Actall Pty Ltd v Pacific Bay Development Pty Ltd - [2006] NSWCA 190

NEW SOUTH WALES COURT OF APPEAL

CITATION: Actall Pty Ltd v Pacific Bay Development Pty Ltd [2006] NSWCA 190

FILE NUMBER(S):
40926/05

HEARING DATE(S): 13/07/06

DECISION DATE: 26/07/2006

PARTIES:
Actall Pty Ltd (Appellant)
Pacific Bay Development Pty Ltd (Respondent)

JUDGMENT OF: Mason P Giles JA Ipp JA

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): SC 2132/04

LOWER COURT JUDICIAL OFFICER: Burchett AJ

COUNSEL:
R J Powell SC/T W Marskell (Appellant)
B Coles QC/D R Pritchard (Respondent)

SOLICITORS:
MBT Lawyers (Appellant)
Fisburn Watson O'Brien (Respondent)

CATCHWORDS:
CONTRACT - sale of subdivided land - contract subject to registration of plan - operation of clause 28 of 2000 Edition of the Standard Contract for the Sale of Land - rescission by vendors - whether vendors did "everything reasonable" to have the plan registered by the registration date - whether rescission by vendors unconscientious - express agreement to terms of rescission by parties - Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 applied. D

LEGISLATION CITED:

DECISION:
Appeal dismissed with costs.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40926/05
SC 2132/04
MASON P
GILES JA
IPP JA
Wednesday 26 July 2006

ACTALL PTY LIMITED v PACIFIC BAY DEVELOPMENT PTY LIMITED

Judgment

MASON P: I agree with Ipp JA.
GILES JA: I agree with Ipp JA.
IPP JA:
The contractual dispute and the grounds of appeal
The respondent, Pacific Bay Development Pty Ltd (“Pacific Bay”), planned to construct a number of villas as part of a strata development it owned in Coffs Harbour. By a contract entered into on 15 November 2002 (“the Contract”), Pacific Bay sold one of the proposed villas “off the plan” to the appellant, Actall Pty Ltd, for $603,500. The villa was to be constructed on a proposed lot in accordance with an unregistered plan.
Clauses 28.2 and 28.3 of the Contract provided:
“28.2The vendor must do everything reasonable to have the plan registered within 6 months after the contract date …
28.3If 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.”
Clause 28 was amended by an “additional clause” of the Contract, namely, cl 44. Clause 44 provided:
“44.1Clause 28.2 shall be amended by the deletion of ‘6 months after the date’ [sic] of this contract’ and the insertion in lieu thereof of ‘on or before the 28 February 2004’.
44.2The vendor may give notice to the purchaser of an extension of time prior to the expiration of the period set out in clause 44.1. Upon the giving of the notice clause 44.1 shall be deemed to be amended by the insertion of the new date in lieu of the date set out in clause 44.1 provided that the new date shall not be later than 31 December 2004.”
By 28 February 2004, the plan had not been…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2006] NSWCA 190
Decision Date: 26 July 2006

CaseChat Overview and Summary

This case involved an appeal by Actall Pty Ltd against Pacific Bay Development Pty Ltd concerning a contract for the sale of subdivided land. The central dispute revolved around Pacific Bay's rescission of the contract, which was subject to the registration of a plan by a specified date. Actall argued that Pacific Bay's exercise of its right to rescind was improper. The appeal was heard by the Court of Appeal of New South Wales.

The legal issues before the court were whether Pacific Bay had acted unconscientiously in rescinding the contract, and whether it had done everything reasonable to ensure the plan was registered by the contractual date. Actall contended that Pacific Bay's rescission was arbitrary, capricious, unreasonable, or in bad faith, and for an ulterior purpose.

The court considered the principles established in *Tanwar Enterprises Pty Ltd v Cauchi*, which held that the term "unconscientious" is an accurate synonym for various epithets used to describe improper exercises of a vendor's power to rescind. The court found that by at least 24 May 2003, Actall, through its principal who was a solicitor, should have been aware that construction delays meant the plan was unlikely to be registered by 28 February 2004. Furthermore, by 3 July 2003, it was evident that construction could not commence before the development application was approved on 1 July 2003, and that 40 weeks of construction would extend significantly beyond the registration date. The court noted that Pacific Bay began considering rescission on 3 July 2003, and subsequently explored options to seek additional funds from purchasers, including Actall, to maintain their contracts.

The appeal was dismissed, and Pacific Bay was awarded its costs.

Orders

Orders of the court

Appeal dismissed with costs.

Background

Background to the litigation

I would not uphold Actall’s first argument. The facts giving rise to the unconscientious conduct argument I turn now to Actall’s second argument, namely, that Pacific Bay exercised its right of rescission under cl 28 arbitrarily, capriciously, unreasonably and/or in bad faith and for an ulterior purpose. In Champtaloup v Thomas (1976) 2 NSWLR 264 Glass JA at 270 pointed out that there was “a considerable diversity in the epithets which have been used to describe those exercises of the vendor’s power to rescind which the courts will invalidate”. The word “unconscientious” is the “more accurate” compendious synonym for these epithets: Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ at 324 to 325. The facts on which Actall based its argument that Pacific Bay’s rescission of the contract was unconscientious are the following. On 28 January 2003 Pacific Bay’s solicitors informed Actall that the construction works were scheduled to commence in February 2003 “with an anticipated construction time of 40 weeks”. This statement was made in error. Mr Powell submitted that by June 2003 it was obvious to Pacific Bay that construction was not going to be completed by 28 February 2004. That must be correct, but it must equally have been obvious to Actall. Mr Smede, a solicitor, was the principal of Actall and practised in Coffs Harbour. He had been told that the construction period was 40 weeks and Mr Powell accepted that he would have been aware that construction work was not being carried out. Working backwards from 28 February 2004, 40 weeks takes one to 24 May 2003. Thus, at least by that date, Actall must have known that the plan was not likely to be registered on or before 28 February 2004. In any event, on 3 July 2003 an employee of Pacific Bay informed Mr Smede that the development application had been approved. Mr Smede had himself established this by his own inquiry. He knew that construction could not have commenced before the approval of the development application on 1 July 2003. Forty weeks from 1 July 2003 extended significantly beyond 28 February 2004. On 3 July 2003 (when it was obvious that the work would not be completed by 28 February 2004) Pacific Bay first considered the possibility of rescinding the contract. By 21 July 2003 Pacific Bay contemplated the possibility of requesting the purchasers of villas, including Actall, to pay an additional sum, over and above the agreed purchase price, to secure their purchases. By 21 August 2003 Pacific Bay had put in train the obtaining of legal advice regarding the feasibility of rescinding the existing sales contracts for villas “with a view to obtaining additional funds from existing purchasers”. By the end of August 2003 or beginning of September 2003, Pacific Bay was considering the tactical approach that should be made to purchasers to persuade them to pay additional amounts to maintain their contracts of sale. At that stage, Pacific Bay was contemplating not extending the date for registration of the strata plan beyond 28 February 2004.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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