Abraham, David Sydney v Johns, Pamela Dorothy

IN THE SUPREME COURT OF VICTORIA	Not Restricted
AT MELBOURNE COMMON LAW DIVISION

No. 5127 of 2008

DAVID SYDNEY ABRAHAM	Plaintiff
v
PAMELA DOROTHY JOHNS	Defendant

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JUDGE:	MUKHTAR AsJ
WHERE HELD:	Melbourne
DATES OF HEARING:	7, 9 −11 December 2009
DATE OF JUDGMENT:	19 February 2010
CASE MAY BE CITED AS:	Abraham v Johns
MEDIUM NEUTRAL CITATION:	[2010] VSC 33

SALE OF LAND ― Specific performance sought against vendor — Term requiring vendor to register restrictive covenant on adjoining land in favour of sold land — Legal character of term — Whether promissory — Inability to perform as an excuse — Whether vendor discharged from completion — Likely difficulties in performance — Imprecise term possibly requiring Court’s supervision or future applications — Appropriateness of specific performance — Decree for less than complete performance of contract

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr I S Williams	Hogan Dodds & Moore
For the Defendant	Mr C R Northrop	Wightons
HIS HONOUR:

This is the trial of an action by the plaintiff, as purchaser, for specific performance of a contract for the sale of residential land. In essence, the defendant vendor contends she is not required to complete the contract because a “condition precedent” of her obligation to complete the contract was void for uncertainty and incapable of being fulfilled by her. The condition concerns the registration of a restrictive covenant over the sold land.
The case involves primarily a question of contractual construction, and ancillary questions of waiver and election. It also involves the considerations applicable to the equitable remedy of specific performance for land contracts, the grant of which is discretionary assuming the contract is enforceable.
The dealings and the transaction had some peculiar features. The plaintiff adduced evidence about pre-contractual events to show what the parties had in their contemplation when the contract was made, as an index of intention. The law determines the meaning of a term in a contract by what a reasonable person would have understood it to mean. That normally requires not only of the words used, but also the surrounding circumstances known to the parties, and the purpose and object of the transaction.[1]
[1] See Codelfa Construction Pty Ltd v State Rail Authority of NSW (1981) 149 CLR 337 at 350-2, and Toll (FCGT)Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179.
In this case, without objection, the circumstantial evidence went and was tested by the defendant a little further. To understand the elements of this the case and its conduct at trial, and to find a legal solution to the problem, requires an unavoidably lengthy exposure of the surrounding facts and circumstances anyway. It is quite a story; with its struggles and tensions.
The facts
The defendant is the registered proprietor of Lot 1 and Lot 2 at 70 Stephens Parade in Barwon Heads, a coastal town on the Bellarine Peninsula. The property is regarded as being in a prime location as it overlooks the Barwon Heads golf club to the north and is close to 13th Beach on the Barwon coast to the south.
In early 2003 the defendant obtained a planning permit to allow the construction of two double storey detached dwellings on the land in accordance with plans endorsed by the responsible authority. Later that year she also obtained a planning permit for a two lot subdivision of the land to enable the development in accordance with the earlier permit. The endorsed plans and the plan of subdivision formed part of the vendor’s statement given under s 32 of the Sale of Land Act in the eventual sale.
The plans depict Lot 1 as having an area of 562 square metres with a street frontage on Stephens Parade. Lot 2 is shown as having an area of 956 square metres, and is behind Lot 1 but accessible from Stephens Parade by a driveway alongside the eastern boundary. One of the conditions of the subdivision permit stated that “The plan of subdivision shall include a restriction sheet to prohibit development of multi- dwellings on all lots and permitting no further subdivision”.
Faithful to the planning permit, the plan of subdivision expresses the creation of a “restriction” upon registration of that plan, to “benefit” and “burden” all lots on the plan. The restriction says, in essence, that the owners of the lots shall not erect more than one dwelling on any single allotment; not further subdivide the lots without approval; and not develop the land otherwise than in accordance with the endorsed development plan. These restrictions are given statutory force under s 24 of the Subdivision Act and are recognised as an encumbrance on the title. The plan of subdivision number PS 518148E, which was registered on 18 August 2004 and which created Lot 1, is noted as a covenant on the register search statement for Lot 1. I refer to this at the outset because an intermediate ingredient of the plaintiff’s case was that such planning restrictions under the Subdivision Act or the planning permit itself are a form of restrictive covenant or have the same effect at law. I shall return to this later.
The materials show a building permit for Lot 1 was subsequently issued to the defendant. An occupancy permit was issued in November 2005 for the newly built residence. In the encomium that customarily accompanies the marketing of real estate, the property which was named “Molyulla” was described as a rare gem, having inspired design, superb build quality and exquisite levels of finish. The residence on Lot 2 is yet to be built.
In 2005 or 2006, the defendant engaged estate agents RT Edgar to sell Lot 1, without success. The plaintiff called evidence from Peter John Molloy, a director of RT Edgar Bellarine Pty Ltd and the branch manager of the Barwon Heads office. He became an agent’s representative in 1998 and then a licensed estate agent in March 2003. He was put forward as an expert to give the court an opinion of the “market value” of Lot 1 as at February 2008 ostensibly for the purposes of a damages claim if the court declined a decree of specific performance. I mention his evidence now because it was apparent that his opinion, which he conceded could not be regarded as a skilled valuation but more of a “market appraisal”, was based on his inspection of the property in 2005 when he was acting as selling agent, as well as a consideration of what he regarded as comparable sales since then. His evidence, based on his 2005 inspection, was that Lot 1 was worth between $1.3 million and $1.4 million.
In late 2006, the defendant engaged another estate agency, AAB Global Pty Ltd to market the property for sale by private treaty. The persons acting were Mr Fred Dumar and Mr Michael Keating, an auctioneer. The evidence is that the defendant was looking for a price of at least $1.75 million. Mr Keating gave her an estimate of value in the range of $1.375 million to $1.5 million.
The plaintiff inspected the property on 4 February 2007. He was told by Dumar that the vendor was looking for a price around $1.8 million. The plaintiff’s evidence was that -
As we stood on the top deck I asked [Dumar] about Lot 2 and what would be built on it. I said to him that I or any purchaser of Lot 1 would require a very tight covenant in relation to height and building materials, particularly roof type and colour. He said he would look into the matter. However, as I left I indicated that the price was “way too high”.
The plaintiff is a lawyer by qualification having been admitted to practice in 1969. He was a litigation lawyer with, he said, a reasonable knowledge of contracts and had given advice occasionally on contracts. He ceased active practice in 1988. He says he had never practised as a property lawyer but had litigated sale of land contracts. Between 1988 and 1994 he was the managing partner of a city law firm doing administrative work. Since 1994, he said he had been acting as a consultant and director of various companies. Without going into details given to the Court, it is apparent the plaintiff has had a good deal of business experience including private and public building projects, and has a familiarity with commercial dealings and legal documentation.
In April 2007, the plaintiff noticed the property was still for sale. At his initiation he met with Keating and Dumar at their city office on 17 April 2007. His evidence was –
We had a long chat, largely about price which I described as “way over-priced” and the need for a strong covenant from the vendor as the owner of Lot 2. They agreed this was essential and showed me some plans for a house on Lot 2. The covenant had not been drafted, but they told me that I could have a hand in drafting the covenant if I purchased Lot 1. I left them in no doubt as to the importance I placed on such a covenant.
At that meeting I was again told that the price was “around $1.8 mill”. I left the meeting saying the price was way too high and “good luck to the vendor”. I did not hear from the vendor’s agent again.
In evidence, he elaborated that the land slopes down quite steeply to the north, and he did not want to look at a high building below that might be built on Lot 2.
Having been unsuccessful in obtaining a sale by private treaty, on 18 September 2007 the defendant then appointed AAB Global to conduct an auction of the land on 10 November 2007. The exclusive authority form stated the vendor’s reserve price as $1.75 million. Keating’s estimate of selling price given under s 47A of the Estate Agents Act was stated on the form to be $1,375,000 to $1,500,000. This is not a valuation but, so the Act says, an estimate of what the agent believes on the basis of his experience, skill and knowledge that a willing but not anxious purchaser would pay for the property.
The auction proceeded on the date as planned. Certain events at the auction and then the actual signing of the contract were the subject of challenge or scrutiny by the defendant in an endeavour, so it seemed to me, to show differences between the version of events given by the plaintiff and by Keating the auctioneer who was also a witness for the plaintiff. The question of fault may have a part to play in cases involving the law of mistake, but I doubt whether this evidence plays any influential part in the primary legal analysis. It seemed to have been spawned by the defendant’s pleaded allegation that the plaintiff was a lawyer who “should have, would have and ought to have been aware” of the problem in the contract.[2] I shall refer to the evidence for completeness as it helps explain other events.
[2] See amended defence and counterclaim, para 5.
The plaintiff says he arrived at the property about 10 minutes before the auction commenced. His evidence was –
Mr Dumar literally grabbed me and thrust the auction contract into my hands saying “we have fixed the covenant, have a look”. I quickly read the clause he pointed out to me and my response was “this is a ‘best endeavours’ clause only and I do not want to end up in a legal fight if the vendor fails to put in place the covenant.”
The clause there referred to is special condition 15. The plaintiff did not read anything else in the contract apart from that clause. Dumar added was that the 30 day settlement period could be extended. This discussion was said to have taken probably 1 to 2 minutes. The plaintiff said he glanced at clause 15 literally moments before the auction.
Special condition 15 was substantial in form and was in the company of two cognate clauses in clauses 14 and 16. Clause 15 came to be subsequently amended in circumstances I shall come to but as initially shown to the plaintiff before bidding started, it and the 2 other clauses stated −
14. In consideration of the Purchaser entering into this Contract and agreeing to pay the purchase price the Vendor shall give to the Purchaser the first option to purchase Lot 2 on Plan of Subdivision No. 518148E should she decide to sell the property at any time into the future as at a price to be agreed upon between the parties at that time. This Special Condition shall not merge upon settlement.
15. It is acknowledged that the Vendor shall take all steps necessary to register a Covenant in the form hereafter on the Title to Lot 2 on Plan of Subdivision No. 518148E to benefit the owner of Lot 1 on Plan of Subdivision No. 518148E and shall endeavour to do so within 90 days of the date of settlement of this matter. The restrictive covenant shall be in the following form namely:-
The Registered Proprietor with the intent that the benefit of this covenant shall be attached to and run at law and in equity with each and every lot on Plan of Subdivision Number 518148E other than the Lot 2 and that the burden of this covenant shall be annexed to and run at law and in equity with the said lot DOES HEREBY for himself, his Transferees, executors, administrators and assigns and as a separate covenant COVENANT with the said the owner of Lot 1, successors and assigns and other registered proprietor or proprietors for the time being Lot 1 on the said Plan of Subdivision said Registered Proprietor, his Transferee, executors, administrators and assigns shall not

a)

Construct only [sic] dwelling or structure on the Lot whereby the colour of the external surfaces of the dwelling constructed thereon [sic] and should the external surfaces require painting only the following paints are to be used:
i) as for the fibro cement sheeting and facias- Solver Paint, Low Sheen
Duragard using the custom tint “Pepper” – accent base (10 litre
formula) SB 3Y + 33, SC 4Y + 59, SI 2Y + 2.
ii) as for the windows doors and timber lining stringybark boards –
Chemysis “Cutek” Timber wood preservative custom tint – “pepper” –
10 litre formula – WT 240, OY 120, OB 120 and BL 30 – The contact
details for Chemisys Australia are:
Chemisys Pty Ltd
A.C.N.
P.O. Box 3604
Loganholme QLD 4129
Phone: 07 3287 7266
Email: [email protected]
Melbourne distributor…..
Laminated Timber Supplies
Factory 3/5 Burgess Road
Bayswater North,
Victoria 3153
Phone (03) 97614488
Email: [email protected]
b)           Construct any dwelling, outbuilding or any other structure on that part of the Plan annexed hereto in Schedule 1 being the land coloured red on that Plan having a height of more than 5.3 meters about the natural ground level.
c)           Construct any dwelling, outbuilding or any other structure on that part of the Plan annexed hereto in Schedule 1 being the land coloured blue on that Plan having a height of more than 4 meters about the natural ground level.
d)          Remove any vegetation from the property other than in accordance with the original Planning Permit No. 1558/2001 issued on the 6 January 2003 and the Plans attached thereto.

and this covenant SHALL appear on the Certificate of Title to issue for the said
lot and run with the land.”

18. This sale is made on the expressed [sic] condition that any transfer of the land sold shall incorporate a restrictive covenant in the following form, namely:-
”AND the said Transferee with the intent that the benefit of this covenant shall be attached to and run at law and in equity with each and every lot of Plan of Subdivision Number 518148E other than the lot hereby transferred and that the burden of this covenant shall be annexed to and run at law and in equity with the said lot DOES HEREBY for himself, his Transferees, executors, administrators and assigns and as a separate covenant COVENANT with the said Transferor and it’s Transferees, successors and assigns and other registered proprietor or proprietors for the time being of each and every lot on the said Plan of Subdivision other than the lot hereby transferred that the said Transferee, his Transferee, executors, administrators and assigns shall not

a)

Alter the colour of the external surfaces of the dwelling constructed thereon and should the external surfaces require painting only the following paints are to be used:
i) as for the fibro cement sheeting and facias- Solver Paint, Low Sheen
Duragard using the custom tint “Pepper” – accent base (10 litre formula) SB 3Y
+ 33, SC 4Y + 59, SI 2Y + 2.
ii) as for the windows doors and timber lining stringybark boards – Chemysis
“Cutek” Timber wood preservative custom tint – “pepper” – 10 litre formula –
WT 240, OY 120 and BL 30 – The contact details for Chemisys Australia are:
Chemisys Pty Ltd
A.C.N.
P.O. Box 3604
Loganholme QLD 4129
Phone: 07 3287 7266
Email: [email protected]
Melbourne distributor …..
Laminated Timber Supplies
Factory3/5 Burgess Road
Bayswater North,
Victoria 3153
Phone (03) 97614488
Email: [email protected]

and this covenant SHALL appear on the Certificate of Title to issue for the said lot and
run with the land.”

There is evidence that special condition 15 was sent to the defendant by her solicitors for her approval before the auction. She examined it and added suggestions as well as reminding her solicitors to insert an option to purchase as it is called in clause 14.
I put aside for the moment the question whether a stipulation about paint colour (including the tinting proportions or formulae) and paint manufacturer, truly do touch and concern land or are too restrictive or truly are negative so as to be valid or registrable as restrictive covenants. The idea of clause 15 and 16 is apparent enough. The endorsed plans show a design or aesthetic harmony between the dwellings on the 2 lots, and the colour stipulation in clause 15 and 16 was made for that purpose. I note that nothing is said about the roof type or colour on Lot 2. Clause 15 (a) does not make sense unless the word “only” was meant to be “any” and the rest of the sentence needs to be rewritten. It also uses the expression “external surfaces” but only by reference to cement sheeting, fascias, windows doors and linings. What if the external surfaces did not require painting but were pre-painted or manufactured of a certain colour? Would that fall outside the restriction in 15(a)? The height restrictions in clause 15 (b) and (c) are meaningful only by reference to the endorsed plans which show in a freehand way the red area as a car parking area and the blue shaded area as the living room wing and the studio wing. How those heights reconcile with the heights and design in the approved plans was not explored in the case.
Returning to the evidence, the plaintiff said that until shown the contract by Dumar, he did not “have any idea” whether or not the contract provided for a covenant of the sort that he had previously said would be required. He said he did not expect to make any bids but was able to pay for the property if he did bid for it. He did not read anything else apart from clause 15 but was prepared to bid at the auction even though he had not read the contract in full. This was his evidence:
Because the covenant was still, as well as price, a very important thing for you, wasn’t it? --- Yes.
If there was no covenant in the contract you wouldn’t have bid at auction? --- Again, that’s a hypothetical and I don’t know whether I would or wouldn’t.
Well, Mr Abraham on three occasions you have said to the agents that the covenant was needed and when you saw the form you said the best endeavours was not acceptable. Are you trying to tell the court that this covenant was something that if it was absent you would still have bid on the property? --- What I am saying to you is that what was offered to me in the contract was a best endeavours clause. My statement was that I felt that wasn’t good enough. Whether I would have bid or not [?] If the property had been at 1.8 million I assure you I would not bid.
One interpretation of this evidence is that the significance of the covenant to the plaintiff seemed to correlate with the price at which the property might be purchased. Or, it was a question of seeing how the bidding went; getting involved if the price was right and later reasserting that a best endeavours clause was not good enough.

23 The plaintiff then gave the following account of the conduct of the auction. Keating gave the “usual spiel” of an auctioneer and then called for questions. According to the plaintiff’s witness statement this is what occurred next –

I asked about the covenant. He said there “was a covenant”, but after some questions from me he stated to all present “that it was the intention of the vendor that the vendor will provide a covenant to the purchaser for the benefit of the purchaser at settlement”. He did not mention that the purchaser was required to give a covenant in favour of the vendor in the terms of special condition 16. The auction then commenced.

Under cross examination the plaintiff altered this to say it was Keating who mentioned there was a covenant from Lot 1 to Lot 2 as part of his spiel, that is, before calling for any questions. Then, the plaintiff said there was banter between him and Keating in which the plaintiff questioned whether there was a covenant already in place because he, the plaintiff, did not think there was. Yet, the plaintiff said nothing in this banter about this being only a best endeavours clause.
The evidence of Keating was slightly different. His witness statement says that during the auction preamble he asked if there were any questions, and the plaintiff then asked about the covenant. He says he told the crowd that “it was my understanding from the vendor’s instructions that it was always the intention of the vendor to guarantee to provide a covenant as described in the contract for the benefit of the purchaser.”
I should say here that in my view it does not matter who first raised in public the question of the covenant. The fact is, Dumar showed it to the plaintiff before the commencement of the auction. The fact is, there was a special condition 15 which said what it said. Further, it is incorrect to say it is a best endeavours clause. No such terminology is used and the “endeavour” on one view is not directed to the acts to be done, but the endeavour to do them in 90 days. Up to the time of the auction there had been no discussion about when the “tight covenant” would be in place, be it at settlement or before or after, but only its content. The banter at the auction confirmed the fact that the covenant was not already in place but the vendor would guarantee to put it in place. The clause as it then stood did not require it to be put in place by settlement, but afterwards.
The auctioneer Keating called for bids. The plaintiff opened the bidding with $1.0 million. No other bids followed. The auction was suspended and after consulting the defendant, Keating resumed the auction and announced a vendor’s bid of $1.1 million. The plaintiff bid another $10,000. No other bids followed. More time was taken to consult with the defendant, and the auctioneer then announced the property was “on the market”. There were no further bids. Then, the plaintiff said that to his complete surprise, the auctioneer announced the property was knocked down to the plaintiff on his last bid of $1.11 million. The plaintiff said in evidence he was “flabbergasted” because the vendor’s expectations were much higher and he expected others to pay more than he was willing to pay.
In evidence, the plaintiff said he was aware that bidding means bidding to buy on the terms in the contract as shown to him. But he denied that he bid not intending to sign the contract with clause 15 in the format it was then in, despite his earlier words to Dumar that it was only a best endeavours clause.
After the auction, the plaintiff went inside the home with Keating and Dumar to sign the contract. The evidence of Keating and the plaintiff largely coincides, although the defendant sought to attack some areas of imprecision or omission. A good part of the cross-examination of both men seemed to me to be directed to a forensic purpose of establishing which of them, actively or passively, conceived of the alterations to the contract which give rise to the present litigation. What follows is an assimilation of their evidence.
The plaintiff told Keating he was a lawyer but not an expert in contracts. He said words to the effect, “We need to fix this covenant, I do not want a best endeavours clause, and I want the protection of the covenant at settlement”. He explained in evidence that he was not comfortable about paying the money at settlement, and then having to wait for the covenant to be in place. He wanted the clause “improved”. Yet, when tested in cross examination, he said that despite the importance of the covenant, if it was not there it would be wrong to suggest he would not have bought the property.
He and Keating agreed to change the contract to a 90-day settlement rather than a 30- day settlement, although this was something not new as it had been mentioned before the auction started. According to Keating:
Mr Abraham told me that he was not an expert with regard to covenants. I told him that if he was insistent on changes I would write them on a contract of sale and discuss them with the vendor and that any changes would require her agreement.
According to the plaintiff, this is what occurred:
Mr Keating’s response was to say that “I agree with you on the covenant, I will change the contract to satisfy your needs and have a covenant available at settlement”. He said he would change the words from a “best endeavours” clause and also the time for settlement and seek the vendor’s approval.
Mr Keating and one of his staff then proceeded to make the alterations to clause 15 . . . and the changes to the settlement clause. I was sitting there still in shock while he proceeded to make all the changes he considered appropriate, and to insert my name as purchaser, the price and the solicitor who would act for me. I did not make any changes whatsoever to the contract. All changes and additions are under the hand of the vendor’s agent who showed me the proposed changes. I commented that I wanted the covenant available at settlement and he explained that the extension of the settlement date to “14 days after” was to facilitate the vendor to complete any necessary actions to set aside the covenant, if for some reason she could not do this within the 90-day settlement time.
With the handwritten amendments as made by Keating, the relevant part of special condition 15 read this way (I will show deletions and underline the handwritten additions):
It is acknowledged that the Vendor shall take all steps necessary to register a Covenant in the form hereafter on the Title to Lot 2 on Plan of Subdivision No. 518148E to benefit the owner of Lot 1 on Plan of Subdivision No. 518148E and shall endeavour to do so within ninety days of PRIOR TO the date of settlement of this matter.
And under the Particulars of Sale section of the contract, payment of balance and settlement date was altered to read :
90 30 days from this date hereof or earlier by agreement or subject to clause 15
settlement shall be effected within 14 days of clause 15 having been satisfied . . .
When cross-examined about who formulated or conceived of the changes, Keating said it was not really a case of the changes being conceived by any one person. Rather, he said, there was a discussion between himself, the plaintiff and Dumar as to how to bring about the object of changing the covenant to meet the plaintiff’s insistence and how to best resolve the situation as he believed he could not make the plaintiff sign the auction contract despite him being the successful bidder. It was more a case, he said, of a discussion taking place and Keating saying “Well, something along these lines”. I think this is the more likely thing that happened. It is clear that the plaintiff was present when Keating actually made the handwritten changes. Keating is not a lawyer; the plaintiff is. The object, no doubt, was to secure a signature and to bring about the plaintiff’s wishes in words that were thought to be plain and simple.
One part of the plaintiff’s evidence was perplexing. He told Keating he did not understand why settlement had to be 14 days after the recording of the covenant. The plaintiff told the court he had read clause 15 but did not understand it. He had queried the 14 days because he wanted the covenant at settlement. He told the Court he did not understand the difference between something being done at settlement and something being done prior to settlement.
The object, so it seems to me, was to bring about a situation where the recording of the covenant was not done or instigated contemporaneous with settlement but already put in place 14 days before the sale was completed. One would think this would be entirely to the plaintiff’s advantage so that he could proceed with certainty to settlement knowing the covenant had been registered, assuming that could be done. At the very least, in the handwritten changes all references to “endeavours” or the perception of “best endeavours” were removed and it became an unqualified obligation, one which the plaintiff ultimately contended was an absolute obligation regardless of the ability to perform.
At all events, the contract with those changes was signed on that day, 10 November 2007. The plaintiff gave a personal cheque for $111,000 as payment of the deposit.
Then something occurred on which the plaintiff seized, expectably, to contend that the defence was unmeritorious in the extreme. This is what Keating said occurred a few days after the contract was signed:
A few days later I was in my office at the premises of AAB Global when Ms Johns rang my mobile telephone, which I had left in Mr Dumar’s office – adjacent to my own. I am informed by him and believe that he answered the telephone and Ms Johns said words to the effect of “What do I have to do to get out of the sale? I cannot have that awful man as my neighbour”.
Mr Dumar switched the telephone to loudspeaker and took it into my office. I then said, “Hi Pamela, is there a problem?” Ms Johns replied with words to the effect of “Michael, how can I get out of this? I simply cannot live with that awful man living there in front”.
(According to other evidence, her grievance was that the plaintiff’s wife had been
gloating that they had purchased cheaply. The plaintiff said that was untrue.)
This evidence was not contradicted or explained by the defendant. Indeed, the defendant did not adduce any evidence whatsoever beyond some uncontroversial correspondence between the parties. Of course, despite this evidence of Keating (who is the defendant’s agent) the defendant’s case was that she was entitled to not proceed with the contract if the law afforded her grounds for doing so.

Events after the contract

On 10 December 2007, the plaintiff lodged a caveat over Lot 1 claiming an estate in fee simple over the land on the grounds of his rights as purchaser under the contract of sale.
On 27 November 2007, the plaintiff’s solicitors identified some matters in special condition 15 which they said required clarification. First, they queried whether there was a grammatical error in clause 15(a). It read, where relevant, that the covenantor (ie, the defendant as owner of Lot 2) “Shall not: a) Construct only dwelling or structure on the Lot [2] . . . “. They asked whether the word “only” really was intended to mean that “only one dwelling” may be constructed on Lot 2. Secondly, putting that aside, they asked whether the rest of clause 15(a) meant that if the dwelling has external surfaces requiring painting then must the specifically nominated paints be used, and would the Registrar of Titles accept a restrictive covenant of that type? Thirdly, they raised a query about the height restrictions in paragraphs 15(b) and 15(c). The plan attached to the sale contract showed hand shading over structures as shown on the plan. But, those coloured areas did not extend to the whole of the area of Lot 2. Therefore, though the height restrictions would apply to the shaded areas, they would not apply in the event that some other building was built on Lot 2 outside the shaded areas. The plaintiff asked:
Is the Vendor prepared to covenant either that the height covenants will apply to the whole of Lot 2 or that a further covenant would be introduced to the effect that any construction of a dwelling on Lot 2 could only take place within the areas covered red and blue on the Plan?
There was no answer given to this letter. Instead, on 2 January 2008 the defendant’s solicitors stated the following:
We refer to the amendments made to the contract in this matter at the time of signing.
The amendments to which we specifically refer are contained in:
1 “The payment of the balance settlement date” in the Particulars of Sale, and
2 Special Condition 15.
As you are no doubt aware it is well established that a person cannot make a contract with ones self.
In this instance, the Purchaser has obliged the Vendor to covenant with herself. The effect of the amendments are to require to Vendor whilst she remains the owner of Lot 1 to register a covenant on the Title of Lot 2 for the benefit of Lot 1 when she is the owner of Lot 2.
It is also well established that rectification would not be available in such an instance to eliminate a party’s error of law if that is the only source of the error. There was no mutual nor unilateral mistake.
It is also our view that the Purchaser cannot waiver. The Purchaser insisted on the position whereby the Vendor must impose the covenant on the property prior to settlement, which the Vendor cannot do in law.
As our client is unable to complete this matter the contract is unenforceable against her.
Would you confirm by return in writing that this matter is at an end. We have required the Agent to refund the deposit.
This position was maintained in subsequent correspondence to which was added the assertions that as the plaintiff was an Australian legal practitioner he should have known that the law cannot require the defendant to contract with herself and that the law and that a court cannot order specific performance if it means ordering the vendor to do something which he cannot do.
Argumentative correspondence followed which I shall not refer to copiously. To meet the defendant’s resistance, the plaintiff maintained that the intention of the parties was clear enough (that is, that there be mutual covenants on both lots), and the plaintiff was looking for any means to try and practically overcome the problem with special condition 15. The first means was to invite the defendant to amend the existing planning permit and the existing restrictions to include the proposed restriction under clause 15. Then, it was suggested that if such a course would not be taken, the plaintiff would consider waiving the benefit of the requirement that the covenant be registered prior to the settlement so as to enable the covenant to be created at settlement either by being included in the transfer of land instrument or in a separate document. That is, not a waiver of clause 15 in its entirety, but rather its timing so as to enable its satisfaction at settlement.
The defendant was not willing, and said she was not obliged to agree to such things.
The final endeavour made by the plaintiff occurred by letter 29 May 2008 which enclosed two alternative transfers of land both of which were signed by the plaintiff. The letter asked the defendant to sign so that the matter could proceed to settlement. The letter said, amongst other things:
I have provided you with two Transfers of Land because the advice I have received from the Land Titles Office is that it may not be possible to register the Transfer which is specific to paint type and supply as it may be deemed that this covenant is too restrictive and incapable of enforcement over time.
Accordingly, the second Transfer omits the words which may be in issue with respect to both Special Condition 15 and Special Condition 16 and impacting on both the Purchaser and the Vendor. The second Transfer will only be lodged if the first Transfer is refused by the Land Titles Office.
Both Transfers have been drawn upon the basis that the intention of Special Condition 15 of the Contract of Sale was to constrain your client from building more than one dwelling on Lot 2. In that regard I refer you to my letter of 27 November 2007 which raises this question and to which there has been no negative response from you.
I further advise consistently with what the Land Titles Office has told me that the Plan attached to the Contract of Sale and coloured red and blue is not acceptable to the Land Titles Office as an annexure to the Transfer.
The Land Titles Office will require a properly dimensioned plan of Lot 2 with the areas coloured red and blue on the plan marked “A” and “B” respectively.
I ask that you attach such a plan to both Transfers and that your client execute both
Transfers with a view to accommodating the Land Titles Office requirements.
It is cumbersome to recite the contents of each of these transfers. It is sufficient to say that each transfer not only required redrawn properly dimensioned plans of Lot 2 in two separate schedules dealing with the separate height restrictions, but they also altered the composition of the restriction in clause 15(a). In the case of the transfer that preserved the choice of paint colour, the transfer read that the covenantor shall not:
construct any more than one dwelling or structure on the said Lot 2 on the Plan of Subdivision in respect of which such dwelling or structure the external painted surfaces shall, where such external surfaces require painting, be
painted only with the following paints . . .
Likewise, the alternative transfer (which deleted any reference to paint choice) also put clause 15(a) as prohibiting the construction of “any more than one dwelling or structure on the said Lot 2”. That is, the plaintiff did not seem to regard the word “only” as really intending to mean “any” which is the word used in the rest of clause 15.
The defendant refused to sign any such transfers and maintained its position that the contract was unenforceable. As the plaintiff had lodged a caveat over the land, the defendant applied under s 89A of the Transfer of Land Act for the removal of the caveat on application to the Registrar which, under the provisions of that section, led to the commencement of these proceedings.
To add to the complications, in October 2009 two warrants of possession were issued by this Court by a mortgagee against the defendant to enforce a judgment for possession of both Lot 1 and Lot 2. For Lot 1, the warrant states that the debt owing to a bank as at 9 October 2009 was $1,000,964 plus interest of $13,711 which, as at that date, is a little below the purchase price in this contract. I am told the lender has taken possession. What is more, it emerged in Keating’s evidence that there are 2 other connected legal proceedings as between the defendant and her estate agents (one brought by her in this Court) which may depend on the outcome of this case.

The competing cases

The case as pleaded became elaborate to the point of rejoinder and eventually the plaintiff amended its case by leave on the last day of trial to put an alternative case. The essence of the plaintiff’s case can be restated in this way:

(a)

The plaintiff has always been ready, willing and able to perform this contract. The defendant should honour the bargain. She has been exposed as looking for a way out of the contract and the Court should not allow that.

(b)

As well as the obligation upon the defendant expressed under special condition 15, there is a general obligation implied in every contract to cooperate and do all things as are necessary on her part to enable the plaintiff to have the benefit of the contract. The whole idea was to have the covenants to benefit both lots, and she ought to cooperate to overcome the difficulties.

(c)

The obligation contained in special condition 15 is absolute. The mere fact that the defendant says she cannot covenant with herself does not therefore give legal justification for saying the contract is uncertain, or that it is somehow comes to an end.

(d)

The defendant has failed to take “all steps necessary” to register the covenant, including making application under the Planning and Environment Act or contracting with herself under provisions of the Property Law Act. That conduct was repudiatory. She has wrongfully disavowed the contract, and the plaintiff will not accept the repudiation. He has elected to hold the defendant to the contract. He has reasonably lodged a caveat to protect his interests.

(e)

The Court need not be concerned about those other possible steps because there is an efficacious solution. The plaintiff is willing to waive the timing requirement that the covenant be registered 14 days prior to registration. Thus, the covenant under clause 15 is to be created at settlement by being included in the transfer (thus overcoming the defendant’s argument that before settlement the defendant cannot covenant with herself). That is the means to be used in clause 16 (for the defendant’s benefit) and can be used as a matter of contractual equality for clause 15 as well.

(f)

She should be compelled by Court decree sign a transfer as required by clause 15. The reference to “only” in clause 15(a) is obviously meant to be “any”. The Court should not be concerned with the apparent problems or oddities in the proposed covenants. The parties should wait and see what the Registrar’s attitude is. The parties can then return to the Court and orders can be modified to meet the exigencies. If the covenant is rejected, or the Registrar takes a disagreeable course, that is an administrative act, and it may be challenged in the Court.

(g)

Alternatively, if the defendant cannot comply, or is not bound to comply with clause 15 on its terms or otherwise for any reason, the Court ought decree specific performance of the contract to the extent the defendant can do so, that is, without requiring the performance of clause 15.

(h)

Damages are obviously an inadequate remedy. The defendant does not have the means and ability as is demonstrated by the mortgagor’s judgments for possession.

The defendant’s case was built on the axiom that the defendant cannot covenant with herself, and the expression “prior to” in the particulars of sale required special condition 15 to be performed before settlement. Her case can be encapsulated as follows:
(a)        She is ready, willing and able to perform the contract but she cannot do so as she cannot covenant with herself as required by clause 15.
(b)        The satisfaction of clause 15 was a condition precedent to the completion of the contract, that is, a contingent condition, similar to a promise to take steps to obtain finance. If that cannot be fulfilled “prior to” settlement then the date of settlement never arises.
(c)         She is not required to take steps under the Planning and Environment Act or the Subdivision Act. That is not required under the special condition 15 nor is it required of her either under those Acts. In any case, that is not the relief sought by the plaintiff. In addition, the Property Law Act provisions are inapplicable.
(d)       Special condition 15 is more than a subsidiary term. By bringing these legal proceedings, the plaintiff has elected to affirm the contract, including special condition 15 in its form. It is not open for the plaintiff to waive only the timing aspect of special condition 15 and also require the defendant to do the act at settlement by means of a transfer. That is in truth a variation of the contract because it seeks to impose an obligation at another time and by another means with which she did not agree and is not bound to agree.
(e)        The implied contractual duty to cooperate has no application because the defendant is not being asked to cooperate in the performance of clause 15, but to do something beyond that clause.
(f)         The plaintiff’s alternative case should not be entertained. He seeks by a side wind, in effect to waive or sever special condition 15, but that is something he has elected not to do in the principal case. He cannot retrace his steps.

Analysis

It is an elementary principle of law that a person cannot covenant with himself or herself. Such a covenant is senseless: Rye v Rye.[3] But that does not simplistically dispose of this case. Putting aside any question of contractual formation, mistake, rectification, or frustration (which play no part in this case), if a contracting party agrees to do something erroneously believing it could be done, but it is subsequently realised or it eventuates that it cannot be done, that does not therefore make the contract uncertain or unenforceable. A contract may be void for uncertainty in various ways. It may be incomplete in some material way, or illusory, or lacking in finality, or expressed in language so obscure and incapable of any defined or precise meaning that the Court is unable to attribute to the parties any particular meaning.[4] But special condition 15 is clear enough in that it stipulates what has to be done and the defendant is not contending she does not know what to do or how to do it. The defendant’s case is that she cannot register the covenant by an agreement with herself. Even so, that does not make the contract void for uncertainty, and that notion needs to be expelled from this case.
[3] [1962] AC 496, 513
[4] See for example Meehan v Jones 149 CLR 571.
Likewise, saying something cannot be done does not therefore provide an excuse from the obligation to do it. If as a matter of proper construction the obligation incurred was an absolute one, then impossibility of performance is no excuse. It may mean that compelling performance in specie is useless; but non performance will nevertheless amount to breach.
To my mind the critical question is whether fulfilment of special condition 15 was a condition precedent to the defendant’s obligation to complete the contract. Although described as a condition precedent (usually taken to mean a condition precedent to the coming into existence or formation of a contract) the defendant contented ultimately that a registration of the covenant was a contingent condition. Special condition 15 is not expressed that way, but the defendant looks to the particulars of sale which were amended to say “or subject to clause 15 settlement shall be effected within 14 days of clause 15 having been satisfied”. The defendant says special condition 15 was an obligation to take steps, not bring about a result; and is similar in some ways to a “subject to finance” clause where it does not lie in the will of a party to ensure the fulfilment of a condition. The defendant submits that unless the defendant could take steps to obtain registration thereby satisfying special condition 15, the date of settlement will never arise. And, she cannot take the steps because she cannot covenant with herself. Hence, her case is that the condition fails, and she is relieved from the contract.
The plaintiff used various expressions to describe its characterisation of clause 15, either an absolute obligation or a promissory term or a promissory condition. Care must be taken in the use of the expressions “condition precedent”, “promissory condition” and “contingent condition” or at least ensure they are used consistently: see McTier v Haupt[5] and the discussion throughout Perri v Coolangatta Investments.[6] The word “condition” is sometimes used to mean the same thing as a term of a contract, as in the oft seen expression “conditions of sale”. A contingent condition can describe an event which is not certain to occur but must occur before performance under a contract becomes due. Such contingencies are usually, but not always, matters that depend on actions by others or at least matters outside the control of the contracting party. But it is possible for a party to promise the fulfilment of such a contingency, in which case there is a promissory condition.
[5] (1992) 1 VR 653 at 657. See also generally Chesire and Fifoot’s Law of Contract(9th Aust ed) at 20.1-20.3; and Carter et al, Contract Law in Australia (5th ed) at [13-07] and [13-16]ff.
[6] (1982) 149 CLR 537.
Following the approach of Brooking J in McTier v Haupt,[7] I too would prefer to use terminology that distinguishes between “promises” (breach of which creates a liability in the promisor in damages) and “conditions” (the non fulfilment of which is not a breach of contract and can never, in itself, create a liability in damages) and use the expression “promissory condition” for a third class of case where there is both a condition and a promise that the condition shall be fulfilled.
[7] (1992) 1 VR 653 at 657.
In my opinion special condition 15 is a promissory condition. The plaintiff did not want to pay the residue until he got his covenant, and the defendant was willing to oblige him by agreeing to do it, and then proceed to settlement 14 days later. The expression “shall take all steps necessary to register a covenant” are cast as an imperative and the expectation was that of a “guarantee” as the auctioneer put it as a matter of ordinary parlance, meaning it would be done. It may be accepted that, generally speaking, a factor which strongly affects the construction of such an obligation is whether the event or the obligation is dependent on the control or activities of a third party, in this case the Titles Office. The removal by amendment of “endeavour” at the insistence by the plaintiff because “best endeavours” was not good enough, supports the characterisation that the clause was intended to have an promissory operation. There is no qualifying language or anything else to relieve the defendant from performing if special condition 15 could not, for some reason or another, be performed.
Thus, I think the fallacy of the defendant’s case is to say that special condition 15 entitled her to rely on its non-fulfilment. In my view, special condition 15 is for the benefit of the plaintiff only, and therefore only the plaintiff could rely on its non- fulfilment. It had the effect that the plaintiff (not both parties) was under no obligation to complete the sale until the condition was fulfilled or waived: Perri v Coolangatta Investments Pty Ltd.[8]
[8] (1982) 149 CLR 537. See generally Cheshire and Fifoot’s Law of Contract (5th Aust ed) at 20.13.
But the plaintiff would not waive the requirement to fulfil special condition 15. A right to waive can also be the subject of election and it is correct to say that the plaintiff has elected to not waive the special condition but rather, insist on its performance: see Sargent v ASL Developments.[9] The bringing of this action is an election to enforce the clause: see Perri.[10]
[9] (1974) 131 CLR 634.
[10] (1982) 149 CLR 537.
The plaintiff put forward three means which he submitted were open to the defendant in order to fulfil special condition 15. As I understood it, these were put forward either as being “all steps necessary” or as coming within the rule of construction or implication originating in Mackay v Dick[11] that the defendant is taken to agree to do what is necessary to enable the plaintiff to have the benefit of the contract: see Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd.[12] But that principle has its limits. The required cooperation is defined by what has been promised under the contract and not a general obligation to look after the interests of the plaintiff.[13]
[11] (1881) App Cas 251 at 263.
[12] (1979) 144 CLR 596 at 607.
[13] See generally Cheshire and Fifoot’s Law of Contract (5th Aust ed) at 10.42.
The first step, said the plaintiff, was that a covenant could have been registered by means of the planning and subdivision legislation. Under s 47 of the Planning and Environment Act 1987, application may be made for a permit to allow, amongst other things, the variation of a registered restrictive covenant. It was submitted that the plan of subdivision which formed part of the vendor’s statement showed the creation of “restrictions” by reference by the land to be benefited and burdened and such restrictions by law came to be registered as covenants on the title. Thus, it was said that the parties had in their contemplation, for the purposes of special condition 15, the use or availability of the planning legislation as one means to give effect to the obligations under clause 15.
I do not think that conclusion follows. I do not accept that just because the plan of subdivision formed part of the vendor’s statement that it therefore became a matter of contemplation in the sense of something which may be assumed to inform contractual intention. Recourse to development permits under planning schemes in State legislation brings with it so many considerations, burdens and processes which may be prolonged. Nothing in the objective circumstances supports such an expectation on the part of the purchaser that such a burden be imposed on the vendor to that extent.
I think the same can be said about the Subdivision Act 1988. Sections 4, 11 and 23 of that Act, in essence, allow for a variation of any “restriction” as part of a plan of subdivision and the amendment of any certified plan. I do not think there is sufficient to show that steps under that Act were in the contemplation of the parties.
I think the more likely view coming naturally from the circumstances is that this special condition (as amended) assumed — and assumed wrongly — that a covenant of the type and in the form as stated in special condition 15 was registrable in the ordinary way under s 88 of the Transfer of Land Act. The ordinary way to create a restrictive covenant is to incorporate it into an approved form of transfer under s 121 of the Act (known as a Form T2) which has an area to insert the “Creation and/or reservation of covenant”. It may also be done by written agreement usually a deed: see Butt, Land Law.[14] Had special condition 15 been left in its unaltered state, it could have happened that way.
[14] (5th ed) at [1777]. Note the author there refers to s 46A of the Real Property Act 1900 of NSW which permits a covenant to be created even though the same person owns both the benefited and burdened land.
As a second possible step, the plaintiff asserted that “there is much to be said for the view” that the provisions of s 72(3) of the Property Law Act enable the defendant to create a restrictive covenant over her own land. Section 72(3) states that “After the commencement of this Act a person may convey land to or vest land in himself.” The Act defines “land” to include incorporeal hereditaments and a right, privilege or benefit over the land, and defines “convey” to include every assurance of property or of an interest therein.
It is doubtful whether s 72 does what the plaintiff contends it does for the purposes of this case. I acknowledge the general proposition that the benefit of a covenant affecting land can be endowed with, or seen as, having a proprietary character as by legal nature it “runs with the land” or “touches and concerns land”[15] and become enforceable as against successors. Section 72 seems to suppose the pre-existence of the interest in land and then its conveyance, rather than a means to create an interest. I would adopt the commentary in Robinson, The Property Law Act Victoria[16] that the provisions of this section are necessary for cases where the real and personal estate of a deceased vests in the personal representatives who may hold the land ultimately for themselves beneficially. The section entitles them to vest the land in themselves, albeit in a different capacity.
[15] See Re Arcade Hotel Pty Ltd [1962] VR 274 at 281.
[16] (1992 Law Book Co) at 146-7.
As the defendant submitted, an examination of the structure of the Property Law Act shows that covenants as a distinct subject matter are dealt with in separate part of the Act in s 76 ff. Those remaining provisions do not in any way say that a person can covenant with himself or herself. At most, s 82 states that a covenant may be entered into by a person with himself and one or more other persons. That is, A can covenant with A and B, but A cannot covenant with himself or herself.
I have stated my views on these two questions to deal with the submissions as made. However, the plaintiff contended that it did not seek to compel the defendant to take either of those two steps. It seeks to compel the defendant to sign a transfer at settlement as the most efficacious and direct means of satisfying special condition 15. It is to be remembered that a transfer is the agreed means to be used for special condition 16.
That leads to the question of waiver. The plaintiff has not waived compliance with clause 15; indeed seeks a decree that it be performed. But it seeks to waive the timing requirement. That is, it will relieve the defendant from having to comply with the 14 day requirement and will accept a transfer at settlement. Putting aside the problems I have identified with the drafting of the proposed covenant, this presents itself as a reasonable solution to get the sale completed.
The defendant says she was not legally bound to sign the 2 alternative transfers as sent by the plaintiff’s solicitors in May 2008 because it was not truly a waiver of special condition 15 but a variation. The particular form of the covenants in the transfers was altered by the plaintiff to overcome the uncertainties and apprehensions about the Registrar’s attitude. It was submitted first, that a waiver cannot operate on the principal terms of a contract in such a way as to effect a substantial change in the right and obligations of the parties Watson v Healy Lands Ltd.[17] Secondly, the substitution of new obligations does not fall within the duty to cooperate.
[17] [1965] NZLR 511.
The doctrine of waiver attracts much discussion: see Commonwealth v Verwayen[18] and more recently Agricultural and Rural Finance Pty Ltd v Gardiner.[19] All that need be said for present purposes is that waiver means an intentional non insistence upon a right. There should be no doubt, that clause 15 and the connected 14-day requirement in the particulars of sale was for the benefit of the plaintiff (and, I would say, solely for his benefit) and he was entitled to waive the time requirement: see Maynard v Good;[20] George v Roach; [21] and Sandra Investments Pty Ltd v Booth .[22]
[18] (1990) 170 CLR 394 at 406-7, 422, 457,466 and 481 .
[19] [2008] 238 CLR 570 at 586ff.
[20] (1926) 37 CLR 529 at 538.
[21] (1942) 67 CLR 253 at 259.
[22] (1982) 153 CLR 153 at 159-61.
Nor do I see any legal barrier to the plaintiff’s accompanying request that the defendant use a transfer of land as the mode of performing special condition 15 even though the clause does not stipulate that. It is not a variation because the clause does not stipulate a mode or manner of performance, just an obligation to “take steps”. A transfer is a step. The obligation under the clause is unchanged; all that has happened is the plaintiff has sought to attract performance by the recognised mode of using a transfer. Subject to what follows, in my view, that is a valid waiver and not a variation. And should it matter, I would say that the use of a transfer, though not stipulated, is a mode of performance and falls within the implied duty to cooperate to fulfil an agreed obligation.
The real problem in this case, as I see it, is the content of the covenant in special condition 15. It raises many questions. The underlying idea is discernible, but not even the purchaser’s solicitors were sure what it meant or what it was intended to say precisely. The 2 alternative transfers as sent to the defendant modified the language and expression of the covenant as agreed, in the interests of satisfying the Registrar and thus meeting the defendant’s obligation anyway. But at trial, the plaintiff did not seek specific performance according to the 2 alternative transfers previously sent. In adherence to the contract, he sought specific performance by means of a transfer containing the covenant in the terms stated in special condition 15.
The plaintiff contended that the clause 15 covenant should be lodged within the transfer and respectable arguments could then be put to the Registrar to justify the restrictions as stated, at least for some of them. It was said that the Registrar performs an administrative or ministerial function, is not infallible, and his or her view is not necessarily determinative of whether something is or is not capable of being registered as a restrictive covenant. If the Registrar refuses to register a dealing or do an act, there is a procedure under s 116 (2) of the Act to summon the Registrar before the Court to substantiate and uphold the ground of his or her refusal. The Court can direct an issue to be tried and “make such order as the case requires, and the Registrar shall obey such order.”
In the predicament that the case presented, no evidence was adduced on behalf of the plaintiff of an expert or experienced conveyancing nature about the processes that lie ahead or the considerations that usually apply to the registration of a restrictive covenant of this nature and composition. The only evidence the Court has is the letter from the purchaser’s solicitors referred to in paragraph 46 of this judgment which exposes not only the difficulties present in their own minds but more importantly, the problems already identified by the Titles Office from their enquiries.

The remedy of specific performance

Specific performance is a discretionary remedy according to the balance of justice or injustice. In Dougan v Ley[23] Dixon J confirmed that the foundation of a decree for specific performance was that damages at law would not give a party the compensation to which he was entitled, that is, would not put him a situation as beneficial to him as if the agreement was specifically performed. The question is usually posed by asking whether it is just in all the circumstances that a plaintiff should be confined to his remedy in damages.[24]
[23] (1946) 71 CLR 142 at 150.
[24] See for example State Transport Authority v Apex Quarries [1988] VR 187 at 193.

Equity expects people to carry out their bargains.[25] Courts have treated a contract for the sale of land as a proper subject of specific performance in favour of a purchaser, certainly a blameless one, because land has a fixed location and is regarded as having a special value for the purchaser.[26] There is also the question whether the remedy of damages, even if otherwise adequate, becomes inadequate because of the possible insolvency of a defendant.
[25] Shiloh Spinners Ltd v Harding [1973] AC 691 at 723.
[26] See generally Jones and Goodhart, Specific Performance (2nd ed) pp 128-30; Meagher et al, Equity Doctrines and Remedies (4th ed) [20-030].
But specific performance may be inappropriate if it could require the continued supervision of the Court to ensure the fulfilment of the contract: J.C. Williamson Limited v Lukey;[27] Patrick Stevedores Operations No.2 Pty Ltd v Maritime Union of Australia.[28] Finality is both in the parties’ interest and in the public interest. As is said by the authors of Jones and Goodhart, Specific Performance:[29]
An award of damages is characterised by its finality and the cost of enforcing a judgment for damages is borne by the parties to the litigation. In contrast, to grant specific performance of a contract which requires a court to supervise its performance may impose pressures on, and consequently increase the expense of, the administration of civil justice.
[27] (1931) 45 CLR 282 at 297-8.
[28] (1998) 195 CLR 1 at [78] – [81], [192].
[29] (2nd ed, 1996) at p 51.
There are two other principles or considerations pertinent to this case.[30] First, obligations may be complex or unclear to the degree that a Court may conclude there is a possibility it might be required subsequently to define the parties’ obligations or else might be required to determine from time to time whether complex or imprecisely defined obligations have been performed. The various probabilities will be taken into account in deciding on the order that is most just in all the circumstances. It may be appropriate to order specific performance despite the uncertainties and, if necessary, the defendant may later approach the Court for a modification or variation by reason of subsequent difficulties. Or the Court may require further information to be provided in order to enable difficulties of performance or enforcement to be assessed. The Court may think it appropriate to make a conditional order or else to adjourn the proceedings until the position becomes clear.
[30] See generally Spry, Equitable Remedies (8th ed) pp 103 ff, Meagher et al, Equity Doctrines and Remedies pp.664-665, 668; and Jones and Goodhart, Specific Performance at p 51.
Secondly, there are cases where Courts of equity have compelled the vendor to perform at least such of his obligations as the vendor can, and then have an abatement of price referable to the default. For example, where in the course of concluding a contract a person has represented that he can grant a certain property, or is entitled to a certain interest in that property, and if it later appears that there is a deficiency in his title or interest, the other party can obtain an order compelling him to grant what he has got, and in an appropriate case, to submit to a reduction of the consideration for the grant.[31] In such a situation, there is no barrier to the Court taking the exceptional course of partially enforcing the contract: Mortlock v Butler;[32] Gall v Mitchell.[33]
[31] See Thames Guaranty Ltd v Campbell (1985) QB 210 at 235. And see generally Jones & Goodhart, Specific Performance at 102, Spry, Equitable Remedies at 302-3, 304-5; and Meagher et al, Equity Doctrines and Remedies at 691-2.
[32] (1804) 32 ER 857.
[33] (1924) 35 CLR 222 at 229.
Where lies the balance of justice in this case? Even if I accept that the word “only” in clause 15(a) was an obvious mistake and meant to say “any” (consistent with the presence of “any” in the rest of the clause and the planning permit) I think there is sufficient to say there are bound to be problems with the registration of the covenant in the agreed form. I am afraid to say it is badly drafted and deserved much greater consideration well before auction if it was thought to be so important, certainly when it was altered to require registration before settlement. There is a real question whether it touches and concerns the land (as distinct from benefiting the covenantee personally with pleasing colour choices) and whether it imposes positive rather than restrictive obligations as I have identified in paragraph 20. The requirement for a properly dimensioned plan to precisely deal with the height restrictions seems highly likely as well as continuing debate whether the height restriction extends to any possible construction on the site, as was sought by the purchaser’s solicitors in their correspondence.
There is no satisfaction I think in saying that the Registrar may be persuadable, or may be wrong and have to show cause. There are bound to be future disputations about who should pursue such action, at what cost or diligence, to what extent, at what cost. That is to say nothing about inevitable delay. To adjourn the case, to “wait and see” or to make conditional orders is undesirable especially as there is a mortgagee in possession (and for that reason doubt over the defendant’s solvency), and it has been over 2 years since the contract was made, and 2 other cases waiting in the wings. I regard it as the duty of the Court to decide the rights between the vendor and purchaser with finality, particularly in the troubled circumstances of this case.
In my view the just solution to this case lies the applying the considerations present in the cases where there is a defect in title, which was the plaintiff’s alternative case. The principle is not confined to cases where the vendor has a defective title. I see those cases as being an example where equity makes an exception to the thinking that specific performance should not be decreed for part only of a contract.[34] If partial or less than “whole of contract” enforcement is just and appropriate, then it may be decreed. I see no reason in principle why the purchaser in this case ought not be able to say that he is willing to take the land without the covenant in question and then seeking damages for the loss in value of the land by reason of the loss of the benefit of the covenant. I think that is the most just order in this case where, as I have found, enforcement of clause 15 is attended with problems that make it unfit for specific performance.
[34] See Spry, Equitable Remedies, p 109 ff.
This may not be regarded as truly the perfect solution, for as the plaintiff would see it, it means he does not get the covenant that was regarded as essential to the sale and guaranteed to be in place. And under clause 16 he has to give the covenant for the benefit of Lot 2, and that might be said to create an imbalance. (Even that assumes the Registrar will accept the clause 16 covenant for registration.) But I can see no basis for relieving him of his obligation to perform clause 16 and moreover, he does not seek it. Perhaps the right of first purchase under clause 14 may give him an interest in preserving the covenant in favour of Lot 2.
Further, I cannot help but think on the circumstantial evidence that the significance of this covenant to the plaintiff really did depend on the price for which he could get the land. The plaintiff’s evidence about his involvement in the bidding revealed that the principal consideration was the price, not the covenant. He was willing to bid according to the unamended contract, and he was fortunate not to be pressed afterwards to sign that auction contract as a matter of ordinary expectation in a sale by auction. Moreover, the evidence also shows that the plaintiff obtained this land at a price far below what he, the vendor and two estate agents thought it would get. Yet, he insisted on the amendment which appears to have created a bigger problem than the one he apprehended by the presence of the pre-existing “best endeavours” obligation.
If it comes to an assessment of damages, I would venture to think the plaintiff may have difficulties saying that he has paid more for the land than it was worth with the covenant in place. And there will be inherent difficulties in attributing a contributing value of the covenant to the land assuming it is registrable, taking into account the restrictions that an owner of Lot 2 will be under anyway under the planning permit, and taking into account the possible impact on value of the negative covenant on Lot 1 in favour of Lot 2. As for clause 16 there is always the possibility that any departure by an owner of Lot 2 from the expected design or aesthetic harmony might afford grounds in the future for a modification or discharge of the restrictive covenant. These are matters that do not fall for decision. But they tend to support the view that no hardship or anomaly is really present in this Court ordering specific performance of this contract except for special condition 15.
Accordingly, I would decree that the defendant specifically perform the contract of sale dated 10 November 2007 (which was tendered as Exhibit A) but absolve her from specifically performing special condition 15, and make ancillary orders for an inquiry or other process concerning into any damages suffered by the plaintiff by reason of the non performance of that clause, should the plaintiff still wish to pursue that course. I would also dismiss the counterclaim. I will hear counsel on the precise form of orders or declarations.

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19 February 2010