Stocks & Holdings (Constructors) Pty Ltd v Arrowsmith

There is no question that if the parties have not agreed upon a price, or upon a method by which a price can be calculated or determined, without the further concurrence of the parties or of either of them, there is no contract of sale. Whether or not in this case they have so agreed depends entirely upon the terms of the written conditions of which the relevant portions are:

1. Prior to completion of this contract the purchaser shall subdivide at its own expense the subject land and the purchaser shall wherever possible subdivide the land in such a way that the subdivided allotments shall be of a total area of 7,500 square ft. and the vendor shall have the right to employ an independent surveyor in order to determine that the maximum number of allotments has been obtained upon subdivision of the said land and any subdivision shall be subject to the approval of the vendor.

1. This contract shall be completed within thirty days after the date of approval by Baulkham Hills Shire Council to the subdivision of such land as is purchased under this contract. The purchaser shall with all possible expedition proceed with the subdivision of the said land and the application to Baulkham Hills Shire Council for approval thereto.

The purchase money shall be a sum represented by £325, multiplied by the number of allotments approved by Baulkham Hills Shire Council on a subdivision of the said land.

It appears that one of the parcels of land included in the written conditions was the subject of a contract of purchase by the respondent which had as yet to be completed. Consequently, provision was made in the conditions for the transaction between the parties to proceed notwithstanding that the respondent may not be the owner of this parcel at the time of the completion of the purchase of the other parcels covered by the conditions - a complicating circumstance in relation to the meaning to be given to the appellant's obligation to prepare a plan of subdivision.

It also appears from other parts of the written conditions and the plan annexed to them that so far as the appellant and the arrangements with it were concerned, the respondent was retaining an area of land partly surrounded by the parcels of land the subject of the written conditions, to which land road access had to be provided in the proposed subdivision.

I think the first matter to be resolved is whether under cl. 1 of the special conditions the respondent could be required to approve a plan of subdivision which did in fact divide the parcels of land set out in the written conditions into as many allotments each of an area of 7,500 square feet as the land was physically capable of containing. In so stating the matter I am conscious that this description of the plan of subdivision which the appellant undertook to produce at its own expense (an obligation which I take the words "subdivide the land" in special cl. 1 at least to include) may not be either the correct, or for that matter the only description of a plan of subdivision which would satisfy the terms in which obligation is expressed. The difficulty of deciding precisely what it was that the appellant undertook to produce by way of such a plan is a separate difficulty: but I put that on one side whilst dealing with the immediate difficulty of deciding whether or not the respondent had committed himself by the written conditions to any plan of subdivision.

The clause, special condition 1, gave him the right - which one would have thought he had apart from the concession in the clause (unless, of course, the clause meant that he could do so at the expense of the appellant), to employ his own surveyor to verify the fact that the maximum number of allotments had been wrested out of the land in the plan of subdivision proposed to him by the appellant. But the clause proceeds, in addition, to provide "that any subdivision shall be subject to the approval of the vendor". Because the respondent was retaining a contiguous parcel of land, and because access to that land was to be obtained through the proposed subdivision, it is apparent to me that the respondent had an interest in the disposition of the land in subdivision beyond the attainment of the maximum number of lots. Consequently, in my opinion, the clause intended what literally it says, namely that any subdivision, whether or not it conformed to the express obligation of the appellant - whatever that might be construed to be - was subject to the respondent's approval. In my opinion, the respondent was not obliged to accept any plan of subdivision or any plan which others might think ought reasonably to have been accepted, nor, in my opinion, would a court at the instance of the appellant be able to substitute its view for that of the respondent in rejecting a plan of subdivision proposed to him by the appellant. It therefore seems to me that, at the very best, the written conditions did no more than provide that if a plan of subdivision could be produced which met with the approval of the respondent, the respondent would sell the land to the appellant for so many times £325 as there would be allotments in that plan of subdivision if and when approved by the Shire Council. Again, in so expressing the result of the combination of cl. 1 of the special conditions and the terms of sale, I put a construction on the latter which is not necessarily the right construction. But it is the construction most favourable to the appellant.

But, taking that construction, it is clear, in my opinion, that the arrangements between the parties had not matured into a contract of sale before action brought. There neither was a price agreed nor could one be determined. This conclusion is sufficient, in my opinion, to dispose of this appeal. I find no need to discuss all the matters or any of the authorities to which reference was made in the judgments of the Full Court.

Had I not been of this opinion it would have been necessary to determine what was the obligation sought to be placed on the appellant with respect to the production of a plan of subdivision and what precisely was the proper meaning of the terms of sale. Having arrived at conclusions on these matters, it may well have been that none the less no agreement for sale would have emerged. But it is unnecessary to pursue these matters. It is enough that an essential step on the path towards the fixing of a price, namely the tender of an approved plan of subdivision to the shire council depended still upon the agreement of the parties.

The question is whether the instrument the terms of which are alleged in the sixth plea to the declaration in the action has binding force as a contract of sale. Such terms relate to the subdivision of the land comprised in the alleged contract and the price. Stocks & Holdings (Constructors) Pty. Limited is the purchaser and R. E. Arrowsmith the vendor. It appears from the instrument that the subject land is an area consisting of eight parcels; Arrowsmith was the registered proprietor of seven and the equitable owner under a contract of sale of the eighth.

The terms of the alleged contract relating to subdivision are three "special conditions", Nos. 1, 2 and5. These are in the following words: "Prior to completion of this contract the purchaser shall subdivide at its own expense the subject land and the purchaser shall wherever possible subdivide the land in such a way that the subdivided allotments shall be of a total area of 7,500 square ft. and the vendor shall have the right to employ an independent surveyor in order to determine that the maximum number of allotments has been obtained upon subdivision of the said land and any subdivision shall be subject to the approval of the vendor" (1). "Upon subdivision the purchaser shall give road access to the western boundary of the land comprising an area of 3 acres 1 rood 0¼ perches and shown as Lot A on the plan annexed hereto" (2). "This contract shall be completed within thirty days after the date of approval by Baulkham Hills Shire Council to the subdivision of such land as is purchased under this contract. The purchaser shall with all possible expedition proceed with the subdivision of the said land and the application to Baulkham Hills Shire Council for approval thereto" (5). By a "special condition" No. 4 Arrowsmith agreed to take all necessary steps to complete the purchase of the eighth parcel as soon as possible. However if such purchase falls through, the alleged contract now in dispute is to "remain in full force and subsistence" in respect only of the other seven parcels. That clause of the alleged contract continues: "However, should he not be the registered proprietor of the above-said land upon completion of the purchase of the residue of the land whenever he obtains Title to same he shall execute separate Memorandum of Transfer in favour of the Purchaser for the consideration described herein and this clause shall not merge with completion of Memorandum of Transfer of the residue of the land". It is a term of the alleged contract that, upon signing, the purchaser is to pay a deposit of £4,000 and, the balance of the purchase money upon completion. The term relating to the price is: "The purchase money shall be a sum represented by £325 multiplied by the number of allotments approved by Baulkham Hills Shire Council on a subdivision of the said land".

It is clear that a definite sum is not fixed as the price of the land. Rather the parties have agreed on a formula for computing it. The term as to price gives the multiplicand, namely £325, but not the multiplier. The question arises whether the parties to the alleged contract have agreed upon a means of ascertaining the multiplier. I think that an agreement as to such means is to be found in the alleged contract. The means are contained in the "special conditions" as to subdivision. In the first place the purchaser's surveyor is to prepare a plan of subdivision containing as many allotments of 7,500 square feet as possible having regard to the size and shape of the subject land. It seems to me to be a reasonable assumption that a surveyor carrying out this task would take into account the requirements of the Shire Council as to footpaths, roads, drainage and public purposes. As the plan must go before the Council for its approval it would be unreasonable to assume that the parties contemplated a plan of subdivision not in accordance with its requirements. I think that whether a plan satisfies the obligation of the purchaser under the first and second conditions is a question that can be determined by objective standards and can be answered by a Court.

I now go to the words of the first of the "special conditions" - "and any subdivision shall be subject to the approval of the vendor". I do not think that these words mean that the vendor is entitled to apply subjective tests in considering whether or not to approve of a plan of subdivision tendered by the purchaser. The purchaser can require the vendor to approve of a plan unless the vendor has grounds for refusing which a Court would find are reasonable. This I think is necessarily implied in the first of the "special conditions".

If upon the submission by the purchaser of his plan of which the vendor has approved, the Council approves of the number of allotments shown in the plan, the multiplier of the formula for computing the price is automatically determined. But perhaps the Council may not approve of the plan prepared by the purchaser and approved of by the vendor. An indication may be given by the Council that the plan allows for too little or too much residential space, or the sizes of the allotments are too large or too small, and for these or other reasons does not approve of the plan. If this should happen then the sale cannot go on and the contract is determined. Neither party is obliged by the alleged contract to accept any plan other than that prepared by the purchaser, approved by the vendor and submitted to the Council. If the Council does not approve of such plan the rights and obligations of the parties arising under the contract sued upon cease. This is not to say that there was not a binding and enforceable contract from the beginning.

In a document expressed as a contract for the sale of a large parcel of land by the respondent to the appellant the following two clauses appear: "Prior to completion of this contract the purchaser shall subdivide at its own expense the subject land and the purchaser shall wherever possible subdivide the land in such a way that the subdivided allotments shall be of a total area of 7,500 square ft. and the vendor shall have the right to employ an independent surveyor in order to determine that the maximum number of allotments has been obtained upon subdivision of the said land and any subdivision shall be subject to the approval of the vendor." "The purchase money shall be a sum represented by £325 multiplied by the number of allotments approved by Baulkham Hills Shire Council on a subdivision of the said land."

No other provision is made with respect to price, and the question is whether in these circumstances the document is a binding contract of sale.

In my opinion the two clauses mean no more as regards price than that if a plan for the subdivision of the land is prepared by the purchaser and approved by both the vendor and the Shire Council the price shall be £325 multiplied by the number of allotments in the plan. Unless there is an implication binding the vendor to give his approval to any plan which fulfils definite conditions, no price is agreed upon which is either certain or capable of being rendered certain, save by the future accord of the parties, and there is therefore no binding contract of sale.

In my opinion there is nothing in the document to support such an implication. The vendor is left free to give or withhold his approval as he sees fit: cf. Viscount Tredegar v. Harwood [1] .

The question which we are called upon to consider and which was raised on demurrer in the Supreme Court is whether the written agreement set out in the sixth plea filed by the respondent in answer to the declaration of the appellant constituted a legally enforceable contract for the sale of the land. By a majority the Full Court decided that it was not and it is from the order which directed that judgment on demurrer should be entered for the respondent that this appeal is brought.

The agreement was one whereby the respondent agreed to sell to the appellant several adjoining parcels of land at Baulkham Hills comprising in all an area of thirty-six acres more or less, the vendor apparently retaining an area of some three acres, known as Lot "A", which was almost entirely surrounded by the land sold. In general, the agreement was in the form of the conditions of sale approved by the Real Estate Institute of New South Wales and no question arises with respect to the general conditions; what is asserted by the respondent is that the agreement did not expressly specify a price for the land or contain any provision by the application of which the price could be ascertained. In other words the proposition is that the parties had not agreed as to the price to be paid for the land. If this proposition be made out there was no enforceable contract: Milnes v. Gery [1] ; Morgan v. Milman [2] ; Vickers v. Vickers [3] and Hall v. Busst [4] but whether it should be held to be made out depends upon the construction and effect of two provisions of the agreement. One of these is cl. 1 of the special conditions which provided as follows: "Prior to completion of this contract the purchaser shall subdivide at its own expense the subject land and the purchaser shall wherever possible subdivide the land in such a way that the subdivided allotments shall be of a total area of 7,500 square ft. and the vendor shall have the right to employ an independent surveyor in order to determine that the maximum number of allotments has been obtained upon subdivision of the said land and any subdivision shall be subject to the approval of the vendor."

1. (1807) 14 Ves. Jun. 400 [33 E.R. 574]. 2. (1853) 3 De G. M. & G. 24 [43 E.R. 10]. 3. (1867) L.R. 4 Eq. 529. 4. (1960) 104 C.L.R. 206.

The other is the clause which purported to stipulate the price payable for the land: "The purchase money shall be a sum represented by £325 multiplied by the number of allotments approved by the Baulkham Hills Shire Council on a subdivision of the said land."

Before proceeding to consider the effect of these provisions it should be observed that the declaration in the action, by which damages were claimed from the respondent for a repudiation of the agreement, was plainly demurrable inasmuch as the consideration for the respondent's alleged promise was not in any way stated: Bullen & Leake, Precedents of Pleadings, 3rd ed. (1868) p. 60; Guthing v. Lynn [1] and Thomas v. Thomas [2] . Possibly this omission resulted from the difficulty of stating precisely what the consideration was but as the substantive point has been fully argued it is as well that the appeal should not go off on the pleading point. Further, it is necessary to say that the declaration contains a general allegation of the fulfilment of all conditions precedent but we are told that this was not intended and should not be taken to allege that any plan of subdivision was ever approved by the respondent or by the Baulkham Hills Shire Council. The question, therefore, for our decision is simply whether the agreement as set out in the sixth plea is a legally enforceable contract for the sale of the subject land. Sugerman J., who was one of the majority of the Full Court, thought it was not and I agree with that conclusion and with the reasons which led him to it. I propose, however, to make some observations on the case for myself.

1. (1831) 2 B. & Ad. 232 [109 E.R. 1130]. 2. (1842) 2 Q.B. 851 [114 E.R. 330].

The special condition above set out is loosely drawn and its language raises difficulties most of which, however, may be passed over. For instance, the purchaser could not "subdivide the land" and the obligation which the condition sought to impose upon it was an obligation to prepare a plan of subdivision. But the plan envisaged was a plan which would, "wherever possible subdivide the land in such a way that the subdivided allotments shall be of a total area of 7,500 square feet". It cannot have been intended that the subdivided allotments should be of a total area of 7,500 square feet; rather it was intended that each allotment should "wherever possible" be of that area. But whether the condition envisaged that some lots might be of a lesser or of a greater area than this is left to speculation. Probably it was the intention of the parties that the stipulated area should be the minimum area for each allotment and having regard to the ensuing words in the condition, it seems that the plan was to provide for subdivision in such a way that the greatest possible number of allotments with this minimum area should be obtained. But how this might be achieved after making provision for necessary access roads and such reserves as the local authority might require to be set aside was a problem to which different minds might well give different answers and no doubt it was for this, among other reasons, that "any subdivision" was to be "subject to the approval of the vendor". I say among other reasons for the second special condition provided that "upon subdivision the purchaser shall give road access to the western boundary of Lot "A" on the plan annexed hereto" and it is apparent from the third special condition that upon Lot "A" was erected a dwelling house and these provisions are sufficiently indicative that the respondent may well have had a special interest in the form which any proposed subdivision took.

Nevertheless, it was the contention of the appellant that the respondent was bound by the terms of the first condition to consent to a plan of subdivision which provided for the maximum number of allotments of what I may, perhaps, call the prescribed size. Whether any plan presented to the respondent for his approval so provided was, it was asserted, capable of ascertainment as a matter of objective fact and the respondent, it was contended, was bound to give his approval if it were the fact that the plan so provided. I find great difficulty with this proposition. The process of subdividing land in no way resembles the process of cutting up a piece of cloth; preparation of the plan requires some anticipatory estimate of what provision the local authority will require to be made for roads and reserves, where such provision will be required, and with those requirements in mind the planner is then faced with the problem of subdividing the remaining land to the best advantage. How the overall problem is to be solved may well be susceptible of more than one answer and whether any particular plan could be said to provide for the maximum number of allotments to which approval could be obtained is very much a matter of opinion and estimate and cannot, as I see it, be determined as a matter of objective fact. In any event, however, I think that the concluding words of the condition are too wide to permit it to be said that the respondent was bound to give his approval to a plan of subdivision even if it could be shown that it provided for the maximum number of allotments of the prescribed area. In my view there is sufficient in the subsidiary provisions to which I have already referred to make it appear that the respondent had a special interest in the form that any subdivision took and this militates against qualifying or limiting the stipulation, expressed in general words that "any subdivision shall be subject to the approval of the vendor".

This, however, is material only because of the stipulation as to price for, clearly enough, the operation of this stipulation was dependent, in the first place, upon the submission by the appellant to the Council of a plan of subdivision accompanied by an application for the Council's approval to the proposed subdivision. But the price was not to be dependent upon the number of allotments shown on any such plan; it was to be dependent upon "the number of allotments approved by the Council" and this, again, was a factor incapable of objective assessment. Any such application might be wholly approved by the Council or it might be approved subject to conditions or disapproved and a perusal of the relevant sections of the Local Government Act makes it only too clear that the "number of allotments approved by the Council" might well be less than the number shown on any such plan.

To my mind these considerations amply demonstrate that the agreement failed to provide any means whereby the price to be paid could be ascertained. In order that it should become an ascertainable amount it was necessary, in the first place, that the respondent's approval to a plan of subdivision should be obtained and this he had a discretion to refuse. But even if such approval was obtained the determination of the price was still dependent upon the number of allotments approved by the Council in the proper exercise of its functions under the Local Government Act.

The documents upon which the appellant relies to constitute a contract for the sale of land do not specify the price but provide for its calculation as follows: "The purchase money shall be a sum represented by £325 multiplied by the number of allotments approved by Baulkham Hills Shire Council on a subdivision of the said land." This, however, does not stand by itself and another provision makes it clear that the parties did not envisage the submission by the purchaser of any plan of subdivision that he might see fit to the Council for its approval. The vendor clearly enough wanted the multiplier to be as big as possible, and to secure that the plan submitted to the Council would provide the maximum number of allotments, there was included the following special condition: "1. Prior to completion of this contract the purchaser shall subdivide at its own expense the subject land and the purchaser shall wherever possible subdivide the land in such a way that the subdivided allotments shall be of a total area of 7,500 square ft. and the vendor shall have the right to employ an independent surveyor in order to determine that the maximum number of allotments has been obtained upon subdivision of the said land and any subdivision shall be subject to the approval of the vendor."

The Full Court has held that, according to this condition, the vendor has a discretion to withhold the approval of any subdivision of the land made by the purchaser and that therefore there was no concluded contract between the parties.

The special condition in question is far from clear but, upon my reading of it, the purchaser has undertaken to subdivide the land so as to obtain as many allotments of 7,500 square feet as possible - it being assumed that such a subdivision would provide the maximum number of allotments - the vendor is given the right to employ an independent surveyor to ascertain whether the maximum number of allotments has been obtained and, finally, the subdivision is subject to the approval of the vendor. What appears to me as the critical question is whether the vendor has an unlimited right to refuse approval or whether the right is merely to refuse approval to a subdivision that does not achieve the maximum number of allotments. If the former, the ascertainment of the price is not assured by an agreed procedure; that ascertainment would depend upon the will of the vendor: if the latter, a rejection could presumably be followed by a further submission until a plan obtaining the maximum number of allotments would be achieved for submission to the Council with the consequence - depending upon the Council but not the parties or one of them - that the price would be fixed or the contract would go off.

I have not found this an altogether easy question but I have reached the conclusion that the condition means the former. My reasons for so concluding are three: (i) The width of the terms of the final provision of the condition, notwithstanding that they appear in a condition that is primarily directed towards ensuring the maximum number of allotments, and therefore the highest price. (ii) The fact that from special conditions (2) and (3), which I will not trouble to quote, it is plain that the vendor has an interest in the subdivision beyond that of securing that it provides as many allotments as possible. (iii) The absence of any machinery to secure the vendor's approval to a plan which does in fact obtain the maximum number of allotments - a matter which, because of the room for an honest difference of opinion, is something which might have been expected if the provision had no more than the definite and limited purpose of ensuring a subdivision with the maximum number of allotments.

In these circumstances, I do not think it possible to confine the vendor's right to withhold approval to a rejection on the ground that the plan submitted does not achieve the maximum number of allotments. Accordingly, I agree that the appeal should be dismissed.