Sentinel Orange Homemaker Pty Ltd v Davis Investment Group Holdings Pty Ltd

Summary of salient facts

1. The sale of the property was the subject of an expression of interest campaign in early-2018. On 20 April 2018 Mr John Davis and his son, Mr Benjamin (Ben) Davis, submitted an expression of interest at a purchase price of $3.5 million (excluding GST) "subject to DA Approval for Motor Vehicle Dealership".
2. John Davis Motors Pty Ltd ("JDM"), a company associated with John and Ben Davis, had operated several motor dealership franchises in Orange over a period of about 35 years. Mr Ben Davis gave evidence to the effect that in the course of the negotiations for the purchase of the property he envisaged that a single purpose corporation would be established to be the purchaser, with JDM to be the operator of the proposed motor vehicle dealership. He explained that a similar arrangement had been used for other dealerships.
3. The defendant was incorporated on 26 July 2018. On the same day, Mr Blackwell, who acted as the solicitor for the defendant in the transaction, sent an email to Mr Scott, who acted as the solicitor for the plaintiff in the transaction. The email, which referred in its subject line to "John Davis Motors Purchase from Sentinel Orange Homemaker Pty Ltd", stated that the purchaser would be Davis Investment Group Holdings Pty Ltd, the defendant. Mr Blackwell had earlier indicated that the purchaser would be "Davis Investment Holdings Pty Ltd", but nothing turns on this apparent misdescription. There is no doubt about the identity of the purchaser.
4. As noted earlier, the contract provided for an initial deposit of $100,000 to be paid on or before exchange. The defendant paid the initial deposit to Colliers International by two tranches of $50,000, on 15 August 2018 and 16 August 2018. Contracts were exchanged on 17 August 2018.
5. It is not necessary to refer to the evidence in detail concerning the steps taken by the parties towards satisfaction of the conditions precedent, save for the period from 17 March 2020 to 31 March 2020. However, it should be noted that there were communications between the parties (and their solicitors) in 2019 concerning the making of a development application to Orange City Council ("the Council") in respect of the property. In particular, in September 2019 there were communications (including some involving a planning consultant engaged by JDM, Mr Peter Basha) in relation to the lodgement of the development application. The plaintiff, as owner of the property, was requested to provide its written consent to the lodgement. Mr Basha sent a copy of his report dated September 2019 to Mr Tim Kent of the plaintiff on 12 September 2019. The report indicated that it was prepared for "John Davis Motors" and that "John Davis Motors" was the applicant. There is evidence that "John Davis Motors" is a business name held by JDM. Mr Basha also sent architectural plans to Mr Kent on 12 September 2019. The plans, prepared by Source Architects of Orange, indicated that the development application was for "John Davis Motors".
6. On 13 September 2019 Mr Kent sent a signed owner's consent letter to Mr Basha. The letter included the following: This consent letter relates to the development described in the Development Application prepared by Peter Basha Planning & Development dated 12 September 2019.
7. The development application was lodged on about 20 September 2019 (DA 347/2019). The name of the applicant was described as "John Davis Motors, c/- Peter Basha Planning & Development". In these circumstances I think that JDM should be regarded as the applicant for the approval.
8. Mr Ben Davis gave evidence that from that time neither he nor, as far as he is aware, his father, had any direct communication with the Council. Mr John Davis is a former Mayor of Orange. Mr Ben Davis deposed that: We were both careful to not have any direct communication with council or council staff so as to avoid suggestion or implication that we were improperly interfering with the development process. Mr Ben Davis further deposed that the defendant was content to rely upon Mr Basha to prepare the information and follow it through all of the steps to approval.
9. On 26 February 2020 the parties agreed to extend the Conditions Precedent Date to 17 March 2020.
10. On 28 February 2020 a planning officer of the Council (Ms Kent - not related to Mr Kent of the plaintiff) informed Mr Basha that the development application would go before the Council on 17 March 2020. Mr Basha informed Mr Kent that the Council would not be considering the development application until 17 March 2020. Mr Basha also informed Mr Kent that he expected the application to be approved, without the imposition of any "odd conditions".
11. An email sent by Mr Ben Davis on 11 March 2020 shows that he was then aware that the development application was going to Council in the following week.
12. On 12 March 2020 Mr Paul Johnston of the Council (Manager Development Assessments) sent a letter to Mr Basha in relation to the development application. The letter included the following: Please be advised that a report has been prepared in relation to your application and will be considered by Council's Planning and Development Committee on Tuesday, 17 March 2020. The meeting commences at 7.00pm in the Council Chamber, first floor Civic Centre, Byng Street, Orange. … A copy of the report will be available for viewing and download from Council's website, at https://www.orange.nsw.gov.au/meetings/meetings-and-minutes-archive/, no later than close of business the Friday preceding the meeting. The matters raised in the report will form part of Council's consideration. The decision of Council, however, may vary from the recommendation contained in the report.
13. The Council report which was included in the Agenda for the 17 March 2020 meeting contained a recommendation that the application be approved subject to the conditions contained in an attached Notice of Approval (which bears the date 18 March 2020). I infer that the Council report was available on the Council website from about (Friday) 13 March 2020. On that day, the parties agreed to extend the Conditions Precedent Date to 31 March 2020.
14. The development application was in fact approved, in accordance with the recommendation, at the meeting of the Council held in the evening of 17 March 2020.
15. On 17 March 2020, at 8:20pm, Mr Ben Davis sent a text message to Mr Basha enquiring about any news from the Council. At 9:25am on 18 March 2020 Mr Basha sent a text message in response in the following terms: It was approved at council meeting last night. The paperwork should come out in the next day or two.
16. Mr Basha also sent a text message to Mr Kent in which it was stated that the paperwork "will issue in the next few days".
17. It appears that the Notice of Determination (which is dated 18 March 2020) and the approved architectural plans were in fact signed by Mr Johnston on 19 March 2020. This is apparent from the handwriting associated with the Council stamp that has been placed on each of the seven plans. It is likely that on 19 March 2020 Mr Johnston also signed the letter dated that day from the Council to Mr Basha. That letter included the following: I refer to your application lodged on 10 October 2019 [sic] seeking Council's consideration of the subject proposal and advise that your application was considered and approved by the Council at its meeting held on 17 March 2020. Enclosed is the formal Notice of Approval which conveys the Council's decision in this matter at the abovementioned meeting. The Notice of Approval referred to is the Notice of Determination referred to above.
18. However, it seems that the Council's letter of 19 March 2020 and the documents intended to be enclosed with it were not immediately sent by the Council to Mr Basha, whether by post or otherwise.
19. In the evening of 19 March 2020 Mr Kent sent a text message to Mr Basha, enquiring as to whether the paperwork had come through and whether there were any conditions of note. There was no response to that text message.
20. On 23 March 2020 Mr Kent had a conversation with Mr Basha in which he asked Mr Basha whether there was any news. It seems that Mr Basha told Mr Kent that he would send him the draft conditions from Council. He also said something to the effect that there was nothing scary or out of the ordinary in the conditions. Mr Basha further told Mr Kent that there was presently no direct access to the Council, and that contact was by way of email only. These statements presumably reflected steps taken by the Council at that time in response to the emerging COVID-19 public health emergency.
21. On 23 March 2020 Mr Basha sent an email to Mr Ben Davis which attached what were described as "DRAFT DA Conditions". The attached "DRAFT DA Conditions" took the form of the Notice of Approval that was included as part of the Agenda for the Council meeting on 17 March 2020. The conditions set out in that document were in the same terms as those that formed part of the actual approval embodied in the Notice of Determination. The email stated that Mr Basha was awaiting the official signed documents. On 23 March 2020 Mr Basha also sent an email to Mr Kent which attached the "DRAFT DA Conditions", and stated that Mr Basha was awaiting the official signed documents.
22. I note in passing that the Notice of Determination and associated documents had been signed on 19 March 2020, some four days earlier. As at 23 March 2020 the Conditions Precedent Date of 31 March 2020 was still eight days away. However, Mr Basha was not made aware of that contractual deadline.
23. On 26 March 2020 Mr Kent sent an email to Mr Basha, enquiring whether he had received the formal documents. Mr Basha responded shortly thereafter in the following terms: Not yet. Council have gone into 75% shut down so things are taking longer. I'll try them again in the morning. The email refers to trying "again". However, in cross-examination Mr Basha gave evidence that between the morning of 18 March 2020, and 10:39am on 31 March 2020 (when he sent an email to the Council), he did not by any means follow up the Council for the signed Notice of Determination.
24. In the afternoon of 26 March 2020 Mr Ben Davis sent a text message to Mr Basha to remind him about "that easement search". That was a reference to a title search to ascertain whether the plaintiff had removed the carparking easement over the property so as to satisfy the condition precedent referred to in Special Condition 13.1(a). Mr Basha sent an email to Mr Ben Davis shortly thereafter which attached a title search made that day which showed that the easement had been removed. Further text messages show that Mr Ben Davis was interested to know when the easement had been removed, but Mr Basha was unable to pinpoint when that had occurred.
25. Later on 26 March 2020 Mr Kent gave instructions to Mr Scott to the effect that a further extension of the Conditions Precedent Date be sought. Given that the plaintiff had satisfied the easement condition precedent, this must be taken as designed to give more time to the defendant to satisfy the development application condition precedent.
26. On 27 March 2020 Mr Scott sent an email to Mr Blackwell confirming that the condition precedent referred to in Special Condition 13.1(a) had been satisfied. His email also included the following: Accordingly, we confirm Special Condition 13.1(a) of the Contract is now satisfied. We note the Contract now only remains conditional upon Special Condition 13.1(b) (DA Condition). We understand Council have held their meeting to decide the outcome of the DA being granted, but because of the effects of Covid-19, are taking longer to process and confirm in writing their decision. As such, our client proposes to extend the Conditions Precedent Date to 14 April 2020, in order to enable your client further time to satisfy the DA Condition. Please confirm if your client agrees to the extension above. I look forward to hearing from you.
27. On the morning of 31 March 2020 Mr Kent sent a text message to Mr Ben Davis in the following terms: Good news on the DA. We are waiting for your lawyer to provide feedback on timing to complete. There is no evidence of any response to that message.
28. At 8:33am on 31 March 2020 Mr Scott sent an email to Mr Blackwell in the following terms: I refer to my email below. I note I tried to call you again today, but you were unavailable. I was just following up on confirmation of the below. Furthermore, my client has confirmed they are agreeable to extending the Conditions Precedent Date out to 28 April 2020 (instead of 14 April 2020 discussed below), noting the difficulty your client may have in getting a written response from Council in respect of the DA. If you could please confirm your client's agreement to the extension of the Conditions Precedent Date, specifically to 28 April 2020, at your earliest convenience.
29. At 10:39am on 31 March 2020 Mr Basha sent an email to Ms Margaret Morgan of the Council in the following terms: Just wondering how far off the DA consent is for this one. I just have the land owner chasing me. Thanks.
30. At 10:41am on 31 March 2020 Ms Morgan sent an email to Mr Johnston, asking him to respond to Mr Basha's enquiry. Mr Basha's email was included.
31. At 4:47pm on 31 March 2020 Mr Scott sent another email to Mr Blackwell. The email included the following: I appreciate you and your client are probably both quite busy at the moment. As such, it is understandable why you haven't had a chance to respond to the below. Consequently, noting that: the Orange City Council (Council) has confirmed on its website that the DA has been granted. For your information, attached is a pdf copy confirming same, and we note relevant links here: … the DA needs to be acceptable to your client, acting reasonably, and the fact that the details of the DA, as appear on the website, do not disclose any significant conditions imposed as part of the DA; both parties are under an obligation to use all reasonable endeavours to satisfy clause 13.1(b) (DA Condition) as soon as practicable (after the Contract Date); the DA Condition was inserted into the Contract for the sole benefit of your client, notably so they had the benefit of knowing the DA had issued prior to completion; substantial progress in the satisfaction of the DA Condition has been made and this condition is, as appears from the above, all but complete; and we are yet to hear from your client in respect to confirming the satisfaction of the DA Condition (which may be as a result of waiting to receive written confirmation from the Council of the DA being granted, and this could in turn have been further delayed because of the Council being affected by Covid-19), and in order that our client can provide such reasonable assistance to your client as is required to enable your client to satisfy the DA Condition (in accordance with their obligations under the Contract), our client agrees to extend the Conditions Precedent Date to 28 April 2020. We note in light of the above there would be no reasonable basis for your client not to confirm the extension of the Conditions Precedent Date. As such, we confirm the Conditions Precedent Date is extended to 28 April 2020. We look forward to confirmation of the satisfaction of the DA Condition in due course. The attached extract from the Council website referred to in the email indicates that the development application had been approved by Council on 17 March 2020.
32. Mr Blackwell responded to Mr Scott by email sent at 6:01pm on 31 March 2020. Mr Blackwell's email is in the following terms: I refer to your recent emails in relation to the proposed extension of the Condition Precedent Date initially to 14 April 2020 and subsequently 28 April 2020. Our client instructs that it is not agreeable to the extension of the Condition Precedent Date from today. Our client instructs that it has not received DA approval in accordance with Special Condition 13.1(b) by the agreed extended Condition Precedent Date and hereby terminate the contract as per condition 13.4, for which this email is written notice.
33. Later that evening, Mr Scott replied by email which included the following: Our client denies that your client is entitled to terminate the Contract, and does not accept the purported termination below. Our client maintains that the Contract remains on foot and that the Conditions Precedent Date is 28 April 2020. We reserve all of our client's rights under the Contract and at law.
34. I note that the plaintiff no longer contends that the Conditions Precedent Date had been extended beyond 31 March 2020.
35. Mr Scott sent a further email to Mr Blackwell on 2 April 2020 in which he enquired about the basis upon which it was contended by the defendant that the Condition Precedent in Special Condition 13.1(b) had not been satisfied.
36. I note that, in the meantime, on 1 April 2020 Mr Kent had a conversation with Mr Basha in which Mr Basha told him that he was chasing up the paperwork with the Council but was not getting any feedback. Mr Basha also said that only one out of nine planners was actually in the Council's office.
37. On 2 April 2020, at 2:12pm, an email was sent to Mr Basha by Ms McDonald of the Council which attached the signed Council letter of 19 March 2020, the signed Notice of Determination (dated 18 March 2020) and the stamped architectural plans. Ms McDonald stated in the email that she would "place the original correspondence into the post tomorrow". Mr Basha gave evidence that he later confirmed with Council that the documents had been posted on (Friday) 3 April 2020. Mr Basha received the original signed development approval documents in the post on 7 April 2020.
38. Shortly after Mr Basha received Ms McDonald's email on 2 April 2020 he sent emails to Mr Ben Davis and Mr Kent which attached the documents he had received from Ms McDonald.
39. On 3 April 2020 Mr Blackwell sent a letter to Mr Scott which included the following: I refer to your recent emails and my email of 31 March 2020 wherein our client gave notice of termination of the abovementioned contract. At the time of the notice Clause 13.1(b), being the Development Approval condition precedent, had not been satisfied by the receipt of a signed and stamped Development Approval. Your client's request to extend the Condition Precedent Date, originally to 14 April 2020 and subsequently to 29 [sic] April 2020, was not approved by the Purchaser. The last agreed Condition Precedent Date was 5.00pm on 31 March 2020. The Purchaser had not obtained a development approval as defined, meaning a signed and stamped Orange City Council Development Approval with conditions by the Condition Precedent Date. The termination was validly exercised. Please provide the Agent with directions to release the deposit to our client in three business days.
40. Mr Scott replied by email on 6 April 2020. Mr Scott took issue with the assertion that the contract had been validly terminated, and gave detailed reasons for his view. It is not necessary to set these out. Mr Scott stated that the plaintiff considered that the defendant had repudiated the contract. He also foreshadowed the commencement of proceedings, and he again reserved the plaintiff's rights. It is not necessary to refer to the further communications between the solicitors on 6 April 2020.
41. On 16 April 2020 Mr Scott sent an email to Mr Blackwell in which it was repeated that the defendant had no right to terminate the contract. Mr Scott called upon the defendant to effect settlement of the contract that day, which he said was in accordance with the terms of the contract, using the PEXA platform. It seems that a settlement was booked for 3:30pm on that day, and an invitation to attend the settlement was issued. Settlement figures and cheque directions, amongst other documents, were attached to the email.
42. Later on 16 April 2020, Mr Blackwell responded by email, repeating the defendant's position that it had validly terminated the contract. A demand was made for the release of the deposit. In these circumstances, the proposed settlement did not proceed.
43. As noted earlier, on 17 April 2020 the defendant was placed into liquidation.
44. On 22 May 2020 Mr Scott sent a letter to Mr Blackwell and the defendant's liquidator (Mr Bailey). The letter included the following: It is our client's position that your client obtained the Development Approval on 18 March 2020 when it was published on the Orange City Council E-Services online portal. On 31 March 2020, the purchaser purported to terminate the Contract in reliance upon its asserted failure to obtain the Development Approval by that date. The purchaser failed to attend completion by 5pm on 16 April 2020; it failed to tender the price due on completion; it continues to assert that it has terminated the Contract. Finally, it is now being wound up voluntarily. In the circumstances, all of this conduct constitutes a repudiation of the Contract. In reliance upon your client's repudiation of the Contract, including its failure to complete, and all and any other grounds entitling it to do so, the vendor hereby terminates the Contract.

Satisfaction of conditions precedent

1. The plaintiff contends that the defendant had no entitlement to terminate the contract on 31 March 2020 pursuant to Special Condition 13.4 because the conditions precedent the subject of the clause had in fact been satisfied by 5:00pm on the Conditions Precedent Date, being 31 March 2020.
2. As already noted, there is no dispute that the condition precedent referred to in Special Condition 13.1(a) had been satisfied by that time. The question is whether the condition precedent referred to in Special Condition 13.1(b) had been so satisfied. That is to say, the question is whether the defendant had by that time obtained the Development Approval (as defined).
3. The plaintiff's pleaded case in this regard placed reliance upon the "registration" of development approval DA 347/2019 on the internet portal of the Council, and also the Council sending the development approval to the defendant (see Second Further Amended Statement of Claim, paragraphs 21 to 28). However, the case ultimately pressed by the plaintiff was to the effect that the development approval was obtained by the defendant when the Council informally communicated to Mr Basha that the Council had given its approval to the development application. As I understood it, the plaintiff did not press any case based upon the content of the Council website or the receipt of the development approval.
4. Mr Basha gave evidence that he was aware by the morning of 18 March 2020 that the Council had given its approval, but he could not recall how he gained that knowledge. He said it was possible that he watched a live stream of the Council meeting on 17 March 2020, and he said it was also possible that he received a text message from a staff member of the Council. Mr Basha was clear that he did not find out about the approval by watching a Youtube video of the Council meeting. There is no doubt that, one way or another, by 9:25am on 18 March 2020 (when he sent his text message to Mr Ben Davis) Mr Basha was aware that the Council had given its approval to the development application.
5. The plaintiff seemed to accept that whatever notification had been given to Mr Basha it did not constitute a notification in accordance with s 4.18(1) of the Environmental Planning and Assessment Act 1979 (NSW) and reg 102(1) of the Environmental Planning and Assessment Regulation 2000 (NSW). However, it was submitted that an informal communication of an approval, not in accordance with the statutory requirements, may be sufficient to bind the Council such that it could not depart from its approval. The plaintiff cited Ex parte Forssberg; In re Council of the Shire of Warringah (1927) 27 SR (NSW) 200 in support of that proposition. In that case, a rule nisi for a mandamus was made absolute against the Shire Council, requiring it to note its approval on a plan of subdivision. The Shire Council had by resolution approved the subdivision, subject to minor amendments, but no formal notice of the resolution was sent to the applicants. However, the Shire Clerk wrote a letter to the applicants in which it was suggested that there was no need to submit further amended plans until it was desired to have the Shire Council's seal affixed to the deposited plan. Ferguson J (with whom Campbell and Davidson JJ agreed) said (at 208): The Council further contends, however, that no notification of approval has been given to the applicant at all. It is not denied that the Council did by resolution approve of the plan, but it is denied that approval was communicated to the applicants. Now it is true that there was no formal statement in terms that the Council have passed the resolution, but I think it is idle to contend that the shire clerk's letter of 30th August, 1923, read in conjunction with the letter to which it was an answer, was not a notification of the Council's decision. It was intended to be acted upon as such and so acted upon both by the applicants and by the Council itself. No other approval was ever asked for or given in respect of No. 2 subdivision, and the intimation that there was no necessity to submit plans until it was desired to have the seal affixed to the "deposited plan" is meaningless unless it means that the applicants were at liberty to proceed with the work of construction and survey on which the deposited plan was to be based. It is not competent for the Council after giving its approval of the plan, and after the work has been carried out on the faith of that approval to require the applicants to alter it.
6. This principle was applied by Richardson J in Little v Fairfield Municipal Council (1962) 8 LGRA 64 at 67.
7. The defendant referred to various authorities, including Notaras v Waverley Council (2007) 161 LGERA 230; [2007] NSWCA 333. In that case, Hodgson JA, after referring to s 81 of the Environmental Planning and Assessment Act (the predecessor of s 4.18), stated (at [13]): Although the determination of an application occurs at the time of the determination itself (Kindimindi Investments Pty. Limited v. Lane Cove Council [2007] NSWCA 38 at [11] and [17]), a determination does not take effect until notification, and can be rescinded so long as notification has not been given: Ex Parte Renouf (1924) 24 SR(NSW) 463, Shanahan v. Strathfield Municipal Council [1973] 2 NSWLR 740, Townsend v. Evans Shire Council [2000] NSWLEC 163, Hopkins v. Tweed Shire Council [2001] NSWLEC 75, 113 LGERA 406.
8. In Shanahan v Strathfield Municipal Council [1973] 2 NSWLR 740, Street CJ in Eq considered the authorities (including Ex parte Forssberg) and said (at 744): Running throughout this line of cases is the requirement of a decision, and a communication of that decision, by a council before approval such as is here under consideration passes beyond the subsequent control of the council, whether by way of rescission or alteration. And equally running throughout that line of cases is the necessity for the communication of the approval to have some formal character as being authenticated on behalf of the council. Admittedly it need not be under the seal of the council. But clearly enough it must be more than that which took place in the present case, namely a mere informal ascertainment by the second plaintiff, an alderman of the council, of what had taken place in the council meeting during his absence. I consider, accordingly, that the decision by this council that the building approval be granted had not gone beyond the recall of the council, in that it had not been the subject of notice to the applicants so as to tie the council's hands.
9. In the present case it appears that either on the night of 17 March 2020 or early on the morning of 18 March 2020 Mr Basha was informed in some fashion that the Council had given its approval to the development application. The means by which that information was conveyed is unclear on the evidence. One possibility is that the information came from a live stream of the meeting. If that is so, I do not think that it would amount to the giving of a notification of the determination made by the Council. A witnessing of the proceedings of the Council as they happen, whether the witness is present in the audience or is viewing from a remote location, may enable the witness to ascertain that the Council has made a certain decision, but this is not the same as receiving a notice from the Council that a certain decision has been made.
10. Another possibility is that the information came from a text message from a Council staff member. Such a communication might be capable of amounting to a notice from the Council that a decision had been made to approve the development application. However, in the absence of firm evidence of the content of the text message and the status within the Council of the sender of the message, I would not be prepared to find that the text was in the nature of a formal communication of the Council's decision, made by a person authorised to do so (see Shanahan v Strathfield Municipal Council (supra) at 744). A similar point can be made about any communication made by telephone, which was another possibility mooted by the plaintiff.
11. In these circumstances, I am not satisfied that on either the night of 17 March 2020 or the morning of 18 March 2020 there was any communication to Mr Basha of the Council's decision to approve the development application which would operate so as to preclude the Council from departing from its decision. Adopting the language of Street CJ in Eq, I am not satisfied that any communication to Mr Basha operated to take the decision beyond the recall of the Council. Accordingly, I do not accept the plaintiff's submission that the defendant obtained the Development Approval (as defined) by 5:00pm on 31 March 2020, such that the conditions precedent the subject of Special Condition 13.4 were satisfied. In my opinion the condition precedent referred to in Special Condition 13.1(b) remained unsatisfied at that time.

All reasonable endeavours obligation

1. I turn then to the question whether the defendant was not entitled to terminate the contract on 31 March 2020 pursuant to Special Condition 13.4 because it was in breach of its obligation under Special Condition 13.3 to use all reasonable endeavours to satisfy the conditions precedent.
2. The plaintiff does not suggest that compliance with the all reasonable endeavours obligation is itself a condition precedent to the exercise by the defendant of a right of termination under Special Condition 13.4. Rather, the plaintiff invokes the principle that a party to a contract is not entitled, as against the other party, to rely on an event that results from its own default (see Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 441; Plumor Pty Ltd v Handley (1996) 41 NSWLR 30 at 34; Actall Pty Ltd v Pacific Bay Development Pty Ltd (2006) ANZ ConvR 65; [2005] NSWSC 1067 at [8]-[10]; Mordue v Kroone (2009) 14 BPR 26,771; [2009] NSWSC 255 at [16]). The plaintiff contends that if the condition precedent referred to in Special Condition 13.1(b) was not satisfied by 5:00pm on 31 March 2020 (as the Court has found), this was the result of breaches by the defendant of its all reasonable endeavours obligation under Special Condition 13.3. It is submitted that, accordingly, the defendant is unable to rely upon that event to justify its termination of the contract under Special Condition 13.4.
3. The onus is upon the plaintiff to show that the defendant was in breach of its all reasonable endeavours obligation and, further, that the breach or breaches relevantly caused the event (being the non-satisfaction of the condition precedent referred to in Special Condition 13.1(b)) (see Plumor Pty Ltd v Handley (supra) at 35A-G; Al Achrafi v Topic (2016) 18 BPR 36,517; [2016] NSWSC 1807 at [88]-[89]).
4. I have in earlier cases stated (in the context of contractual rights of rescission) that the preferable view is that this causation question depends upon proof that the breach materially contributed to the occurrence of the event that gives rise to the right (see Abourjaily v Parkview Estate Pty Ltd [2017] NSWSC 1256 at [28]; Tamanna v Zattere (2017) 18 BPR 37,139; [2017] NSWSC 1388 at [94]). I adhere to that view, and see no reason why it should not be applied in the present case that involves a contractual right of termination. On that basis, it is not necessary for the plaintiff to establish, on the balance of probabilities, that breaches by the defendant caused the non-satisfaction of the condition precedent; it is sufficient for the plaintiff to establish that breaches by the defendant materially contributed to that state of affairs. So, it would be sufficient for the plaintiff to show that if a breach or breaches by the defendant had not occurred there was a substantial chance that the condition precedent would have been satisfied by 5:00pm on 31 March 2020 (see Mordue v Kroone (supra) at [16] per Brereton J as his Honour then was; cited with approval in Joseph Street Pty Ltd v Tan (2012) 38 VR 241; [2012] VSCA 113 at [47] where the Court of Appeal in Victoria stated: 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 rescission.
5. Putting aside for the moment the contention that the defendant was obliged to seek a development approval in its own name, the plaintiff's case was that the defendant breached its all reasonable endeavours obligation in the period between 17 March 2020 (when the Council approved the development application) and 5:00pm on 31 March 2020 (when the time for satisfaction of the condition precedent expired). In short, the plaintiff submitted that in that period the defendant failed to take reasonable steps to obtain the duly signed development approval documents.
6. The obligation imposed by Special Condition 13.3 is to use "all reasonable endeavours" to satisfy the Conditions Precedent "as soon as practicable after the Contract Date".
7. In Waters Lane Pty Ltd v Sweeney (2008) Aust Contract R 90-287; [2007] NSWCA 200 the Court of Appeal was concerned with a provision (cl 4.1 of a Heads of Agreement) that required, inter alia, a party to use all reasonable endeavours to satisfy certain conditions subsequent by a particular date. Tobias JA (with whom Giles and Santow JJ agreed), said at [101]-[103] and [106]-[107]: Both the appellants and the primary judge relied upon the following passage from the judgment of Gibbs CJ in Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 64: "The implied obligation to use best efforts to promote the sale of the goods necessarily imported the obligation not to take any deliberate steps to damage the market for those goods in Australia. The meaning of terms of this kind has been considered in a number of cases, but it is trite to say that the meaning of particular words in a contract must be determined in the light of the context provided by the contract as a whole and the circumstances in which it was made, and that decisions on the effect of the same words in different context must be viewed with caution. On the one hand, an express promise by an agent to use his best endeavours to obtain orders for another and to influence business on his behalf 'necessarily includes an obligation not to hinder or prevent the fulfilment of its purpose': Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 at 378. On the other hand, an 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: Sheffield District Court Railway Co v Great Central Railway Co (1911) 27 TLR 451 at 452; Terrell v Mabie Todd & Co Ltd (1952) 69 RPC 234 at 237" (Emphasis added) His Honour (at [59]) observed that there appeared to be very little difference between the concept of "best endeavours" as defined by Gibbs CJ in the above passage and "all reasonable endeavours". Each required the person undertaking the obligation to do all he or she reasonably could in the circumstances to achieve the contractual object but no more: in particular, he or she was not required to go beyond the bounds of reason. Nevertheless, his Honour did not regard the difference between the two concepts as one in which "best endeavours" was seen as more onerous than "all reasonable endeavours": rather "best endeavours",subject to context, required the capacity and ability of the obligor to be taken into account. His Honour therefore concluded as follows (at [59]): "In my view, a promise to 'use all reasonable endeavours to satisfy the conditions subsequent by the Sunset Date' means that [Waters Lane] will take all such steps as are objectively required and reasonable to achieve the ends specified by the HoA, viz, obtaining rezoning and approval to permit development with the specified requirements by 9 March 2006. The nature of the obligations and the critical importance of them to the agreement and its purpose, and the specific requirements of cl 4.1 reinforced the view that 'all reasonable endeavours' is not concerned with any personal limitations of [Waters Lane]." … In my opinion the appellants' criticism of his Honour's formulation of the standard encapsulated in the expression "all reasonable endeavours" should be rejected. The circumstances which preceded the entering into of the HoA do not seem to me to throw any light whatsoever on the issue. I have already concluded that the ability of Waters Lane to extend the Sunset Date to 9 March 2008 pursuant to cl 4.5 is irrelevant to the determination of the issue raised by cl 4.1 (see [60] above). I see no reason not to adopt the words of Gibbs CJ in Hospital Products that cl 4.1 required Waters Lane to do all it reasonably could in the circumstances to satisfy the Conditions Subsequent by 9 March 2006 although it was not required in doing so to go beyond the bounds of reason. If this means that there is no relevant difference between the standard constituted by the expression "all reasonable endeavours" and that constituted by the expression "best endeavours" then so be it. However, it is unnecessary to express any final conclusion on that possibility. Suffice it to say that in the present case the description articulated by Gibbs CJ in Hospital Products of what is required to satisfy the obligation to use "best endeavours" is directly applicable to the obligation to use "all reasonable endeavours" in cl 4.1.
8. I note further that in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7, a case concerning a reasonable endeavours obligation, the argument proceeded on the basis that substantially similar obligations are imposed by a reasonable endeavours provision or a best endeavours provision (see at [40]). At [41] it was stated that an obligation to use reasonable endeavours to achieve a contractual object is not an absolute or unconditional obligation, and the nature and extent of such an obligation is necessarily conditioned by what is reasonable in the circumstances, which can include circumstances that may affect an obligor's business (see Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 92 per Mason J).
9. It may be assumed for present purposes that as at 17 March 2020 the defendant was in compliance with its obligation under Special Condition 13.3. The defendant was aware at that time that the development approval it was seeking via its related entity JDM (which should be regarded as the applicant for the approval), was about to be considered by the Council. The defendant was also aware at that time that the Conditions Precedent Date had recently been extended to 31 March 2020.
10. Mr Ben Davis was informed by Mr Basha on the morning of 18 March 2020 that the Council had given its approval to the development application. It remained necessary for the formal notification of the approval to be given. Mr Basha indicated to Mr Ben Davis that this "paperwork" should come out in the next day or two.
11. If the formal notification (involving the provision of the development approval documents duly signed by the Council) was given within that time frame there would have been more than ample time prior to 31 March 2020 for the defendant to consider the terms of the approval and whether the terms were acceptable to it (acting reasonably).
12. Mr Basha sent what he described as the "DRAFT DA Conditions" to Mr Ben Davis on (Monday) 23 March 2020. Those conditions are the same as those that form part of the actual approval embodied in the Notice of Determination. The defendant did not submit that the conditions, or any one of them, could have been reasonably regarded by the defendant as not acceptable to it. Mr Basha also informed Mr Ben Davis that he was awaiting "the official signed documents".
13. At that stage, the Notice of Determination and associated documents had already been signed by Mr Johnston on behalf of the Council, but had not been sent to Mr Basha.
14. On 23 March 2020 the defendant was aware that the signed development approval documents had still not been received, contrary to the timeframe initially suggested by Mr Basha. There is no evidence that any explanation for this situation was given to the defendant, or requested by the defendant. The defendant was also aware that the Conditions Precedent Date was still 8 days away.
15. Mr Ben Davis gave evidence to the effect that at no stage did he inform Mr Basha of that contractual deadline. It further appears that at no stage did he give any instruction to Mr Basha to chase up the formal paperwork. Neither did he make any direct approaches to the Council to obtain the formal paperwork.
16. Mr Ben Davis was evidently content to "follow the process", or allow the Council to take its course unaffected by any prompting from the defendant or anyone on behalf of the defendant. His approach to the matter is essentially encapsulated in the following answer he gave in the course of cross-examination: I was following the council's process. It goes to a council meeting, they've got 14 days for it to come out, and we were following the process. At that stage, Covid-19 had hit that week of the 23rd. Covid-19 was potentially going to shut down motor dealerships, so my focus at that stage was on my business, on my staff, and on my customers. In a covid environment, anything normal went out the door, I'm sorry about that, but that week between the 23rd and the 31st was more about worrying about if and when we were going to be shut down. All reports from Deliotte and from Fordham that we were going to be shut down and the motor industry in some respect, and it was about cost saving, it was about working how we would survive. That's the mindset at that stage.
17. It is notorious that by about 23 March 2020 the emerging COVID-19 pandemic was causing widespread disruption to normal social and economic life. Mr Ben Davis gave further evidence about that in his affidavit. There is also evidence that the normal operations of the Council were affected by that time, with no direct access allowed, only contact by email. I have taken all of that evidence into account, as urged to do by the defendant in submissions.
18. However, it seems to me that in the circumstances that existed at the beginning of the week commencing on 23 March 2020, the defendant's all reasonable endeavours obligation required it to take steps aimed at facilitating the provision of the signed development approval documents as soon as possible and in good time before the contractual deadline of 5:00pm on 31 March 2020.
19. The obligation is to use all reasonable endeavours to satisfy the Conditions Precedent "as soon as practicable after the Contract Date". The required endeavours are not simply directed to achieving satisfaction of the conditions precedent. There is a temporal element as well. The required endeavours are also directed to achieving that outcome as soon as practicable. The defendant was required to do all that it reasonably could do in the circumstances to achieve that outcome as soon as practicable.
20. In circumstances where the signed development approval documents had still not been received by 23 March 2020, but the contractual deadline was still 8 days away, it was open to the defendant to take simple steps aimed at facilitating the prompt provision of the signed development approval documents. The defendant could have informed Mr Basha of the existence of the contractual deadline of 31 March 2020 and the defendant's obligation to use all reasonable endeavours to obtain the Development Approval prior to that time. The defendant (through Mr Ben Davis) could have caused an instruction to be given to Mr Basha to make contact with the Council (by whatever means were then available) to request that the signed development approval documents be provided as a matter of some urgency, given the contractual position of the defendant. I note that Mr Basha said in cross-examination that he took his instructions in relation to the development approval from Mr Ben Davis. The defendant could have taken other steps in the same vein, such as making direct contact with the Council itself, or instructing Mr Blackwell to contact the Council. Of course, given Mr Basha's involvement with the development application and his experience of dealings with the Council, he was the most obvious candidate to chase up the paperwork.
21. The defendant did none of those things. In my opinion its failure in that regard was a failure to do all that it reasonably could do in the circumstances to facilitate the obtaining of the signed development approval documents, and thus the satisfaction of the condition precedent, as soon as was practicable. Mr Ben Davis did not say that he did not have the time to take such steps. In one answer given in cross-examination he said that he "might have had the time, I don't know". The evidence otherwise suggests that Mr Ben Davis did have the time to take such steps had he wanted to do so. It is clear that he had the time to deal with other aspects of the contract with the plaintiff, including the making of enquiries on 26 March 2020 about the other condition precedent concerning the car parking easement, and the giving of instructions to Mr Blackwell in relation to the email Mr Blackwell sent at 6:01pm on 31 March 2020. There is no good reason to think that at the beginning of the week commencing on 23 March 2020 Mr Ben Davis would not have been able to find time to provide instructions to Mr Basha to chase up the signed documents as a matter of some urgency. I would add that the likelihood that the COVID-19 situation was affecting the normal operations of the Council would reinforce the apparent need to intervene in an effort to expedite the matter.
22. As it turned out, no such instruction was given to Mr Basha. He remained unaware of the existence of the contractual deadline. In those circumstances Mr Basha made no attempt to contact the Council about the development approval documents until 10:39am on 31 March 2020. As befitting his state of knowledge, this contact was nothing more than a polite enquiry as to progress.
23. Even so, the Council responded quite quickly. Ms Morgan promptly forwarded Mr Basha's enquiry to Mr Johnston, and in approximately 2 business days an email was sent by Ms McDonald to Mr Basha which attached the signed Council letter of 19 March 2020, the signed Notice of Determination (dated 18 March 2020) and the stamped architectural plans.
24. Mr Basha gave evidence in cross-examination that had he been asked to make enquiries of Council staff to obtain the signed documents by a particular date he "would have made a very different set of communications". He said that if he had been aware of a deadline he would have communicated it to the Council staff and asked for everything to be done to expedite the paperwork. Mr Basha said that he would have pursued that course "in all possible modes". Mr Basha agreed that when the Council ceased face-to-face communication it did not stop communication by email or telephone. He agreed that in his experience the Council will try to accommodate a need for signed paperwork "if there was a deadline that they were aware of". Mr Basha went on to say that he could not guarantee that the Council would meet such a request, and that it would be "50/50 really" as to whether in his experience the Council would satisfy a request to provide signed development approval documents that were needed "in a matter of days". He said that it all depends on the circumstances.
25. There was also evidence given by a town planner, Mr David Walker, to the effect that in his experience the Council's planning staff are sympathetic to external deadlines and generally make every effort to accommodate and assist in meeting them. Mr Walker's evidence was not challenged.
26. I am comfortably satisfied on the evidence that had the defendant not breached its all reasonable endeavours obligation under Special Condition 13.3 there was a substantial chance that the condition precedent referred to in Special Condition 13.1(b) would have been satisfied by 5:00pm on 31 March 2020. Indeed, I would go so far as to find that had the defendant not breached its all reasonable endeavours obligation under Special Condition 13.3 it is more likely than not that the condition precedent would have been satisfied by that time. That is, had the defendant taken steps in the early part of the week commencing 23 March 2020 aimed at facilitating the provision of the signed development approval documents as a matter of some urgency and in good time before 5:00pm on 31 March 2020, the likelihood is that the signed documents would have been provided by email by no later than Friday 27 March 2020 such that the condition precedent would have been satisfied. The request made by Mr Basha on 31 March 2020 was met by email within about 2 business days. Had such a request been made in the early part of the week commencing 23 March 2020, coupled with reasons why the signed documents were needed as a matter of some urgency, I think it likely that such a request would have been met in no more than 2 business days, even allowing for difficulties associated with the COVID-19 disruption. It should not be overlooked that the documents had already been signed by Mr Johnston. It was only necessary for the documents to be released. In my view, there are sound reasons to think that the relevant Council staff, once informed of a valid need to receive the signed documents in good time before 31 March 2020, would have acted to meet the request.
27. It follows from the above that the plaintiff has established that the defendant breached its all reasonable endeavours obligation under Special Condition 13.3, and that such default relevantly caused the condition precedent referred to in Special Condition 13.1(b) to not be satisfied by 5:00pm on 31 March 2020. In these circumstances it was not open to the defendant to rely upon the non-satisfaction of the condition precedent as a basis for the exercise of a right of termination under Special Condition 13.4. In my opinion, the defendant's termination of the contract on 31 March 2020 was invalid and ineffective. Accordingly, the defendant is not entitled to claim the deposit and any interest earned thereon, pursuant to Special Condition 13.4(a) and (b).
28. The conduct of the defendant after its purported termination, in maintaining that the contract was no longer on foot and consequently refusing to proceed to settlement of the contract, amounted to a repudiation of the contract. The plaintiff was entitled to accept that repudiation, as it did, on 22 May 2020. In my opinion, the plaintiff's termination of the contract on that day was valid and effective. Upon that termination, the deposit was forfeited to the plaintiff.

Other matters

1. The above conclusions render it unnecessary to consider the plaintiff's alternative case based on an alleged breach by the defendant in failing to apply for and obtain a development approval in its own name. I do not propose to express any concluded views on this alternative case. I will observe, however, that the plaintiff's contention that the condition precedent referred to in Special Condition 13.1(b) envisages the defendant personally, in its own name, obtaining the Development Approval, gains support from Special Condition 13.4(d). That provision, which operates following a termination pursuant to Special Condition 13.4, obliges the defendant to assign to the plaintiff any of its rights in and to the Development Approval. However, even if the defendant's all reasonable endeavours obligation under Special Condition 13.3 required it to seek a Development Approval in its own name, the fact that the development application lodged in 2019 was not in the defendant's name must have been known by the plaintiff. The plaintiff, as owner of the property, gave its consent to the making of the application by "John Davis Motors".
2. Complications are thus raised in the application of the principle that a party to a contract is not entitled, as against the other party, to rely on an event that results from its own default. It seems that the plaintiff at least acquiesced in any default of the defendant in not seeking a Development Approval in its own name. It is thus questionable whether the principle would operate in relation to such a default. However, as I have said, I do not propose to express any concluded view on this question, which was not the subject of focused submissions.

Conclusion

1. Declarations will be made to the effect that the plaintiff validly terminated the contract on 22 May 2020, and is entitled to the deposit of $100,000, together with any interest earned thereon. Costs should follow the event. Accordingly, the Court will also order that the defendant pay the plaintiff's costs of the proceedings.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 May 2021