

[10] Cf Respondents' submission dated 13 February 2012, para [7]; Australian Medic-care Co Ltd v Hamilton Pharmaceutical Pty Ltd [2009] FCA 1220; (2009) 261 ALR 501, [271] and [346] (Finn J).

[11] The learned trial judge discerned from certain authorities a 'principle' that the obligation upon a vendor to use best endeavours to secure the registration of a plan of subdivision is discrete and not affected by other obligations the vendor may have had under the contract: [2010] VSC 586 at [79 (second dot point)]. Although in this case we would agree that the obligation was discrete, it seems to us, with respect, that in other cases the matter may depend on the particular wording of the contract of sale.

[12] To be mentioned at the end of this judgment.

[13] In re New Zealand Shipping Company and Societe Des Ateliers Et Chartiers De France [1917] 2 KB 717; CSS Investments Pty Ltd v Lopiron (1987) 16 FCR 15, 31; Williamson & McGillivray & Ors v JIA Holdings & Anor [2011] QCA 346, [31].

[14] See Byard et al, Planning and Environment Victoria, Butterworths [240,705.10], and see further below.

[15] [2010] VSC 586, [148]-[154].

[16] Those provisions were supplemented by the Subdivision (Procedures) Regulations 2000 (SR 101/2000) as then in force ('the regulations'). See, especially, version number 3 incorporating amendments as at 23 May 2005. Part 1 of the Sale of Land Act 1962 was also a part of the relevant statutory background: see, generally, Etna v Arif [1999] VSCA 99; [1999] 2 VR 353, 356 [5].

[18] Section 13.

[19] See the discussion in Maroondah City Council v Fletcher (2009) 169 LGERA 407; [2004] VSCA 250.

[20] See s 18.

[21] See, for example, s 184(4)(b) of the Planning and Environment Act 1987; and see Maroondah City Council v Fletcher (2009) 169 LGERA 407; [2009] VSCA 250, esp [63]-[72], [207]; Byard et al, op.cit [240,675.6] and [240,680.25] and cases there cited.

[22] See ss 174(2)(a) and (b), 176(2)(b) and (e), 177(1)(c) and 184(1)(a).

[23] Section 3.

[24] Further amended statement of claim dated 11 March 2010.

[28] Costs Ruling [2011] VSC 41, [16].

[29] In his reasons for judgment the learned trial judge was highly critical of Mr Tyrell in relation to the changes between his first and second reports. But see further below.

[35] [2008] VSC 586, [109].

[37] [2004] VCAT 2356.

[38] [2008] VSC 586, [119].

[39] Ibid [120], quoting the evidence of Mr Green at transcript 417.

[52] Ibid [147]. Transcript references omitted.

[59] [2010] VSC 586, [148]-[150].

[69] Transcript, 727. See also Mr Fraser's answers to the like effect at transcript 526, 530.

[82] CSS Investments Pty Ltd v Lopiron Pty Ltd (1987) 16 FCR 15, [27] (Davies J); Munro v Bodrex Pty Ltd [2002] NSWSC 122, [54] (Bryson J); O'Rourke v V & B Corporation Pty Ltd [2008] WASC 36; (2008) 36 WAR 197, 229 [161]-[170] (Martin CJ).

[83] Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, [64]-[65] (Gibbs CJ).

[84] Sheffield District Railway Company v Great Central Railway Company (1911) 27 TLR 451, 452 (Lawrence J); Paltara Pty Ltd v Dempster (1991) 6 WAR 85, 100 (Kennedy J); Rehins Pty Ltd v Debin Nominees Pty Ltd [No 2] [2011] WASC 168, [145] (Murray J).

[85] (1980) FSR 335, 343 (Buckley LJ).

[86] IBM United Kingdom Ltd v Rockware Glass Ltd (1980) FSR 335, 343 (Buckley LJ).

[87] (1991) 6 WAR 85, 89 (Malcolm CJ and Pidgeon J).

[88] [1990] 1 Qd R 135, 150-151.

[89] [2012] NSWCA 122, [34] (Macfarlan JA with whom Meagher JA and Tobias AJA agreed).

[90] [2008] WASC 36; (2008) 36 WAR 197.

[91] See Mordue v Kroone [2009] NSWSC 255, [16] (Brereton J) and the numerous cases there cited.

[92] [2008] VSC 586, [155]-[175].

[93] Appellants' post-hearing written submissions dated 17 February 2012, [5].

[94] Reasons of trial judge [2010] VSC 586, [39].

[95] [2008] WASC 36; [2008] 36 WAR 197, 223-229 [144]-[157], 229 [170]

[96] Respondents' post-hearing submission dated 13 February 2012 [9]-[10].

[97] In paragraph 10 of their post-hearing submission.

[100] Unreported, New South Wales Supreme Court, Windeyer J, 5 December 1997, BC 9706488.

[102] Respondents' post-hearing submissions [15].

[103] Respondents' post-hearing submissions [15], [17]-[19].

[104] Appellants' post-hearing submissions paras [4], [14].

[105] [1999] VSCA 99; [1999] 2 VR 353.

[106] (1987) 16 FCR 15, [26]-[27], [31]-[32], [34]-[35].

[107] See n 13 above.