Wardy v Hardy & Anor

2526/2002 ANTE MAGANIC v. GUIDO RAVAGNANI JUDGMENT

1 HIS HONOUR: By statement of claim issued on 3 May 2002 the plaintiff sues for specific performance of a contract for sale of land made about 25 July 2001 in which the defendant was vendor and plaintiff was purchaser of a parcel of land in a then unregistered plan, a copy of which was annexed to the contract. The agreed price was $470,000 of which a 10 percent deposit was paid. The land sold was referred to as Lot 872 being part of lot 87 deposited plan 31360 of which the defendant was and is the registered proprietor. The plan shows the contemplated subdivision of the plaintiff's land into two rectangular parcels, each 1.012 hectares. The subdivision was as simple a subdivision as could well be supposed, as each of the proposed new parcels had frontage to an existing road. Proposed parcel 871 which the defendant was to retain already had a number of structures on it including his house, while parcel 872 was vacant except for a dam in the western corner. 2 The contract was on the standard printed form 2000 edition and included printed clause 28 in the standard form with the figure 6 as the number of months within which the plan was to be registered. 3

Clause 28 is in these terms: 28.1 This clause applies only if some of the land is described as a lot in an unregistered plan. 28.2 The vendor must do everything reasonable to have the plan registered within 6 months after the contract date, with or without any minor alteration to the plan or any document to be lodged with the plan validly required or made under legislation . 28.3 If the plan is not registered within that time and in that manner - 28.3.1 the purchaser can rescind ; and 28.3.2 the vendor can rescind , but only if the vendor has complied with clause 28.2. 28.4 Either party can serve notice of the registration of the plan and every relevant lot and plan number. 28.5 The completion date becomes the later of the completion date and 21 days after service of the notice. 28.6 Clauses 28.2 and 28.3 apply to a plan that is to be registered before the plan is registered. 4 By 8 March 2002 the plan had not been registered; so far as appears it still has not been registered. 5 On 8 March 2002 the defendant by a letter between solicitors rescinded or purported to rescind the agreement in exercise of the right of rescission conferred by clause 28.3. Soon afterwards the plaintiff lodged a caveat which remains on the title register, and in May he commenced these proceedings. There is no doubt and there is no issue of the plaintiff's readiness, willingness and ability to perform the agreement at a proper time, or otherwise as to his entitlement to succeed, except for the issue raised on the pleadings about whether the defendant, upon the facts which had happened, was entitled to rescind or was prevented from rescinding by his own want of compliance with clause 28.2. 6 Clause 28.2 is the subject of an authoritative decision of the Court of Appeal in Wardy v Hardie [2002] NSWCA 215. Particularly significant for the present case are passages in the judgment of Mason P, with whom other members of the Court of Appeal concurred, at paragraphs 62, 63 and 64 from which it appears that compliance with clause 28.2 is a condition precedent to availability of the vendor's right to rescind. 7 This is not a case in which it is alleged that the vendor has broken any promise contained in clause 28.2 or has incurred any liability in respect of failure to have the plan registered; the present issue is rather simpler and is to the effect that the condition precedent to rescission was not fulfilled. 8 The timetable of six months for having the plan registered was, the evidence makes it very plain, very tight, but in my finding it was feasible. The contractual obligation was to the effect that the vendor was to act with urgency as if registration within this period was feasible, and to do all things reasonably necessary to achieve that outcome. Whether the outcome of registration within six months was actually achieved is not quite to the point, the obligation being to do everything reasonably necessary to have the plan so registered. The condition precedent does not include the element of actual success. Upon the evidence achieving registration within six months required consistently maintained determined action, including pre-planning so that each new stage in the project could begin as soon as a previous obstacle was passed. 9 Registration within six months was feasible with highly expeditious handling and good fortune but could easily have been defeated by events, even if the vendor had acted reasonably and complied in the fullest way with clause 28. Interventions by the weather, industrial events, the responses of Council, unavailability of contractors or of materials and the fortuitous influence of events, could prevent achievement of the six months objective, which was the best imaginable outcome. However, these circumstances do not much affect the condition precedent, with which the defendant is to comply, and he is to persist whether or not circumstances turn against him; the vendor has to contribute his doing everything necessary towards attaining the contemplated outcome. If he does so, he will have complied with the condition precedent even if the plan is not registered within time. If he does not do so he does not obtain the contractual right of rescission. 10 The defendant put the conduct of the subdivision in the hands of a Surveyor, Mr Kerfoot, who had significant relevant experience in the conduct of such business and was familiar with what was required and the kind of problems which could arise. 11 The defendant considered early in 2000 the possibility of a subdivision of this kind and spoke to Mr Kerfoot about it, and he actually gave Mr Kerfoot instructions in April 2001. This led to Mr Kerfoot giving him a letter dated 4 May 2001 which surveyed what was likely to be required and the expense likely to be incurred in the subdivision application. The letter showed that Mr Kerfoot was adept in this work, as he foresaw broadly all that arose in the application, to him a relatively familiar kind of application, and dealing with Fairfield Council with which he had had earlier experience. Council's attitude to a history of market gardening in subdivisions of this kind was known to Mr Kerfoot to be difficult. It was known to Mr Kerfoot that Council's concerns would relate to market gardening on the vacant land and not on the house site. 12 Mr Kerfoot's letter of 4 May 2001 referred, among many other things, to the need for the application to Council to be accompanied by a soil contamination report which he explained by enclosing a quotation from URS, a firm equipped to provide such a report. 13 In his review of conditions that Council would be likely to impose and of costs that might be incurred, Mr Kerfoot set out estimates of a number of expenses. The total of these costs was in the order of $8,500 together with an expected s 94 contribution of $15,372. The figure of approximately $8,500 included $780 for a soil contamination investigation, but Mr Kerfoot's letter and the enclosure indicate that there would be extra expenditure in the order of $2,500 if the site had been used for market gardening activities. 14 Mr Kerfoot obtained from the defendant and put before URS Australia Pty Ltd, Environmental Engineers, whose report he sought, a letter signed by the defendant on 4 May 2001 (erroneously shown as 2000) which refers to "87 Cecil Road, Cecil Park" and says "The purpose of this letter is to provide a brief history of the above site, of which I am the owner". That is to say, the letter appeared on its face to refer to the whole of Lot 87, which was to be subdivided into two lots. The history provided was: "The property was purchased by me in 1984, at which time it was used for grazing stock. Prior to this, the land was used for keeping race horses. In the period I have owned the property it has been used for the following activities: house and surrounding garden and grazing. No market gardening activities have been conducted on the site. The site is currently not being used for anything". There was some further information. 15 On a fair reading the letter says to the effect that neither lot had been used for market gardening. This took events on an unfortunate course. 16 URS's report of 18 July 2001 was prepared to the lower figure of $780 which Mr Kerfoot had indicated. It includes in its introduction: We understand that this investigation was required so as to satisfy Fairfield City Council as to the suitability of the soils for the purpose of subdividing the property for residential development. 17 The identification in this report of the land to which it refers is not altogether easy to understand, as it contains several references to lot 87, which of course comprises the two proposed lots. In the introduction it refers to "Lot 872 DP31360", and this introduces some doubt as that deposited plan was the plan on which lot 87, not lots 871 and 872, appears. On the most careful reading, however, it should be understood that the lot reported on is proposed Lot 872; this appears from the site description in paragraph 3.1 which unmistakably describes Lot 872. Among other things, paragraph 3.1 says "no evidence of market gardening activities... was observed on the property." 18 The conclusion in paragraph 4 was: Due to the limited work program, our comments should not be considered as covering all potential site contamination issues. The program was limited to addressing the potential for contamination of the immediate subdivision area given the past land use of the site. With respect to potential land use of the site, URS considers that portion of the site investigated suitable for residential subdivision. 19 The soil report was dated 18 July 2001, that is before the date of exchange of contracts and before the period to which the obligation in clause 28.2 to do everything reasonable related. The report was included as an enclosure in the application for development consent for subdivision which was submitted by Mr Kerfoot on 30 July 2001 within that period. The letter of 4 May 2001 from Mr Ravagnani addressed to the Council is referred to as an enclosure in the URS report of 18 July and was part of the material submitted to Council on 30 July. 20 In my finding, if the history of market gardening on the house site had been initially revealed, explained and carefully distinguished from the history of the vacant land, Council's response would probably have been much simpler than it was. 21 The defendant committed the management of the subdivision application wholly to Mr Kerfoot's firm. The defendant says in his affidavit: In late May 2001 I instructed Britten & Associates Pty Ltd to proceed with the subdivision. I put the entire matter of subdivision in their hands and did my best to comply with any of their requests as I was and still am very ill suffering from cancer. 22 The defendant did not tell Mr Kerfoot of the 6 month contractual limit or the terms of clause 28, and did not give Mr Kerfoot any particular instruction for expedition. To my mind the evidence does not show signs that expedition or any particular time objective was part of Mr Kerfoot's proceedings; not surprisingly, as he was not made aware of any need for expedition. 23 To my mind the reasonable way to handle the situation before the defendant at the time of making the development application, having regard to Council's attitude to market gardening as known to Mr Kerfoot, was to approach the Council with a full and accurate account in the first place, to anticipate and provide answers to likely inquiries before the inquiries were made, and to establish and state the situation about Lot 871, the home lot and distinguish it from the situation of Lot 872. 24 The circumstance that the defendant had chosen the cheaper option for the URS report enhanced the desirability of making such a full approach in the first instance. 25 Council responded to the development application by its letter of 15 August 2003 to Mr Kerfoot's firm which referred to the proposed subdivision of lot 87 DP 31360 and said: Council's environmental management branch has a ssessed the preliminary history review and advises as follows: 1. A review of Council's records and the submitted preliminary contamination assessment has found that potentially contaminating activities have been conducted on the site. Therefore, a detailed site investigation is to be conducted by URS for the property identified as proposed Lot 872 in the subdivision of lot 87DP31360. Number 271-203, Cecil Road, Cecil Park. 2. The amended report is to be prepared in accordance with the NSW Environment Protection Authorities "Guidelines for consultants reporting on contaminated sites", and the "Sampling design guidelines".

3. Please note that Council may request that any contamination report be reviewed by an EPA accredited site auditor if it considers that insufficient information has been provided in support of the application." 26 One reasonable response to this letter was to comply with it straight away or after no more than a few days given to attempted negotiations. The matter raised by this letter would not have been raised if Council had been given soil tests or full and clear information at the start. As things were, the choice of courses available on a reasonable basis plainly included compliance, and this would involve expenditure in the order of $2,500 or $2,600, as was established soon afterwards by a further quote obtained by Mr Kerfoot from URS. 27 As there has been comment on the question of whether it was reasonable for the defendant to incur expense in this respect and in other respects, I should say that in my finding expenditure of this kind ought not, on a reasonable basis to have been regarded by the defendant as a difficulty, as he had been prepared for some such expenditure and for the possibility of a requirement of a fuller report by Mr Kerfoot's letter of 4 May 2001. 28 In relation to the price for which the property Lot 872 was to be sold and still more clearly in relation to the value of the whole of the land which was to be subdivided, $2,600 is a relatively small expenditure. It does not seem to me that $2,600 is a significant part of the anticipated subdivision costs. Various other tests of proportionality were suggested. Another suggested test was testing $2,600 against the interest cost running on the purchase price during the six months, and I suppose this test might have some value. It was not a sum of money which ought to have been an obstacle to a party committed to a contract of sale and committed to taking reasonable action to achieve registration of a subdivision plan. 29 Although, as I have said I regard compliance as the reasonable response, it does not seem to me that it would have been inappropriate (in this respect I have regard to Mr Timbs' evidence) to attempt to negotiate with Council officers and to establish more fully what was required and what might be thought acceptable, and generally to try to find a way of handling the problem by passing around it rather than through it. If such an endeavour were embarked on, it should have been governed, it should have been dominated by the overriding need to achieve registration within six months. It was in my judgment not reasonable to spend more than a few days, perhaps till the end of August at the most, on some such endeavour. 30 If the defendant or Mr Kerfoot who was conducting his affairs had embarked straight away on obtaining a further report from URS and complied with Council's requirement of 15 August, it can be expected with fair confidence that the report would have been available by mid October, or possibly earlier having regard to URS' own predictions about the time they would require. 31 Time was given to some process, the details of which have not been established in a clear way, of negotiating with and dealing with Council, first and principally by Mr Kerfoot. Mr Kerfoot is unable to give a detailed account with times and content of conversations which constituted this phase. At a later stage Mrs Howard, the defendant's daughter, was also involved in communications with Mr Kerfoot and with a Council officer. It was a long time before anything concrete emerged. 32 If communications of this kind had been conducted with energy Council's position should, in my view, have been ascertained by the time the end of August arrived. Council's position was not complex, and did not depart very far from what Mr Kerfoot had expected even before there was a development application. Council was satisfied eventually by measures of no great difficulty, being assurances to Council that the market gardening which had taken place (and the fact that it had taken place emerged during the communications and not at the beginning) took place on the house lot 871. 33 Mr Kerfoot's account of his part in these communications appears in his first affidavit commencing at paragraphs 13 to 18. He speaks of numerous telephone conversations, of communicating with Mr Ravagnani and getting his instructions, and of conferences with Fairfield City Council officers. The upshot was that he obtained a further letter directed to Fairfield City Council and signed by Mr Ravagnani dated 24 October 2001 clarifying the letter bearing date 4 May 2000, he bespoke a further report from URS and obtained a report on 8 November 2001 (not indeed based on soil sampling), and he submitted it to Council on 14 November. Mr Ravagnani's letter of 24 October referred to his earlier letter and said, "(I)... wish to clarify the second paragraph of it. In the period I have owned the property it has been used for the following activities: Lot 871 - house with surrounding garden, and market gardening activities. Lot 872 - vacant land used for grazing and domestic gardening for household consumption only and irrigated by the dam on the said lot. I do hope this letter clarifies the situation. 34 There were also some communications by Mrs Howard with Council, apparently in November 2001, which are recorded in some Council memoranda made in November but not at all clear as to the dates of the events with which they deal. 35 In November a Council officer appears to have raised with Mr Kerfoot the suggestion that Council would require and would accept a statutory declaration from the owner declaring that Lot 872 was used only for domestic gardening but that no chemicals had ever been applied to this lot. 36 There was discussion with Mrs Howard also about the possibility of the defendant's making a statutory declaration and she is recorded in a Council memorandum as having passed on some information about market gardening on lot 871: "She also advised that her dad had allowed some Chinese farmers to conduct market gardening on lot 871". 37 All the information given and all the information recorded about use of the land is strikingly bare of particulars about times, places, identification of chemicals or of persons, and of other convincing circumstantial material. 38 In some way not shown in detail the proposal that the defendant should make a statutory declaration matured, and a Council officer prepared a form of statutory declaration which would give information relating to the use of Lot 872 particularly and would state "No chemicals, pesticide, herbicides have been applied to Lot 872 during the period I have owned the property". This proposal developed, not at all rapidly, until the defendant in fact made a declaration in that form on 11 December 2001; the declaration was submitted to Council on that day and Council issued its notice of determination of the development application on 24 December, containing many conditions, but nothing relevantly adverse or surprising. 39 In my finding the application for development consent was conducted in a dilatory manner, and not at all in conformity with clause 28.2. Much more close and more prompt application to the satisfaction of Council's known requirements, either from the beginning or from 15 August onwards would, with a high degree of probability, have produced a much earlier outcome, perhaps in the order of 2 months or more. Undue attention was paid to the cost of taking the course most likely to achieve a clear outcome, that is, bespeaking a full soil contamination report; it appears that this cost was successfully avoided but avoiding cost received much too much attention, far more than was reasonable. The subject appears to have been one which the defendant did not find it possible to address on a realistic basis. 40 Not only did the question of cost of soil sampling have excessive influence in relation to the total of the costs involved; it also had an undue influence on the amount of time used, and insufficient regard was paid to the force of the contractual obligation for expedition. 41 In my understanding of clause 28.2, the vendor is disentitled from exercising the right of rescission if he did not do everything reasonable to have the plan registered within six months, whether or not his failure to do everything reasonable actually had any effect on the outcome and on the time taken to produce particular results, in this case Council development consent. 42 If it is important, however, I would find that the dilatory conduct of affairs in these respects did have a significant adverse effect on the time of which Council's development consent was available. 43 For these reasons the defendant was in breach of clause 28.2 and cannot rely on clause 28.3. There were, in my view, other significant failings on his part but as the findings I have already made dispose of the defence to the proceedings, I will not deal with them at great length. 44 Mr Timbs in his report set out a series of measures which were available to be taken and, in my view, should reasonably have been taken in anticipation of future stages in the project, including seeking a certificate under section 73 from Sydney Water, addressing engineering design, seeking approval from the energy authority, and seeking advance consideration of the survey plan by the Land Titles Office. With retrospection it can be seen that as there were no large surprises in the development conditions, anticipatory measures of the kinds outlined by Mr Timbs would, if taken, have been effectual. The opportunity to take them was enhanced by Mr Kerfoot's good foresight of what was likely to happen and what was the likely outcome of the development application. Pre-planning and anticipatory action would not have gone astray, but would have produced favourable results in terms of saving time. Other anticipatory action which was available was seeking information in the form of contractor quotations and availability, and acting reasonably it would have been appropriate to approach several contractors so as to have a range of choices both as to cost and also as to availability of particular contractors. None of these things even started until late in January 2002. As it happens they continued until October 2002, long after the purported termination, but were not carried to conclusion; during this period as before the events do not show expeditious handling. 45 For these reasons, I am of the view that the plaintiff should succeed and that the cross-claim claiming declarations in the contrary sense to the plaintiff's claim should be dismissed. 46 The orders are: 1. Declaration in the statement of claim; 2. Order 2 in the statement of claim; 3. Order that specific performance take place under and in accordance with directions of the Court, with leave to either party to apply for directions from time to time on two days' notice; 4. Reserve further consideration of the plaintiff's claim for damages; 5. Order that the defendant pay the plaintiff's costs of the proceedings; 6. Upon the cross-claim give judgment for the cross defendant with costs.

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