Walker v Chanrich Properties Pty Ltd

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1908/03 - WALKER v CHANRICH PROPERTIES PTY LTD JUDGMENT 1 HIS HONOUR: This is a purchasers' suit for specific performance. 2 The proceedings were heard by me on 10 and 11 November 2003. Mr J B Whittle SC and Miss Y Holt appeared for the plaintiffs and Miss J E Richards appeared for the defendants. The argument finished on 11 November, but there was then insufficient time to give judgment. 3 The defendants were developers of an estate at Wahroonga. On 22 June 2001 the parties entered into a contract in the 2000 edition of the standard form for the purchase by the plaintiffs and sale by the defendants of Lot 31 in the estate for $650,000. The standard deposit of $65,000 was paid. 4 Completion under special condition 34(1) was to be within 14 days from the date of notification of registration to the purchasers' solicitors that the relevant plan had been registered with the Land and Property Information Office. 5 Special condition 30(6) is as follows: "(6) The vendor shall take all reasonable steps to procure approval for the registration of the Plan, Instruments or Community Management Statement as referred to in sub-clause (2) of this condition as soon as practicable after the date hereof. If the Plan, Instruments or Community Management Statement are not so approved and registered on or before the date which is nineteen (19) calendar months after the date hereof, either party may prior to registration of the Plan, Instruments and Community Management Statement rescind this agreement by notice in writing to the other whereupon the provisions of Condition 19 shall apply. If the Plan, Instruments or Community Management Statement are registered prior to service of a notice of rescission by either party hereto, neither party shall thereafter be entitled to rescind this agreement pursuant to this condition."

The time under special condition 30(6) expired at midnight on 21 January 2003. On 22 January 2003, the vendors purported to rescind the contract pursuant to 30(6) and returned the deposit. 6 The relevant plan was lodged with the local council, the Ku-ring-gai Council, on 13 December 2002. It was uplifted from the council duly authenticated on Monday 20 January 2003. It was lodged with the Registrar General on Friday 24 January 2003 and registered on 6 February 2003. 7 It seems to me that there is only one basic question in these proceedings, and that is, whether the vendors can rely on special condition 30(6) to justify rescission. 8 A subsidiary question was raised by the amended reply which raised a problem with the doctrine of election. However, at the end of the case Mr Whittle could see that the point had no future and more or less abandoned it. 9 It is trite law that a person cannot rely on a right of rescission if the events which have given that right come about because some act or omission of that person materially contributed to the event not taking place; see eg Suttor v Gundowda Pty Ltd (1950) 81 CLR 418, 440-3. 10 The present case, however, is slightly different from that line of territory because the parties have by special condition 30(6) made specific provision as to what is to happen if the plan is not registered by the due date. There might be an argument that the first sentence of the special condition is independent of the second sentence. However, the authorities on similar clauses such as Hawes v Cuzeno Pty Ltd (1999) 10 BPR 18,011 at 18,012 say that clauses such as 30(6): "has both the character which appears from its express terms of a promise the breach of which would give rise to a liability for damages and also the character of a condition for the exercise of the vendor's right of rescission; breach of the promise is also the failure of the condition in which the vendor can rescind."

That method of approach has been adopted by the Court of Appeal in Wardy v Hardy (2002) 11 BPR 20,227. 11 It should be noted, however, that in Mitchell v Pattern Holdings Pty Ltd (2002) 11 BPR 20,241 at 20,258 [55] Powell JA, with whom Stein JA and Rolfe AJA agreed, said: "I must say that I have difficulty in accepting as correct the approach taken by Bryson J in Hawes … both as to the construction accorded by his Honour to condition A6 and as to the appropriateness of implying into the contract thereunder consideration the term making compliance by the then vendor with condition A6.1, a condition of exercise of the right of rescission." 12 It is to be noticed that Wardy v Hardy (supra) was decided by a Court of Appeal consisting of Mason P, Giles JA and Ipp AJA on 5 July 2002 and Mitchell's case was decided by a differently constituted Court ten days later, the reason why no-one referred to the other was that the Mitchell case had been reserved for some nine months. 13 It seems to me in the instant case that I have two inconsistent decisions of the Court of Appeal. The decision in Mitchell is in accordance with the way in which Hodgson JA, Windeyer J and myself have approached the problem. However, for present purposes I will merely follow Wardy v Hardy and thus adopt a course more favourable to the plaintiffs. The reasons for taking this course will become apparent. 14 Accordingly, the key question is whether the non-registration of the plan by 21 January 2003 was materially contributed to by the defendants' failure to take all reasonable steps to procure its registration as soon as practicable after the date of the contract. 15 As was made clear in the authorities to which I have already referred, cases where the parties have made provision for the conditions governing the right of rescission are in a separate category. However, it would be a mistake to think that all clauses in this separate category have an identical construction. The clause in Hawe' case was that: "The vendor must do everything reasonably necessary to have the plan registered within the plan registration time."

Bryson J said at 18,015: "Doing everything reasonably necessary included preparing the building application, and doing it within a time scale within which the plan registration time could be complied with …. . Their contractual obligation was not to commission some suitable person to do it; it was a direct obligation to do it and I do not regard it as open to them to point to pressure of other work in their architect's office, as the words used … do not admit of any concession for inattention or attending to other business." 16 The present clause does not require the vendors to "do everything reasonably necessary", but rather to take "all reasonable steps" and the obligation is to procure approval "as soon as practicable". 17 Mr Whitte said that there was only a small semantic difference between the two clauses. On the other hand, Miss Richards pointed out the difference between taking reasonable steps and doing everything necessary. I consider Miss Richards' submission here to be the more accurate. 18 Before dealing with the factors which Mr Whittle mentioned were the ones that were relied on by the plaintiffs to show that clause 30(6) had been breached, it is necessary to refer to some general guidelines that one bears in mind when approaching the present exercise. 19 As the plaintiffs acknowledge, they, as the party resisting rescission, bear the onus of proof as to whether the vendors were at material fault leading to the non-performance of the condition; see Pulmor Pty Ltd v Handley (1996) 41 NSWLR 30. 20 However, in Hunyor v Tilelli (1997) 8 BPR 15,629, 15,631, M H McLelland CJ in Eq fleshed out the statement he made in Pulmor's case by saying: "It is necessary however to bear in mind that all evidence is to be weighed according to the proof which it was reasonably within the means of one party to produce or of the other to contradict. This has particular significance in respect of evidentiary facts which are peculiarly within the knowledge of one party rather than the other … ." 21 The proviso in Hunyor's case received little attention in the addresses until I drew attention to it at the end of the debate. Then, as was to be expected, Mr Whittle said that this was a case where the facts were in the defendants' camp, while Miss Richards said that the copious affidavits on both sides and the cross examination had fully exposed all the material that could reasonably be expected to be exposed so that there was nothing on which the principle could operate. 22 Both counsel thought it was of significance that the original draft of the contract contained 22 months rather than 19 months. However, apart from the value that negotiations and statements made to parties' solicitors before the contracts were exchanged may be part of the factual matrix, this evidence is of little value. It is also affected by the fact that one would have expected that if the focus was on procuring registration earlier rather than later, words such as "and at the very most within nineteen calendar months after the date hereof" would have been inserted at the end of the first sentence of 30(6) rather than in the second sentence. Literally, the only effect of putting these words in the second sentence is to make it easier for the vendors to rescind. 23 The material showed that, in essence, Mr Fornari, the principal of the first defendant and virtually the Project Manager for the development, thought that the development should be finished by Christmas 2002, but he was acutely conscious of the problems that can occur in developments and so he thought it wise to give a breathing period. Had the original draft been accepted, then the date for the registration of the plan would have been 21 April and this deadline would have been met and the case would never have come to court. It seems that the date was altered because Mrs Walker wanted to ensure that she would be in by Christmas, but in any event, the clause did not seek to achieve that. It may be that there was some delay in the exchange of contracts. Indeed the evidence from Mr Fornari was that the contract had been out for a period of six weeks before the plaintiffs signed it (T2/3). 24 I cannot see anything in those negotiations which assist the proper construction of clause 30(6). 25 Although Mr Fornari was the person ultimately in charge of the development, he was not necessarily in charge of the project from day to day. A contract was let to a builder and the builder had possession of the site and could have excluded the defendants from the site had the builder so wished. There were a number of independent contractors employed to carry out various aspects of the development, though this has little significance in view of the approach taken by the courts that the acts of the independent contractors in the present type of case are accounted the acts of the developer; see Wardy v Hardy (supra). 26 The development was a big development. It involved four stages. Stage 1 had already been implemented. The present subdivision was part of Stage 2. Stage 3 does not concern this litigation. Stage 4 involved a block of Strata Title home units. There was thus a lot of work to be done by different trades and semi-government authorities, and accordingly, a lot of X factors in the development. The evidence from Mr Fornari and others in this case, and indeed, the court's general experience in this sort of case, is that there are a whole host of matters which can go wrong in a development including what the developer considers to be obstruction from local authorities or from neighbours, material for building not being available, the appropriate contractors not being available or doing their work properly, and a host of other problems. It accordingly does not follow that merely because a plan is not registered by the anticipated date that necessarily it was the fault of the developer. 27 However, it is also very common for developers, when planning a project, to prepare a time line, that is, they prepare a document which indicates the number of months anticipated for drawings to be prepared and for the appropriate development consent to be given by the local council, a time for letting of tenders, a time for the builder to do the works, the time for landscaping etc and an estimated time for completion. Singularly, no such time line was produced to the court in the present case. Mr Fornari said that he had prepared such a document for the bank which contained a very conservative estimate of times because it is good policy not to let banks get the idea that the project might be finished ahead of time and so want to be repaid their loan funds. It is rather extraordinary, however, that sales were being made without any realistic time line providing the vendors with the basis of a reasonable expectation as to when the project would be finished. Rather, Mr Fornari seems to have taken the view that he was an experienced developer, as he was, he had 23 years' experience as a developer, and that he had in his head a good idea of when the project would be finished. 28 The final general point that should be made is that in the instant case there was no reason for the developer to delay. Its interest was to have the project finished as soon as possible so sales could be made, loan funds repaid and profits maximised. 29 I put to Mr Whittle that this factor was one of the major factors that he needed to overcome if he were to succeed in establishing that the vendors had not taken all reasonable steps. Mr Whittle's reply was that it may well be that self interest and the contractual obligations pulled in the one direction, but that the evidence was clear that Mr Fornari did not give sufficient weight to the contractual obligations the defendants had solemnly undertaken. 30 Mr Whittle seemed to be fond of the word "solemnly". I do not, with respect, consider that it adds anything here. Indeed, I also consider as a tribunal of fact, that usually a person's self interest is of greater incentive than any contractual obligation, particularly, as here, where breach of those contractual obligations is not likely to lead to substantial damages. 31 In his closing address, Mr Whittle particularised the vendors' failure to take all reasonable steps under four heads:

A. The vendors did not take sufficient steps to ensure that survey was done as soon as practicable and that linen plans were prepared as soon as practicable as a result of that survey work. This failure can be put into two categories: (i) failure to commencing the survey work at too late a time; and (ii) once the work had started, to proceed with it too slowly;

B. Delays in production to the council of the final plan and certificate in relation to the landscaping;

C. Delay in production of the extra Water Board certificates from Mr Stubbs; and

D. Minor delays due to extra changes to linen plans as a result of survey errors. It was recognised that category D only involved minor delays and it is only to become significant in this case if added to other delays. 32 I would intersperse here that with the plan registered on 6 February and the rescission notice being given on 22 January, one is looking at a 15 to 16 day period of delay. If it can be seen on the balance of probabilities, that that 15 to 16 day period can be laid at the feet of the vendors not doing what they were required to do under clause 30(6), then the plaintiffs should succeed. Thus it may be that if one can find a 14 day delay under headings A, B or C, then a one or two day period under D may be sufficient to enable the plaintiffs to get over the "finish line". 33 I should also note though it has little bearing on the result that whilst Mr Fornari was an experienced developer, the plaintiffs appear to have had high expectations but had no experience of the difficulties which can easily occur with land development. 34 I will deal with the four categories separately. 35 A. As noted above, Mr Whittle puts this complaint into two categories (i) delay in commencing work on the survey and plans; and (ii) having commenced work, proceeding too slowly. 36 Mr Whittle says that the evidence shows that Mr Ward was commissioned to do the surveying work for fencing on 6 August 2002. However, only on 30 September had the work proceeded sufficiently far for Mr Ward to believe that it was appropriate to prepare the linen plan for Stages 2, 3 and 4. I should interpolate here that Stage 1 had already been completed at the time of the present contract. Stage 2 is the part of the subdivision involved in the present proceedings, and Stage 4 was the Strata Title home unit building. 37 Mr Ward said to Mr Fornari, "We can prepare and lodge the strata plan for the apartment building lot. However, there is not much point in lodging the linen plans for the housing lots until the fencing work is substantially completed as fencing line errors could result in the linen plan not complying with the fencing encroachment limits set out in the Community Management Standard." Mr Fornari told Mr Ward that he would accept his advice. 38 In late October Mr Fornari again spoke to Mr Ward and said, "Most of the fencing has been completed. Would you do a survey check and lodge the linen plan for the houses with council." The linen plans for Stages 2 and 3 were lodged, at least in a preliminary fashion, with the Ku-ring-gai Council on 4 November 2002. On 21 November they were sent to Land Titles Information for what is known as pre-checking, in order to save time later on. 39 The plaintiffs say that the defendants should have started on the plans at least by 30 September and there was no good reason to follow Mr Wards' advice and put off commencement for three to four weeks. Although they say Mr Fornari took professional advice, he was master of the situation and chose a course which led to delay. 40 The plaintiffs relied on an affidavit from Mr Surveyor Dowdle. He says in relation to Mr Ward's statement that the approach taken by Mr Ward was permissible if time permitted, but "if it is imperative to get the linen plan registered there is no reason in Surveying practice why appropriate steps could not be taken to make sure the fence was erected correctly". 41 There was considerable cross examination of Mr Fornari as to whether he could have had the fence put in in the presence of a surveyor. There is no doubt that this could have occurred. It may also be that if the clause that was before Bryson J in Hawes' case (the vendor must do everything reasonably necessary to have the plan registered within the plan registration time), it may also have been incumbent on Mr Fornari to ensure that this was done despite the cost. However, the question for me is whether that expense would be a "reasonable step" to procure registration as soon as practicable. 42 Miss Richards says that there was nothing to show that anything would have been achieved had the plan been commenced earlier, or that doing the development in the way Messrs Fornari and Ward did it was other than what an ordinary reasonable developer would have done in all the circumstances. Mr Dowdle's evidence really just says that it was possible to have the fencing work done at the same time as the surveying as she acknowledged it was, but whether it was reasonable or appropriate is a matter that Mr Dowdle does not address. 43 Mr Ward says that on 6 August he received instructions to peg out boundary points to assist the fencing contractor which he did by 8 August. In late September he was instructed to prepare the Stages 2, 3 and 4 linen plans. He suggested that apart from the Strata building the other plans be delayed until after the fencing was complete. Fencing work had commenced on 30 September. The survey work for the plans for Stage 2 was done between 9 and 11 October. 44 Miss Richards also points out that the current subdivision was not just a simple subdivision or one that merely involved excising the plaintiffs' Lot 31. It involved 18 houses and a unit building. It involved an easement and it involved a set of neighbours, some of whom had been objectors to the subdivision in the Land and Environment Court and whom the evidence suggests had to be treated with kid gloves. 45 There was extensive cross examination in this case but, with respect, I did not think that the cross examination helped me one whit to determine who was more likely to be giving an accurate account of what had happened. Indeed, there is little conflict between the witnesses. The plaintiffs' basic proposition was that the defendants were contractually bound to have the plan registered as soon as practicable; they did not do that and the four aspects particularised shows why they did not do it. 46 However, it does not seem to me that there is any reliable evidence as to why any reasonable developer would take a step to proceed with the finalisation of the linen plan earlier than the defendants did or that there was any failure to take a reasonable step in proceeding with the survey work and the registration of the plan. 47 Mr Fornari was cross examined to the effect that he had not brought to Mr Ward's attention that he needed to get the plan registered before 21 January and he agreed he had not. He added that he did not see that what Mr Ward was recommending was making one iota of difference to the date of registration. Mr Whittle continued:

"Q. It was very important that you take, under the contract, all reasonable steps to get that land registered?

Q. That meant that you wanted to ensure that anything that could be done be done sooner rather than later, didn't you?

A. You have got to be practical. I had to do it, if it would achieve getting it done quicker. But after discussion with Larry I saw I was not going to achieve it by doing it sooner. I would have to do it twice rather than once.

A. The survey work or the fencing work, if the fencing was put on the wrong lines.

Q. It would be perfectly possible to have somebody on site making sure at the time that the fencers put their fences on the right land?

A. Extremely expensive." 48 I would accept that evidence. Mr Fornari was an experienced developer. I would also accept his evidence that he was aiming to have the plan registered by December. 49 I really cannot see sufficient in the material to show that there was a failure to take a reasonable step with respect to the surveying and linen plan. 50 B. I now turn to landscaping. The officer of the Ku-ring-gai Council who gave certificates as to landscaping was a Ms Askew, a lady who only worked three days a week so that if a request landed on her desk after those three days it would have to wait for perhaps four days before it would even come to her attention. In addition, the evidence showed that it took two days for letters to come through the council's mailing system on to Ms Askew's desk. 51 It would seem that late in November 2002 there had been a change in the arrangement of planting trees which would act as a screen protecting neighbours from activities of a development. Mr Whittle says that according to Ms Askew she discussed with Mr Bird, who was the person in charge of the landscaping for the developers, that it may well be that as a matter of technicality an application under s 96 of the Environmental Planning and Assessment Act 1979 would have to be lodged to deal with the variation. Mr Bird said that the neighbours had agreed and Ms Askew suggested that in view of past problems that be put in writing. She then says that 90% of the works had been completed by 26 November and the outstanding works had been completed on her third inspection on 11 December 2002. Mr Whittle says that this shows that there was a delay of approximately four weeks in the landscaping. However, if one goes to Mr Bird's affidavit, this four weeks get whittled away fairly smartly. 52 First Mr Bird says that at his first meeting with Ms Askew she was only concerned with dish drains and not with landscaping. The landscaping conversations only commenced on 26 November when she asked for additional work to be done which was done and a certificate sent to the council that it had been done on 28 November. About 9 December there was a telephone conversation between Ms Askew and Mr Bird and Ms Askew indicated she required a further inspection. That was made and there was no talk about the neighbours until 16 December. He sent a fax to Ms Askew on 17 December indicating that the neighbours had consented and Ms Askew has marked it "Noted RA 18/12". 53 It seems to me that whilst both witnesses are endeavouring to give an accurate version of what happened, it is far more likely that Mr Bird who was in charge of the project and whose fax of 17 December to some extent corroborates his evidence, is correct, rather than Ms Askew who doubtless had a large number of projects on her plate which she had to deal with in the three days a week on which she worked. 54 I cannot see how this raises any failure by the vendors to take reasonable steps about the development. 55 There was some evidence in October there had been delays to the landscaping because a supplier had failed to deliver plants as contracted. However, this matter does not appear to be one which the plaintiffs rely on in the case. 56 C. The third principal head of delay involves the alleged late furnishing of certificates under s 73 of the Sydney Water Act 1994. Certificates for Stage 1 had been forwarded to the council on 1 May 2001. These further s 73 certificates including that for Stage 2 were forwarded to the council by the letter of the consulting engineers, K R Stubbs & Associates Pty Ltd on 10 December 2002, the date the certificates bear. 57 Mr Whittle says there was a ten day delay involved in furnishing these certificates and that these held up the processing of the plan because it was the busy Christmas period and indeed, Mr Lam, the council officer who was dealing with the matter, went on holidays on 17 December, though there is no evidence to show that anyone involved in this case actually knew of his intention to go on holidays. 58 There is no evidence as Miss Richards points out, that the certificates could have been obtained earlier. The landscaping matters were not approved by Ms Askew until 18 December, so that any delay involving the s 73 certificates would, in any event, be immaterial. 59 I do not consider that there was established to be any delay in this area. 60 D. As I mentioned earlier, it is conceded that any delay resulting from changes in the linen plans as a result of a small surveyor's error is de minimus as it could only have affected the registration of the plan by one day. I am not completely sure that this concession was rightly made as most government departments have standard delay problems, that is, once a requisition is made and answered the file goes back to the bottom of the pile and it may take some weeks to come back to the top again. But there was no evidence of this. In the light of failure of the plaintiffs to establish delay under the other heads, a one day delay even if established, could not be significant. 61 Accordingly, in my view the onus was on the plaintiffs to show that there was a failure by the vendors to take all reasonable steps to have the plan registered as soon as practicable. It may have appeared to the plaintiffs that as they only had to show 16 days and as there appeared to be some failures to progress matters as quickly as possible, they could establish this. However, when one looks at all the evidence, particularly the detailed evidence provided by the defendants, I am of the view that they have failed to make out their case. 62 Perhaps I should note that Mr Whittle had Mr Fornari admit in the witness box that he was irritated by the purchasers' behaviour and it was this that led him to take the step as soon as he could to bring the contract to an end. There was no pleading as to any rescission on some capricious ground, and indeed, whilst it may be capricious to rescind solely because the market is going up, the fact that the vendor and purchaser don't get on well together is merely a matter of motive and has no other significance. 63 It follows that the proceedings must be dismissed with costs.

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