Vamiso Pty Ltd v Chopard & Anor

Court of Appeal (NSW)|1999-08-10|Before: Sheller JA, Stein JA, Giles JA, Young J

New South Wales Court of Appeal CITATION : Vamiso Pty Ltd v Chopard & Anor [1999] NSWCA 297 FILE NUMBER(S) : CA 40018/99 HEARING DATE(S) : 10 August 1999 JUDGMENT DATE : 16 November 1999

PARTIES : Vamiso Pty Ltd - Appellant J P & G Chopard - Respondents JUDGMENT OF : Sheller JA at 1; Stein JA at 2; Giles JA at 3

LOWER COURT JURISDICTION : Supreme Court - Equity Division LOWER COURT FILE NUMBER(S) : EQ 2226/97 LOWER COURT JUDICIAL OFFICER : Young J

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

1 SHELLER JA: I agree with Giles JA. 2 STEIN JA: I agree with Giles JA. 3 GILES JA: By a contract dated 28 May 1996 Vamiso Pty Ltd ("Vamiso") agreed to sell and Mr and Mrs Chopard agreed to purchase for the sum of $1,500,000 a parcel of land at Hunters Hill in Sydney ("the property"). The property was described as lot 137 in an unregistered plan of subdivision a copy of which was attached to the contract. By a clause which I will shortly set out in full completion of the contract was conditional upon the vendor obtaining development and subdivision approvals. 4 On 8 April 1997 the vendor purported to rescind the contract on the ground that the development approval it obtained was not, in the terms of the clause, "acceptable to the vendor in all respects". 5 The purchasers brought proceedings claiming specific performance of the contract. On 4 December 1998 Young J declared that the contract remained on foot and ordered that it be specifically performed and carried into effect. 6 The vendor appealed from his Honour's decision. The issue on appeal was whether the purported rescission was effective.

The property and the contract 7 The property was in the Pulpit Point Estate at Hunters Hill, a major development for which Vamiso was the vehicle within the Comrealty group of companies. The group had encountered financial difficulties, and the development had come under the control of its financier NatWest Markets Australia Ltd ("NatWest"). The property was part of vacant land known as 16 Le Vesinet Drive, Hunters Hill. 8 Le Vesinet Drive ran approximately north-south, following the promontory leading to Pulpit Point and (despite its name) terminating at its southern end in a turning circle at the end of the promontory. On the eastern side of Le Vesinet Drive, for the most part sloping down to Fern Bay, were lots 130 to 134 in DP843181 and lot 123 in DP852203. Lot 130 in DP843181 was at the turning circle, lots 131 to 134 in the DP were to its north, and lot 123 in DP852203 was to their north. 9 The unregistered plan of subdivision, only part of which was in fact attached to the contract, was a resubdivision whereby these lots became three lots only: lot 137 corresponding in all but detail to lot 130 in DP843181; lot 138 extending to the north approximately to the innermost point of Fern Bay and encompassing lots 131 to 134 in DP843181 and part of lot 123 in DP852203; and lot 139 further to the north again taking up the remainder of lot 123 in DP852203. The resubdivision was for the purposes of the vendor's application to Hunters Hill Municipal Council ("the Council") for approval inter alia to the resubdivision and the erection of five residential flat buildings, containing a total of 35 apartments, on lot 138. 10 The application was lodged with the Council on 3 May 1996, and was designated DA 53/96. The contract was entered into some three weeks later. 11 Clause 25.1 of the contract provided - " 25.1 Vendor's Development Application and Registration of Plan (a) Except as provided in this clause, completion of this contract is conditional on: (i) the vendor obtaining development approval under the Environmental Planning & Assessment Act 1979 to the vendor's development application no 053/96 on terms and conditions acceptable to the vendor in all respects; and (ii) the vendor obtaining the approval of the Hunters Hill Municipal Council (the "Council") or of any other authority (judicial or otherwise) that may be charged with exercising the Council's approval function to a subdivision plan (the "Plan") in or substantially in the form of the draft plan attached and marked with the letters "AA" (the "Draft Plan") or varied as permitted by this contract and the subsequent registration of the Plan as a deposited plan at the Land Titles Office. (b) The condition set out in paragraph (a)(i) is for the sole benefit of the vendor and may be waived at any time by notice in writing to the purchaser referring to the condition and specifying that it is waived. The condition set out in paragraph (a)(ii) is for the benefit of both parties. (c) If the conditions set out in paragraph (a) are not met (or waived) by 10 December 1996 (or such later date as the parties may expressly agree to in writing) then, subject to paragraph (c) [sic], either party may by notice in writing to the other rescind this contract before the conditions in paragraph (a) are met (or waived) in which case the provisions of clause 19 apply. (d) If the purchaser fails for any reason to rescind this contract within 7 days after the right of rescission first accrued, then the purchaser is deemed to have waived its right to and may not rescind this contract under this clause. (e) the purchaser consents to the application by the vendor for the development approval referred to in paragraph (a)(i) and will not make any objection or cause or encourage any objection to be made to the consent authority in respect of the application." 12 Clause 25.1A provided - "25.1A The vendor will use reasonable endeavours to obtain development consent on terms acceptable to the vendor and subdivisional approval and will prepare and lodge at its cost any necessary plan of subdivision with reasonable expedition. For the avoidance of doubt the parties acknowledge that this clause does not place any obligation on the vendor to commence proceedings in the Land and Environment Court." 13 Clause 28.1 of the contract provided for completion on the later of 10 December 1996, fourteen days after notification that the plan of subdivision had been registered, and six months after "the condition in clause 25.1(a)(i) is met or, in the alternative, waived". 14 Clause 39 of the contract made provision to the effect that the vendor would consent to any application made by the purchasers for approval to the erection of a dwelling on the property, that the purchasers would not make such an application until after "the condition set out in clause 25.1(a)(i) has been met or, in the alternative, waived", and that the purchasers could commence construction of the dwelling after obtaining their development approval and a building approval but before completion of the contract. 15 The broad intent of the parties is tolerably clear. The unregistered plan of subdivision left the property as a site suitable for a dwelling, in contrast with the much larger lot 138 suitable for a number of residential flat buildings. The purchasers wished to purchase the property for the erection of a dwelling. The vendor was prepared to sell the property provided it had planning approval to use lot 138 for the erection of five residential flat buildings. If the vendor could not obtain approval to putting lot 138 to that use by 10 December 1996 or the approval it obtained was not acceptable to it, it could call the deal off. The purchasers could also call the deal off, but their rights in that respect were limited compared to the rights of the vendor.

The development approval 16 As I have said, the vendor's application to the Council was for approval relevantly to the resubdivision and the erection of five residential flat buildings on lot 138. It was expressed to relate to "lots 123, 130-134". It appears that lot 130 in DP 843181 was included because affected by resubdivision, and the application was not otherwise for the carrying out of development on that lot. 17 The development approval obtained by the vendor was granted on 29 October 1996. It was expressed to be "a deferred commencement consent pursuant to s 91AA of the Act [the Environmental Planning and Assessment Act 1979 ("the EPA Act")] subject to the following conditions". The conditions began - "A. That a 'deferred commencement' consent be granted to DA53/96 subject to the restriction as to user or [sic] the land which prohibits the erection of any residential dwelling other than a free standing dwelling house or more than two (2) free standing dwelling houses, being released from the title, within 12 months. B. That upon satisfactory fulfilment of (A) above, Development Consent be granted to Development Application No 53/96 as amended generally in accordance with DWG No [here various drawings were listed], dated September 1996, prepared by John Bruce, Taylor and Partners subject to the following conditions of consent: … "

There followed numbered paragraphs stating conditions of consent of various kinds. 18 Section 91AA of the EPA Act, since repealed, permitted the grant of development approval "subject to a condition that the consent is not to operate until the applicant satisfies the consent authority as to any matter specified in the condition" (subs(1)). It was necessary that the deferred commencement consent "clearly distinguish conditions concerning matters as to which the consent authority must be satisfied before the consent can operate from any other conditions" (subs(3)). 19 The condition on which operation of the development approval depended was "release from the title" of "the restriction as to user or [sic] the land … ". The restriction as to user had been imposed by a s 88B instrument (see Conveyancing Act 1919 s 88B) at the time of DP843181. As varied in 1995, it burdened lots 130 to 134 in DP843181 and benefited the others of same lots, lot 129 in DP843181 (of which the later lot 123 in DP852203 was part), and many lots in DP's for land in the vicinity. It precluded as between the owners of the land burdened and the land benefited the erection of residential flat buildings on the land burdened. 20 It was open to the Council, if not incumbent on it, to take into account in considering the vendor's application the existence of the restriction as to user as one of the "circumstances of the case" under s 90(1)(g) of the EPA Act. Two of the five residential flat buildings to be erected on lot 138 in the unregistered plan of subdivision were to be erected on the land in lots 131 to 134 in DP 843181, and it can readily enough be seen why the Council thought that the restriction as to user should be released. 21 Whether the condition requiring release of "the restriction as to user or [sic] the land … " meant release so far as the restriction as to user burdened lot 130, as well as lots 131 to 134, even though the residential flat buildings did not extend to lot 130, is not clear. No point was made of this in the appeal. 22 But the condition affected development approval with respect to all five residential flat buildings, including the three residential flat buildings to be erected on part of lot 123 in DP852203 being land not burdened by the restriction as to user. The condition was significant to the vendor. Without the condition the vendor would have obtained a relevantly immediately operative development approval and would have had planning approval to use lot 138 for the erection of the five residential flat buildings, although as between it and the owners of the land benefited it could not erect the two residential flat buildings on the land in lots 131 to 134 in DP843181 until the restriction as to user was modified or extinguished. It could immediately have erected the three residential flat buildings on the remainder of lot 138, because that land was not burdened by the restriction as to user. The condition meant that the vendor would not have an operative planning approval with respect to any of the five residential flat buildings, and could not erect the three residential flat buildings on the land in lot 138 not being the land in lots 131 to 134 in DP843181, until the restriction as to user was "released from the title", that is, modified or extinguished. And the release had to be effected within twelve months.

The vendor's rescission 23 What follows in relation to the vendor's rescission should be read together with the "other facts" later set out, which assist in explaining and understanding the communications concerning rescission. 24 By a letter dated 5 December 1996 the vendor's solicitors wrote to the purchasers' solicitors - "You will recall that the contract is conditional on the vendor obtaining development approval to its application number 053/96 on terms and conditions acceptable to it and on the approval of a plan of subdivision and registration of that plan as a deposited plan. I refer you, in particular, to clause 25 of the contract. The 'sunset' date for meeting the conditions was 10 December 1997 (shown as '1996') in the contract. The council has recently determined our client's development application and has granted a 'deferred commencement consent', subject to various conditions including the removal, within 12 months, of a restriction as to user on the land, which prohibits the erection of any residential dwelling other than a free-standing dwelling house or more than two free-standing dwelling houses. A copy of the development approval as provided to us by our client is attached. We are instructed to advise that the development approval is not acceptable to our client. Our client is currently in the process of investigating the feasibility of removing the restriction as to user in order to satisfy condition A of the consent but has not arrived at any concluded view. In the circumstances and in view of the imminent approach of the sunset date our client is prepared to amend the contract to allow for an extension of time under clause 25.1(c) up to say '29 October 1997' (being 12 months from the date of the notice of determination. Would you please obtain your client's instructions as to whether they are agreeable to our client's proposal for an extension of time under clause 25.1(c) and let me have your response at your earliest convenience."

25 Although at one time it was sought to make something of the statement that the sunset date was 10 December 1997, not 10 December 1996, it came to be accepted that the contract correctly read 10 December 1996. 26 The purchasers' solicitors replied by a letter dated 16 December 1996, indicating the purchasers' agreement to extending the time under cl 25.1(c) of the contract to 29 October 1997, offering the purchasers' "support to your client in seeking to have the restriction as to user removed", and suggesting amendment to cl 28.1 of the contract to provide simply for completion six months after notification that the plan of subdivision had been registered. 27 The vendor's solicitors replied by a letter dated 20 January 1997 - "We refer to your letter of 16 December 1996 to which we now have our client's instructions. From our client's perspective, the main obstacle to obtaining a satisfactory approval from the council is the removal of the restriction as to user created by DP843181 from lots 130 to 134. Our client is still investigating whether this is in fact achievable and feasible. In any event it is highly unlikely that this will be achieved in the next few months and if the condition was met there would be a further delay in obtaining council's consent to the plan of subdivision and registering the plan. Consequently our client is not prepared to allow your clients an additional six months from registration before completion. Our client would be prepared to keep your clients advised of the achievement of any milestones in terms of the removal of the restriction. In these circumstances while still happy to extend the sunset date to 29 October 1997 our client is only prepared to amend clause 28.1 to read: 'Subject to clause 25.1, completion is to take place on the later of: (a) two months after the date the vendor notifies the purchaser that the restriction on the use of land created by DP843191 has been removed from lots 130 to 134 in DP43181; and (b) 14 days after the date the vendor notifies the purchaser that the Plan (referred to in clause 25) has been registered by the Land Titles Office as a deposited plan.' Please advise whether or not your clients are agreeable. We suggest that the change should be effected by way of a variation to the contract signed by our respective clients." 28 A telephone conversation on 23 January 1997 between Mr Shane Martins of the vendor's solicitors and Mr Douglas Stewart of the purchasers' solicitors was noted by the former - 'Requests we prepare deed extending the sunset date. Does not propose we make any other changes. He understands that our client has not accepted current dev. consent - will only accept if it becomes fully fledged and unconditional. I stressed that that was the position." 29 By a letter dated 4 February 1997 the vendor's solicitors sent a draft deed of variation of the contract to the purchaser's solicitors. It changed the date in cl 25.1(c) of the contract to 29 October 1997, replaced cl 28.1 with a clause in the terms set out in the letter of 20 January 1997, and recorded the parties' confirmation "that the condition set out in clause 25.1(a)(i) of the Contract will not be satisfied until such time as the restriction on the use of land created by DP843181 has been removed from lots 130 to 134 in deposited plan 843181". 30 By a letter dated 5 February 1997 the vendor's solicitors wrote to the purchasers' solicitors informing them that they had been advised by the vendor that it was "in the process of pursuing an alternative development consent which would permit the subdivision contemplated under your client's contract without the removal of the restriction". It was said that the further development application was expected to be considered some time in March 1997, and that the proposal necessitated a change to the draft deed of variation of the contract. A revised draft was enclosed. The effect of the change was to add to the possible completion times a time two months after notification that "the removal of the restriction is not required to enable completion of this contract".

31 It seems that the revised draft deed of variation was acceptable to the purchasers, and on 21 February 1997 the vendor's solicitors sent to the purchasers' solicitors a deed "in execution mode" and foreshadowed exchange of counterparts. By a letter dated 24 February 1997 the purchasers' solicitors informed the vendor's solicitors that the purchasers had executed the deed and stood ready for exchange. 32 But exchange did not occur. A telephone conversation between Mr Martins and Mr Stewart on 26 March 1997 was recorded by the latter - "By telephone with Shane Martins. He 'has bad news for me'. He has contacted his client in New Zealand who states that his superiors are not prepared to extend the sunset clause at all. They consider the Sydney market to have gone haywire and they can sell the property for much more to someone else. Shane is waiting on formal instructions from his client before writing to me. I told him my client would no doubt take the view that the contract is still on foot and his client is not entitled to terminate." 33 It seems that Mr Chopard spoke to Mr Chris Rose of NatWest. Mr Rose appears to have become an officer of the vendor - he executed documents on its behalf and for practical purposes NatWest can be regarded as the vendor - and the letter next mentioned recorded that Mr Rose told him that NatWest was "having discussions with the 'disgruntled residents' regarding their objections to your subdivision plan". By a letter to Mr Rose dated 3 April 1997 Mr Chopard offered support and assistance in the negotiations with or litigation against "disgruntled residents". 34 By a letter dated 8 April 1997 the vendor's solicitors wrote to the purchasers' solicitors - "We refer to your facsimile on 24 February 1997 and to your clients' letter to our client of 3 April 1997. Our client appreciates your clients' offer to assist it in its dispute with the various residents in Le Vesinet Drive who are opposing its development proposal. However, we are instructed to advise that our client is not prepared to proceed with the proposed variation of the contract referred to in our recent correspondence. Our client's proposed development has met with considerable opposition from a number of residents in Le Vesinet Drive. Consequently, our client is not in a position to proceed with satisfying the condition set out in the council's deferred commencement consent of 29 October 1996 (which required the removal of the restriction affecting lots 130-134). Accordingly we give you and your clients notice under clause 25.1(c) of the contract that the vendor rescinds the contract. A copy of this letter has been forwarded to the agent together with a direction to the agent to release to your clients the deposit paid under the contract. … "

35 There may have been a faint suggestion in the appeal that the communications prior to 8 April 1997 had resulted in a binding agreement to extend the date in cl 25.1(c) of the contract to 29 October 1997. That was not part of the proceedings before Young J and, if there was the suggestion, it should not be entertained.

Other facts 36 The vendor was the developer of the Estate, and had brought about the subdivision by DP843181. At all material times, therefore, it knew of the restriction as to user. So did the purchasers. Copies of DP843181 and the s 88B instrument lodged with that DP were annexed to the contract, together with other DP's and s 88B instruments, and cl 31.1 of the contract recorded that the property was sold subject to the restrictions as to user set out in the s 88B instruments. The relevant s 88B instrument annexed to the contract was in the unamended form, but nothing turned on that. 37 The application lodged with the Council on 6 May 1996 did not advert to the restriction as to user burdening lots 130 to 134 in DP843181. NatWest's urban planning consultant was in communication with the officers of the Council, and so far as appears nothing was raised concerning its release in the initial discussions with the Council. On 25 July 1996 six residents of properties in the Estate commenced proceedings against the vendor and NatWest in the Federal Court, alleging that they were "contractually obliged" to limit the development in the relevant area of the Estate in certain ways and that development other than in those ways would entitle the residents to relief for misleading or deceptive conduct contrary to s 52 of the Trade Practices Act 1974. The limitations to which the residents claimed to be entitled were that the buildings should not be more than two storeys, not be higher than 8 metres above ground level, and not interfere with views from other buildings in the Estate. 38 The residents did not confine themselves to these proceedings. They were obviously aware of the vendor's application to the Council, which underwent a public consultation process. In a conversation with Mr Rose, the solicitor for the residents said that they "would appeal the Council decision should they approve the DA in its current form". And the residents were owners of land benefited by the restriction as to user, so they could be expected to, and did, oppose modification or extinguishment of the restriction as to user. 39 Perhaps because of the foreshadowed opposition of the residents, by a letter dated 8 October 1996 NatWest's urban planning consultant drew the restriction as to user to the attention of the Council - "We refer to our recent letter dated 1st October 1996 regarding the revised development plans for Development Application No.53/96 for the proposed Residential Flat Building pertaining to (Lots 130134, in Deposited Plan No 843181) in Area 'F', Le Vesinet, Pulpit Point. The purpose of this letter is to advise Council that an 88B Instrument applies to a part of the site namely, Lots 130-134 in Deposited Plan No 843181, Le Vesinet Drive. We enclose a copy of this 88B Instrument for Council's information. This 88B Instrument was created by NatWest Markets Australia Ltd, with the intent of preventing any speculative, uncoordinated medium density housing development (by separate building companies) upon the affected lands (as would be generally permissible in the 2(b) zone), that could otherwise impact upon the adopted 132 dwelling limit, as contained in the master plan. In fact, the approval of this application would be consistent with both NatWest's objectives and Council's own planning objectives. It is noted that the provisions of Clause 22(1) of Hunters Hill Local Environmental Plan (LEP) No.1 generally enable Council to override any covenant, agreement or instrument imposing restrictions on the development of land in its assessment and determination of a Development Application in any zone, other than lands in Zone No 2(a)(1), 2(a1), 2(a2), 2(a3), 2(b) or 2(c). The subject lands are however, zoned 2(b) in accordance with Hunters Hill LEP No. 1 and hence, Council is obliged to give due consideration to the existing 88B instrument pertaining to the site. Accordingly, we request that a copy of this letter be made available to all Councillors. NatWest Markets Australia Ltd will apply for the removal of the covenant upon receipt of development consent. Should you have any enquiries or wish to discuss this matter further, please contact the undersigned or Ron Zwicker of this office."

40 The letter to the Council of 8 October 1996 followed the submission of a draft to Mr Rose, and incorporated amendments he suggested. 41 The Council's officers then prepared a recommendation for a deferred commencement consent in the terms of the development approval in due course granted. NatWest's urban planning consultant was told of this, and by a letter dated 11 October 1996 it informed Mr Rose - "As advised by Mr Joe Vescio, (Council's Senior Development Planner) today, the report will be however, amended in light of our recent letter regarding the 88B Instrument applying to Lots 130-134 in Area 'F'. This will involve a change to the recommendation of the report by way of a 'Deferred Commencement' consent, instead of a normal conditional consent. The 'Deferred Commencement' consent will require the extinguishment of the covenant, prior to the remainder of the consent, becoming valid and operational." 42 Even before the grant of the development approval, NatWest instructed its solicitors to bring proceedings to extinguish the restriction as to user. The solicitors approached the urban planning consultant for a statement to be converted into an affidavit. But together with preparation for the proceedings, after the grant of the development approval NatWest sought to find other ways to proceed with the erection of the residential flat buildings. 43 At the end of November 1996 the urban planning consultant prepared a draft letter to the Council requesting that the development approval be amended. The draft letter included - "As you are aware, Part A of the 'Deferred Commencement' consent imposed two 'pre-conditions' of consent which must be completed to Council's satisfaction prior to the consent becoming fully operative. The first 'pre-condition' involves inter alia, the extinguishment or release of the existing restriction on the use of the land pursuant to Section 88B of the Conveyancing Act. This restriction currently prohibits the erection of any residential dwelling other than a free standing dwelling-house or more than two (2) free standing dwelling-houses upon the burdened lots. The extinguishment of this restriction as such, is required to be completed within 12 months from the date of the consent. This 88B restriction applies to Lots 130-134 in Deposited Plan No. 843181 only and as such only affects the proposed development of the 2 residential flat buildings within this portion of the site. The proposed 3 residential flat buildings on the separate Lot 123, DP852203 are not burdened by this restriction. Accordingly, we hereby request a formal amendment pursuant to Section 102 of the Act to permit two separate stages for the development and the deletion of the 'Deferred Commencement' conditions to the consent. OR THE NEXT ALTERNATIVE PARAGRAPH Accordingly, we hereby request a formal amendment, pursuant to Section 102 of the Act to permit two separate stages for the development with the 'Deferred Commencement' conditions pertaining to stage 2 of the development only. This request for the staging of the development under Section 91 AB of the Act will allow for the development of the 3 residential flat buildings (not affected by the restriction) without undue delay, whilst ensuring that the relevant restriction on the burdened lots is extinguished, prior to the erection of the remaining 2 residential flat buildings as part of the second stage of the development. The first stage of the development will involve the erection of the 3 residential flat buildings (Blocks A, B & C) upon Lot 123, DP852203. The second stage of this development will involve the re-subdivision of Lots 130-134, DP843181 and the subsequent erection of the remaining 2 residential flat buildings. In this respect, it is requested that the first 'pre-condition' in the 'Deferred Commencement' consent be deleted so that the extinguishment of the restriction on the use of the burdened lands, legally known as Lots 130-134, DP 843181 is required prior to the release of the Building Application required for stage 2 of the development. OR ALTERNATIVELY In this respect, it is also requested that the first 'pre-condition' in the 'Deferred Commencement' consent reflect this proposed amendment so that the extinguishment of the restriction on the use of the burdened lands, legally known as Lots 130-134, DP843181 applies to stage 2 of the development." 44 The essential concern apparent from the draft letter was that the condition precluded the erection of the three residential flat buildings on the land other than lots 131 to134 in DP843181, although the restriction as to user burdened only those lots. The objective was to have the condition apply to the development only with respect to lots 131 to 134 in DP843181, so that the vendor could immediately erect the three residential flat buildings: the erection of the other two residential flat buildings would await the release of the restriction as to user. 45 The urban planning consultant provided the draft letter to Mr Rose on 2 December 1996, and also suggested that NatWest obtain legal advice material to the alternative courses for which it provided. The letter of 5 December 1996 from the vendor's solicitors to the purchasers' solicitors earlier set out, referring to a "process of investigating the feasibility of removing the restriction as to user in order to satisfy condition A of the consent", seems to take up the instructions to commence proceedings for the extinguishment of the restriction as to user rather than the consideration of requesting that the development approval be amended. 46 On 6 December 1996 there was a lengthy meeting between Mr Rose, NatWest's solicitors, and the urban planning consultant. 47 Mr Rose asked about the prospects of successfully modifying or extinguishing the restriction as to user, and the solicitors advised that the prospects were "less than 50%" and that "there were some nice arguments but … on the whole the equity proceedings may well not succeed". Notwithstanding this, the previous instructions were confirmed, but with a view to modification of the restriction as to user rather than extinguishment. Accordingly to the notes of the meeting (the A, B and C refer to residential flat buildings) - "CR stated that construction of A, B and C was not likely to take place before the second half of next year, by which time a result of the equity proceedings would have been obtained. If the equity proceedings are successful then Vamiso could act on DA53/96. If the equity proceedings aren't successful then RFBs A, B and C can be constructed and the burdened lots, subdivided into six new lots, and sold." 48 There was reference to the proceedings brought by the residents and the possibility that they could restrain the erection of the three residential flat buildings. Mr Rose did not think that the three residential flat buildings would offend in height or by interfering with views, and expressed the view that "this was a low risk". It was recognised that the residents could oppose the proceedings to modify the restriction as to user, and it was said that what the residents wanted was "to remove the third storey off" the other two residential flat buildings. It was said that once the proceedings had been commenced and the evidence filed "the option of negotiation and possibly even mediation would be considered". 49 There was discussion of other ways to proceed with the erection of the residential flat buildings. The solicitors advised against requesting that the development approval be amended, doubting that there was power to amend it pursuant to s 102 of the EPA Act. It was decided to lodge a fresh application for the development of the three residential flat buildings on the land other than lots 131 to 134 and "a fresh DA for a six lot subdivision of the burdened lots". 50 On 20 December 1996 the vendor lodged with the Council an application for the development of "21 apartments in 3 buildings on vacant land". Although the land was described as "lots 123, 130-134", the application was for development by the erection of the three residential flat buildings on the land other than lots 130 to 134, that is, on part of lot 123 in DP852203. Although the evidence was sketchy, it seems that at the same time an application was lodged seeking approval to a "six lot subdivision" of lots 130 to 134. 51 Mr Rose wrote to NatWest's solicitors on 13 January 1997, it seems following a request to provide information in support of expedition of the proceedings to modify the restriction as to user. After an introductory paragraph, the letter read - "On 29 October 1996 NatWest obtained a 'deferred commencement' consent to DA53/96 for the erection of 35 apartments contained in 5 buildings. This development approval is subject to the relevant restriction as to user being released from the title within 12 months from the date consent was granted, ie by 14 October 1997. Until this condition is satisfied NatWest will be restricted in dealing with the land and in particular pre-sales of the proposed apartments. This development application is of considerable financial importance to NatWest and is crucial to the recoupment of substantial loan and development funds which the bank has invested in the Project to date. From a sales/revenue perspective this represents deferring approximately $37 million in potential sales income. NatWest has already exchanged one conditional sales contract for $1.5 million which is subject to the removal of the covenant. As well as the above financial ramifications, the covenant issue is also having a negative impact on the Estate's existing residents. The proposed development will remove a number of uncertainties such as view corridors and building envelope as well as provide many new amenities including waterfront access paths, additional off street visitor car parking and a new 25 metre swimming pool. From the date of this correspondence there remains less than 10 months in which to determine the covenant issue. Any opportunity to expedite this matter would result in significant financial savings to NatWest as well as remove uncertainty for existing Estate residents." 52 The two applications lodged on 20 December 1996 were consolidated within the Council as DA188/96. On 21 February 1997 the urban planning consultant was told that the Council's officers would recommend its approval in relation to the erection of the residential flat buildings but not in relation to the subdivision. NatWest's solicitors advised that this was tantamount to a refusal of the application. At this time, therefore, the course decided upon on 6 December 1996 in order to proceed with the erection of the residential flat buildings had led nowhere. 53 There were negotiations with the residents over this period in relation to modification of the restriction as to user, and as at 21 March 1997 it was proposed that there be a mediation. The outcome of the proceedings to modify the restriction as to user would have appeared uncertain and distant. 54 It will be recalled that Mr Martins gave Mr Stewart "bad news" on 26 March 1997. On 27 March 1997 Mr Martins received his formal instructions from Mr Rose. He recorded them - "I am to terminate/rescind contract on Tuesday. · Currently too much uncertainty concerning the site and what arrangements will have to be reached with the four disputing homeowners along Le Vesinet. It may be necessary to agree to a 8 metre height restriction. No certainty as to what the final development profile will be. Vamiso not prepared to lock in with purchaser at this stage." 55 Mr Martins prepared a draft of the letter which became the letter of 8 April 1997 earlier set out, and sent it to Mr Rose. On 4 April 1997 he discussed the draft letter with Mr Rose. His file note recorded - "He believes that Vamiso can justify on the basis that it would not be in a position to remove the restriction. The removal is opposed by four homeowners and Mallesons advice is the Vendor does not have much hope of forcing the removal. Other efforts to remove by discussions/arrangements have not been beneficial." Wishes me to vary letter of termination giving reason for rescission."

56 The draft letter was amended, approved by Mr Rose, and sent as the letter of 8 April 1997.

The decision of Young J 57 Young J held that the vendor's rescission had not been effective essentially for two reasons. 58 The first reason was that the condition by which the restriction as to user had to be released within 12 months did not fall within the phrase "terms and conditions" in cl 25.1(a)(i) of the contract. His Honour compared the phrase with the words "condition" and "conditions" in cl 25.1(b) and (c), and considered that it - " … would mean something which imposed an obligation on the person getting the development consent, and what might be called a contingent condition would not be one of the terms and conditions of a development consent. The reason is that no additional burden is placed on the defendant. It was already bound as a matter of conveyancing law to get rid of the burden of the restriction vis-a-vis any purchaser, and was already bound to comply with the covenant, so far as the persons to whom it had already sold land in the subdivision [sic]. The words 'terms and conditions' of a planning consent were examined by this Court in Karbonkraft Pty Ltd v Hampson (1996) 13 LGRA 54. In that case the court said at pp 55-56 that it was usual for councils to provide not only matters which were conditions of the consent in the strict sense, but also other matters as to how work should be carried out and during what hours, which, whilst not conditions, were terms. Again the whole flavour is that 'terms and conditions' (though it should be noted that the phrase is often 'terms and conditions') relate to what the council required to be done as a partial quid pro quo for granting the consent. It is clear from PX52 that the only reason the terms and conditions were not acceptable was because of condition A. As this is not a term and condition within clause 25 the defendant must fail on this point." 59 The second reason was that his Honour was satisfied that the terms and conditions were acceptable to the vendor. His Honour approached the matter on the basis that the purchasers bore the onus of proof of whether the terms and conditions were acceptable, following Plumor Pty Ltd v Handley (1986) 41 NSWLR 30 at 35-6, but said that he did not think that the question of onus made any difference in this case. After considering a number of cases, he expressed the view that for something to be unacceptable there had to be more than inexpediency or "the idea that it is somehow or other not the done thing", and that it was necessary that "for some core reason it is not able to be welcomed". Noting that there was no direct evidence from the vendor, because the evidence was confined to the tender of documents, his Honour said that regard had to be had to the conduct of the vendor as well as the statements that its solicitors made, and - "The whole of the material suggests that the development consent was one which was asked for. It was realised that it was going to issue in that form. Nothing was ever said about the form. The vendor tried to get its solicitors to reach the position where the consent would become activated and the solicitors did this. It was a very valuable consent to the defendant and no matter on whom the onus is, I am satisfied that the terms and conditions were acceptable to the vendor." 60 Possibly as a third reason, his Honour also said - "The other aspect of cl 25.1(a) is that when one looks at clauses 28.1(b) and 28.1(c) it can be seen that it is vital to the working out of the contract that a person know whether the event in clause 25.1(a)(ii) has happened or not.

As Mr Coles QC put, this means that subject to the usual period of grace allowed for people to collect their thoughts and take advice, the time for the vendor indicating that a development consent contains acceptable or unacceptable terms and conditions must be within a reasonable time after the development consent is issued or not at all.

It would seem to me that the reasonable period would have expired at least a month after the deferred commencement approval was given, so that anything that happened after the end of November 1996, apart from a light it might shed on to earlier conduct, cannot affect the position." 61 The submissions on appeal addressed each of these reasons.

Terms and conditions 62 In my opinion, even if the vendor was obliged under the contract to procure the release of the restriction as to user, procuring the release could still be a term or condition imposed by the Council. I am respectfully unable to agree that "terms and conditions" in cl 25.1(a)(i) of the contract called for something which imposed an obligation on the vendor as the person getting the development approval. Of course, if the vendor wanted the deferred commencement consent to become operative it had to fulfil the condition, but if it was unable or unwilling to fulfil the condition, it was under no obligation to the Council to do so. 63 If it be asked, was release of the restriction as to user a term or condition on which the development approval was granted, in my view the answer must be yes. Section 91AA of the EPA Act used the word "condition" for that on which the operation of a deferred commencement consent depended, and the substance of the matter was that the vendor would not have an operative development approval unless the restriction as to user was released within 12 months but would have an operative development approval upon the release of the restriction as to user within that period. On the ordinary meaning of the words in cl 25.1(a)(i) of the contract, and in conformity with the broad intent earlier described, the vendor obtained development approval on the condition (amongst other matters) that it procured the release of the restriction as to user within 12 months. 64 I do not think that anything said in Karbonkraft Pty Ltd v Hampson (1996) 13 LGRA 54 goes against this. Karbonkraft obtained consent to use a building for paper converting between specified hours "subject to the condition that the proposed use shall cease if requested by [named local government authorities] at any time after the expiration of ten years from the date of this resolution". It was convicted of using the building for paper converting outside the specified hours, on the ground that, contrary to cl 59 of the County of Cumberland Planning Scheme Ordinance, it had failed to "comply with the terms and conditions imposed by any consent for approval …". It was held that the specification of hours, although not stated as a term or condition and to be contrasted with the condition as to cessation of use if requested, was a term upon which the consent was granted. This does not seem to me to support the notion of a term or condition as something required to be done in return for granting the consent - Karbonkraft did not have to use the building for paper converting even between the specified hours. 65 In any event, I do not think it was correct to say that the vendor was already obliged to the purchasers to procure a release of the restriction as to user. By cl 31.1 of the contract the property was sold subject to the restriction as to user. If his Honour had in mind an obligation to a purchaser other than the purchasers, I am not aware of any such obligation. That the vendor was "already bound to comply with the covenant, so far as the persons to whom it had already sold land in the subdivision" was no doubt correct, in so far as the owners of the land benefited by the restriction as to user could look to enforce it against the vendor as the owner of the land subject to the burden of the restriction as to user. But that was the occasion for the Council imposing the condition on which the operation of the development approval depended, and did not deny its character as a condition.

Acceptability to the vendor 66 The vendor knew about the restriction as to user, and had it given thought to it in May 1996 it would have appreciated that the erection of two of the five residential flat buildings was precluded by the restriction as to user. Undoubtedly, as at early October 1996 the vendor intended to procure the modification or extinguishment of the restriction as to user - it said so in the letter to the Council of 8 October 1996. But that does not mean that the development approval was relevantly "one which was asked for" or, as the vendor submitted, that the Council's imposition of the condition on which the development approval would become operative was not a matter which the vendor could properly have claimed was unacceptable. 67 The vendor could have anticipated a condition by which it had planning approval for the immediate erection of the three residential flat buildings on the remainder of lot 138 in the unregistered plan of subdivision, being the land not burdened by the restriction as to user, but planning approval for the erection of the two residential flat buildings on the land in lots 131 to 134 in DP843181 only after modification or extinguishment of the restriction as to user. The vendor did not ask for development approval structured in that way or, if such a split development approval could not be given, for a staged development or for two separate development approvals whereby that result could be achieved. But neither did it ask for development approval under which the erection of the three residential flat buildings was tied to the release of a restriction as to user which did not burden the land on which the buildings were to be erected. 68 The vendor did know, see the letter to Mr Rose of 11 October 1996, that a deferred commencement consent would be granted, and I will assume that it knew that the condition would apply to the development as a whole and so in respect of the three residential flat buildings. It did not protest at the time, or seek a change in the recommendation with a view to what I have described as a split development approval. But the later events which I have outlined seem to me to require that it be inferred that the vendor only realised the difficulty in which it was placed after the development approval was granted. When the difficulty was appreciated, NatWest sought to find other ways to proceed with the erection of the residential flat buildings. 69 In my view the later events, quite apart from what the vendor's solicitors wrote to the purchasers' solicitors, also establish that the vendor found the condition unacceptable. It was unacceptable because the vendor had to procure the release of the restriction as to user within twelve months, over the opposition of the "disgruntled residents", and was advised that its prospects were not good; while it tried, it would suffer the deferral of potential sales income (apart from any other "negative impact") described by Mr Rose in his letter of 13 January 1997. There is no reason to decline to accept what Mr Rose said in that letter. The vendor endeavoured to get out of the difficulty in which it was placed by bringing about a planning approval or approvals according to which it could embark on the erection of the three residential flat buildings before it had procured the release of the restriction as to user, but still it faced the opposition of the residents. It took advice and acted on it, but as at the end of March 1997 without success. With respect to Young J, I do not see the matter as he did, and Mr Rose's state of mind as reflected in the file notes of 27 March 1997 and 4 April 1997 was in my view justified and can be taken as support for the condition being unacceptable to the vendor. 70 The purchasers placed some emphasis on the notes of the meeting of 6 December 1996 recording the timing for the erection of the three residential flat buildings. They suggested that Mr Rose did not consider the condition unacceptable because he thought the restriction as to user would be released before the vendor was ready to erect the three residential flat buildings. The suggestion overlooks first, that whether the three residential flat buildings could be erected at all would remain uncertain until it was known whether release of the restriction as to user could be procured, and secondly, that Mr Rose's contemplation of subdivision of the burdened lots presupposed that the contract had been rescinded. What Mr Rose is recorded as stating is consistent with unacceptability and rescission. The purchasers also placed emphasis on Mr Martins telling Mr Stewart that the vendor thought it could sell the property to someone else for more money. This could provide a motive for rescission, but does not mean the condition was acceptable. It provokes particular care in determining whether the vendor found the condition unacceptable. I reach the view earlier stated with due regard to what Mr Martins told Mr Stewart.

A reasonable period? 71 It is not clear whether Young J held that the vendor's rescission was not effective because the vendor did not rescind within a month after the grant of the development approval on 29 October 1996. His Honour may have meant only that events immediately after the grant of the development approval were the best guide to whether the vendor found the condition unacceptable. If he did so hold, I am respectfully unable to agree. 72 Clause 25.1(c) of the contract contemplated that fulfilment of the conditions in cl 25.1(a) could be waived. It was not contended that there had been waiver in the present case. Subject to waiver, the contract could be rescinded "before the conditions in paragraph (a) are met or waived", which suggested that there could be rescission at any time prior to the fulfilment of the conditions in cl 25.1(a) or the waiver of their fulfilment. The purchasers' right to rescind was then confined to a seven day period, which suggested that, still subject to waiver, the vendor's right to rescind was not limited in the time for its exercise. Clause 25.1A of the contract contemplated that the vendor might commence proceedings in the Land and Environment Court as part of its reasonable endeavours to obtain development consent on terms acceptable to it. Nothing in the contract made time of the essence in exercising the right to rescind. All of this was inconsistent with rescission by the vendor within a month or not at all. Indeed, it may be noted that the vendor, should it have chosen to avail itself of its appeal rights, had 12 months to do so. 73 It was not submitted by the vendor that, on the proper construction of cl 25.1(c) of the contract, the vendor was not entitled to rescind the contract prior to 10 December 1996. I do no more than note the possibility. 74 A person entitled to rescind a contract may elect not to do so. But he is not required to rescind immediately, or within a short period, on pain of losing the right to rescind. As was said by Mason J in Sargent v ASL Developments Ltd (1964) 111 CLR 41 at 55 - "A person confronted with a choice between the exercise of alternative and inconsistent rights is not bound to elect at once. He may keep the question open, so long as he does not affirm the contract or continuance of the estate and so long as the delay does not cause prejudice to the other side."

75 In Champtaloup v Thomas (1976) 2 NSWLR 264 this Court held that purchasers had not elected to affirm a contract, and lost the right of rescission, by making requisitions, because the act of making requisitions was in circumstances clearly reserving the right to rescind and not prejudicial to the vendors. The purchasers were entitled to keep their options open. 76 So was the vendor in the present case, and it did so by its solicitors' letters of 5 December 1996 and 20 January 1997 and the telephone conversation of 23 January 1997. The purchasers accepted the position, at least until the "bad news" of 26 March 1997. There was no election to affirm the contract and no case was put forward of prejudice to the purchasers. The vendor had informed the purchasers that it regarded the condition as unacceptable but that it was seeking to overcome the unacceptability. It had taken advice, had sought to overcome the unacceptability of the condition, but had come to the view that the prospects of overcoming it were at best uncertain. The factual situation entitling the vendor to rescind remained, and in my view the rescission was effective.

The result 77 In my opinion the appeal should be allowed, the declaration and orders made by Young J on 4 December 1998 should be set aside, and in lieu it should be ordered that the proceedings be dismissed with costs; the purchasers should pay the vendor's costs of the appeal but should have a certificate under the Suitors Fund Act if qualified.

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At a glance

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Judgment (25 paragraphs)

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Cases Cited (3)