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 registered and Pacific Bay had not extended the time for registration of the plan in terms of cl 44.2. By notice dated 15 March 2004, Pacific Bay rescinded the Contract.
Actall contended that Pacific Bay was not entitled to rescind the Contract and brought proceedings for specific performance. Burchett AJ dismissed Actall’s claim.
Actall now appeals on two grounds that, in substance, are as follows:
(a)Pacific Bay had not done “everything reasonable” in terms of cl 28.2 to have the plan registered by 28 February 2004; thus, it was not entitled to rescind the Contract under that clause.
(b)The exercise by Pacific Bay of its right to rescind was invalid as it exercised that right “arbitrarily, capriciously, and unreasonably and/or in bad faith” and “for an ulterior purpose”.
Actall’s argument on the first ground
On 27 November 2002 Pacific Bay called for tenders for the construction of its villa development. M & A Hawkins Constructions Pty Ltd (“Hawkcon”), one of seven contractors who had expressed an interest in tendering, submitted a tender providing for a construction period of 44 weeks. Three of the other contractors submitted tenders. Hawkcon’s tender price was the lowest and the construction period it quoted was the longest. The next lowest tender price exceeded Hawkcon’s price by about $285,000 and was based on a construction period of 40 weeks. The shortest construction period offered was 38 weeks but the price of the tenderer in question exceeded Hawkcon’s price by more than $500,000.
On 25 February 2003, Pacific Bay chose Hawkcon as the preferred tenderer. There was then a considerable delay until 1 July 2003 when the local authority issued the development approval. Burchett AJ commented on this delay as follows:
“The plaintiff does not complain of the delays with approvals. For the purposes of the case, it accepts that these were unavoidable on the defendant’s part, and the defendant’s evidence is they were caused by inappropriate bureaucratic procedures at the official level.”
Actall does not contend that these comments are incorrect.
On 18 August 2003 Pacific Bay accepted Hawkcon’s tender and made no attempt, thereafter, to ascertain from Hawkcon if the 44-week construction period it had offered could be reduced so that the time period laid down by cl 28.2 could be met.
Actall alleged in its statement of claim that:
(a)Pacific Bay should have requested Hawkcon to amend its tender by agreeing to complete the works in sufficient time to enable the plan to be registered by 28 February 2004; and
(b)If Hawkcon refused to agree, Pacific Bay should have conducted “another tender process” in an attempt to arrive at a contract with another contractor for the completion of the works in sufficient time to enable the plan to be registered.
In oral argument, Mr Powell SC, who together with Mr Marskell appeared for Actall, said that Actall did not contend that Pacific Bay should have entered into a contract with any contractor before approval was given to the development application on 1 July 2003. Nor did Actall contend that there was any unreasonable delay between the issuing of development approval and the commencement of construction (which occurred on 8 September 2003). Actall’s case was simply that Pacific Bay should have made the inquiries pleaded in the statement of claim, and these inquiries should have been made during the period from February 2003 to the end of June 2003.
The reason for so confining the period can readily be explained. Actall contended that, by February 2003, it had become apparent that there would be considerable delay in the grant of development approval and, therefore, the commencement of the work. Hence, Pacific Bay should have then commenced making inquiries. On the evidence, the construction work could not have been completed in less than 38 weeks. Actall accepted that, by July 2003, the exigencies of time were such that it was no longer possible to have the construction works completed and the plan registered by 28 February 2004; hence its acceptance that Pacific Bay was not bound to make the inquiries after the end of June 2003.
Should Pacific Bay, reasonably, have made the inquiries?
Burchett AJ held that the inquiries that, according to Actall, Pacific Bay should have made could not conceivably have contributed to the completion of the construction works and the registration of the plan by 28 February 2004. He held, by implication, that this fact was obvious and known to Pacific Bay; hence, the making of such inquiries did not fall within the ambit of the expression “everything reasonable to have the plan registered” in cl 28.2.
A number of factors supported his Honour’s finding, including the state of the construction industry at the time. In 2003, in the Coffs Harbour area, building contractors were very busy. Mr Roger Duckworth, a quantity surveyor and associate of a firm of surveyors appointed by Pacific Bay as the project co-ordinators and quantity surveyors for the construction of that part of the development that included the villa purchased by Actall, said that in that year all builders were “experiencing significant difficulties in sourcing tradesmen”. He said: “the situation in New South Wales through all of 2003 was one of a shortage of tradesmen.”
On a common sense basis, this meant that it was unlikely that any of the contractors who had already tendered would have been prepared to reduce the construction period or the price.
Mr Mark David Hawkins, the principal of Hawkcon, testified that the tender that was accepted “was the best tender that Hawkcon could make in terms of cost and time given the prevailing conditions”. He said:
“If at any time, whether before or after tendering or entering into the Contract, I had been requested … by the defendant to carry out the construction works … more quickly, I would have responded that I could not do it more quickly than the 44 weeks for which I had tendered.”
Mr Hawkins’ testimony bears out what seems to have been self-evident.
Mr Powell submitted that, as one of the unsuccessful tenderers was prepared to undertake to complete the work in 38 weeks, there was reason for Pacific Bay to make inquiries with this in mind. But that tenderer’s price represented additional costs of more than $500,000 to Pacific Bay. The indications were that, as time went by, the cost of doing the work was increasing rather than decreasing. It is difficult to argue, therefore, that Pacific Bay, reasonably, should have made inquiries as to whether it would be possible for it to have the work done at an additional cost of more than half a million dollars. The relationship between construction period and tender price does not appear to be an issue that the trial judge was called upon to consider.
As mentioned, Pacific Bay chose Hawkcon as the preferred tenderer on 25 February 2003. Actall did not contend that Pacific Bay acted unreasonably in so doing. That being so, I do not see how Pacific Bay, acting reasonably, could have been expected before that date to have commenced inquiring whether Hawkcon’s 44 week construction period could be reduced.
There was no evidence as to how long it was likely to have taken, after the work had been completed, to have the strata plan registered. A suggestion of one week was made from the Bar table. Had Hawkcon commenced work on 19 April 2003 and completed the work in 44 weeks, then – allowing one week for registration of the plan – the time condition in cl 28.2 as amended by cl 44.1 would have been met. After Pacific Bay had selected Hawkcon as the preferred tenderer (on 25 February 2003), there was reason to believe that the grant of development approval was imminent and would occur within a matter of weeks. In these circumstances, there was no compelling need for inquiries to be made about a shorter construction period until at least mid or late March 2003. Until at least then, as I have explained, it was on the cards that development approval would be granted in time for the work to be completed and the plan registered by 28 February 2004.
There would, however, have been no point in making inquiries from new tenderers after the middle of March 2003. It would have then been too late. Mr Duckworth testified:
“If further tenders had been called for, in my experience, it would take at least 12 weeks for any new tenderers to start building.”
Assuming that new contractors could have been found, within say two weeks of making inquiries, who were ready to consider doing the work in 38 weeks at about the same price as Hawkcon (and there was no evidence to support this proposition), a period of 52 weeks, as a minimum, would have been required to complete the work. Fifty-two weeks is the aggregate of two weeks to make inquiries (which I have taken to be the minimum period for this task), the 12-week period indicated by Mr Duckworth and the 38-week construction period. Fifty-two weeks from 15 March 2003 takes one to mid March 2004 (past the stipulated date of 28 February 2004).
Actall led no evidence that any of the unsuccessful tenderers were likely to have been interested in reducing the construction periods they had quoted. The prevailing circumstances (a considerable amount of building work in the area, rising costs and a shortage of tradesmen) do not support any inference that those tenderers would have been prepared to undertake to complete the work within a shorter period (without even taking into account the likelihood of their tender prices increasing).
The matters I have so far mentioned under this heading weigh heavily against Actall’s argument on its first ground, but, in my view, the most telling piece of evidence against Actall’s argument is the following statement by Mr Duckworth:
“Once problems arose in obtaining the development consent …, I was of the view that it was pointless engaging in a re-tendering process until the development consent had been obtained. This was because it was not possible to give prospective builders a commencement date.”
Mr Duckworth was not cross-examined on this evidence.
This unchallenged evidence is telling because there would have been no point in attempting to inquire about negotiating a new building contract before development approval had been obtained. Until the grant of development approval, the date by when construction could commence could not be known. As Mason P remarked during the course of argument, unless Pacific Bay knew the date of development approval it would not know what construction period was required to enable the date stipulated by cl 28.2 as amended by cl 44.1 to be met; it would not know whether it should try to negotiate, say, a 40-week or a 38-week or even a lesser construction period. And the construction period would no doubt influence the price. And also the availability and preparedness of a contractor to undertake the work. While these elements were unknown, any discussions about a new contract would have been futile; no reliable answers could have been given to any relevant inquiries.
Mr Powell was driven to submit that, for Pacific Bay to discharge the requirement under cl 28.2 that it do “everything reasonable to have the plan registered” within the stipulated time, it should have made inquiries as to whether a contractor would have carried out the work within a period shorter than 44 weeks, even were it obvious that those inquiries would be pointless.
Mr Powell endeavoured to support this submission by reference to Ante Maganic v Guido Ravagnani [2003] NSWSC 1063 where Bryson J (as he then was) said at [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.”
Mr Powell argued that this observation means that the actual consequences of steps that might have been undertaken by a vendor are irrelevant to whether it was reasonable to undertake them. He submitted that, on that basis, it is reasonable for a vendor to make inquiries of the kind relied on by Actall even when the vendor reasonably believes that those inquiries would serve no purpose.
This argument wrongly construes Bryson J’s remarks (with which I respectfully agree). His Honour was expressing the view that the mere fact that, in hindsight, a particular step would have had no effect on the outcome, does not necessarily mean that it was unreasonable for the vendor to take that step. His Honour was not saying that reasonableness requires a step to be taken in circumstances when, at the time it arguably should have been taken, it was reasonably believed to be futile. Doing everything reasonable does not include doing things that are reasonably believed to be pointless. That would be giving a very strange meaning to the concept of reasonableness. As Burchett AJ put it:
“A vendor is not required to take a step that cannot possibly achieve success.”
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.
On 13 August 2003 Mr Smede informed Mr Hogendijk, Pacific Bay’s development manager, that he did not think that the strata plan could be registered by 28 February 2004 and Mr Hogendijk agreed.
On 7 October 2003 Mr Hogendijk informed Mr Smede that Pacific Bay was still reviewing its options in regard to the Contract and had “not decided either way”.
On 10 October 2003 a report was made to the board of Pacific Bay’s holding company in the following terms:
“Legal advice has been obtained regarding the feasibility of rescinding the existing sales contracts for the villas with a view to obtaining additional funds from existing purchasers. The advice indicates that a precipitory [sic] rescission is a viable option. A direction on the rescission is expected by mid-October 2003.”

Pacific Bay engaged a valuer to assist it in deciding whether or not to rescind the existing contracts. On 22 October 2003 the valuer estimated the value of Actall’s proposed villa as being $825,000 (a sum to be contrasted with the existing sale price of $603,500).
On 18 November 2003 Pacific Bay’s solicitor informed Mr Smede that Pacific Bay was not going to extend the period for registration of the strata plan. On 19 November 2003 Pacific Bay wrote to Actall advising it that construction would not be completed before 28 February 2004, that it was not extending the cl 28.2 period and if the plan was not registered by the cl 28.2 period it proposed to rescind the contract, and that it was prepared to enter into another contract for the sale of the villa at a price of $714,250. Pacific Bay’s decision not to extend the period for the registration of the strata plan and to rescind the Contract was based on advice from senior counsel.
In cross-examination, Mr Hogendijk gave the following evidence:
“Q.Are you able to say why Pacific Bay did not propose to extend the registration date beyond 28 February 2004?
A.We wanted to enter into a new arrangement with the existing purchaser.
Q.For the purpose of obtaining more money from those purchasers?
A. That is correct.”
Initially, in oral argument, Mr Powell submitted that an element of the unconscientious conduct cause of action was that Pacific Bay had kept Actall “in the dark” about the progress of the Contract and as to whether it intended to grant an extension of the time for the registration of the strata plan. He later retreated from these propositions (at least to a significant degree) after a number of difficulties that stood in his way were put to him. Firstly, there was no allegation in the pleadings that Pacific Bay had deliberately failed to keep Actall advised of the true situation or had misled Actall. Secondly, on the facts, as I have observed, Actall, through Mr Smede, should have known by May 2003 and in fact knew by 3 July 2003 that it was not likely that the 28 February 2004 date would be met. Mr Powell in fact later eschewed any contention that Actall had been misled. Thirdly, these issues did not appear to have been raised at the trial and Burchett AJ, for that reason, did not deal with them. Fourthly, there was no evidence to support the proposition that Pacific Bay had decided earlier than mid-November 2003 to rescind and, according to the documents in evidence, it only made the final decision to do so after it had obtained the valuation for the property on 22 October 2003.
In the end, although Mr Powell continued to submit (without enthusiasm) that, after July 2003, Pacific Bay should have kept Actall informed as to its intentions regarding rescission so that it could have gone into the market and bought other property, this in reality was a subsidiary argument. His main argument was that Pacific Bay rescinded the contract for an ulterior purpose, namely, “to extract a higher price from [Actall] for the property”. He submitted that this constituted unconscionable (unconscientious) conduct on the part of Pacific Bay.
The power of a vendor to rescind
I shall deal immediately with the proposition that Pacific Bay should have kept Actall informed as to its intentions regarding rescission. In my opinion, there is no substance in this argument. Firstly, there was no obligation, contractual or otherwise, on Pacific Bay to advise Actall of the possibilities that it, from time to time, entertained with regard to its contractual rights. Secondly, as a matter of fact, Pacific Bay advised Actall of its intentions within a reasonable time once it had finally decided what to do about the Contract. Actall can have no legitimate complaint on this issue.
Actall’s principal submissions were based, substantially, on dicta by Gibbs J in Pierce Bell Sales Pty Ltd v Frazer (1973) 130 CLR 575 at 590 to 591 where his Honour dismissed as “the merest speculation” the proposition that the vendors in that case had rescinded the contract “as an excuse to enable themselves to get rid of the contract for some ulterior purpose, such as to obtain a higher price for the land from some other purchaser”. Mr Powell submitted that, in making these remarks, Gibbs J accepted that an “ulterior purpose” could be constituted by a rescission motivated by a desire to obtain a higher price from some other purchaser.
The contract the subject of Pierce Bell Sales Pty Ltd was in a material sense similar to that considered by the High Court in Godfrey Constructions Pty Ltd vKanangra Park Pty Ltd (1972) 128 CLR 529 in that both contained a clause that afforded a vendor unrestricted power to rescind. Barwick CJ in Godfrey Constructions Pty Ltd commented at 538 on that power as follows:
“”[I]t ought, in my opinion, to be held that it would be unconscionable for the respondent to have attempted to exercise his powers under cl 14, in the circumstances. I would have thought clearly it was so, because what he would be doing would be to deny to the purchaser the performance of an essential obligation which he had undertaken when entering into the contract … To allow the vendor to rescind in the circumstances would be to afford him the right, in substance, to say that the sale was in reality no sale at all: only a transaction conditioned on his own willingness to perform.”
Young J in Woodcock v Parlby Investments Pty Ltd (1988) 4 BPR 9568 at 9570 to 9571, after referring to the kind of clause considered in Pierce Bell Sales Pty Ltd and Godfrey Constructions Pty Ltd, said:
“[Such a clause] has been construed by Courts to mean that a vendor may if it is not unreasonable for him to do so so rescind a contract if he is unwilling to comply with a requisition but that he cannot utilise the condition to make the contract into a solemn farce. He cannot both have a contract and also have the situation where he can opt out of the contract virtually at will.”
His Honour described a clause in the form of cl 28.2 now under consideration as being “quite different”. The difference, as his Honour pointed out, is the insertion of the requirement that the right to rescind can only be exercised if the vendor has done “everything reasonable to have the plan registered” by a stipulated date. This imposes a serious restriction on the vendor’s right to rescind. The vendor can only “opt out of the contract” if he has “done everything reasonable” in regard to having the plan registered.
Unlike the situation in Godfrey Constructions Pty Ltd and Pierce Bell Sales Pty Ltd the Contract, itself, imposes the requirement of reasonable conduct as a condition precedent to the vendor’s right to rescind. The condition precedent to the right to rescind contained in cl 28.2 is a significant protection to the purchaser. It represents a significant part of the bargain to which the parties agreed in entering into the Contract. What need is there then for equity to intervene? The parties have themselves agreed upon the character of the acts that Pacific Bay had to perform before being entitled to rescind.
In Tanwar Enterprises Pty Ltd v Cauchi Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ said at 324 to 325:
“In the present case [the term ‘unconscientious’] directs attention to the question why the vendors ought not be heard to assert the exercise of their legal right to terminate in answer to the claim by Tanwar for specific performance. The conscience of the vendors which equity seeks to relieve is, as Gleeson CJ put it in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [(2001) 208 CLR 199 at 227, [45]], a ‘properly formed and instructed conscience’”.
Their Honours at 325 explained that the phrase “unconscionable conduct” tends to mislead in several respects. One of those respects is that:
“[T]o speak of ‘unconscionable conduct’ may, wrongly, suggest that sufficient foundation for the existence of the necessary ‘equity’ to interfere in relationships established by, for example, the law of contract, is supplied by an element of hardship or unfairness in the terms of the transaction in question, or in the manner of its performance.”
Their Honours returned to the same theme in Romanos v PentagoldInvestments Pty Limited (2003) 217 CLR 367. The issue in the latter case was whether purchasers under contracts for the sale of land were entitled to relief against forfeiture and specific performance when they had failed to pay the balance of deposits on the due date and the vendors, without prior notice, had issued notices of termination. Their Honours said at 375 to 376:
“[T]he decision in Tanwar indicates that equity does not intervene in such a case to reshape contractual relations in a form the Court thinks more reasonable or fair where subsequent events have rendered the situation of one side more favourable than that of the other side.
Rather, as Giles JA emphasised in his dissenting judgment in the Court of Appeal, one asks in the present case whether the conduct of the vendors caused or contributed to a circumstance rendering it unconscientious for them to insist upon their legal rights to terminate the contracts.”
(See also at 383 per Kirby J and 385 per Callinan J).
Burchett AJ held that it was not unconscientious for Pacific Bay “to have regard to its own financial interests in determining whether or not to rescind”. He said:
“The fact that it gave consideration to those interests, as is evidenced by its documents, before the right to rescind had arisen, that at a time when, looking ahead, the defendant could see that the right would inevitably arise, does not seem to me to make any difference.”
I agree with these remarks which are consistent with what was said in Tanwar Enterprises Pty Ltd and Romanos v PentagoldInvestments Pty Limited.
In my opinion, in the circumstances of this case, where the parties have expressly agreed on the extent of the limitations on the vendors’ right to rescind, there is no requirement for equity to intervene. The mere fact that subsequent circumstances have resulted in Pacific Bay benefiting financially from its own rescission is not material. The mere fact that Pacific Bay was motivated by its own financial interest does not constitute the rescission unfair. The parties, by the very terms of their agreement, agreed that this would be Pacific Bay’s (conditional) right in the circumstances that in fact prevailed. To paraphrase Callinan J in Romanos at 385, there is no reason to suppose that this was not a matter that was factored into all of the terms and conditions of the contract, including in particular the price and the time within which it was to be paid. To paraphrase Kirby J in Romanos at 383, this conclusion is reinforced by the entire circumstances of the relationship between the parties; the commercial character of the transaction and of Actall; the availability to Actall at all times of independent legal advice; the explicit terms of cl 28.2; and the absence of any suggestion that Actall was disadvantaged, vulnerable or otherwise in need of equity’s protection from a party in a superior position.
Mr Powell submitted that the fact that Pacific Bay intended to obtain a higher price from Actall, a purchaser which under the Contract was entitled to acquire the villa at a lower price, led to Pacific Bay’s rescission being in bad faith. He accepted that, had Pacific Bay simply rescinded and put the units on the open market, Actall would have had no complaint.
In my opinion, the fact that Pacific Bay hoped in the circumstances as they turned out to improve on the price under the Contract by entering into a new contract with Actall (and not some other party) is not unfair or improper or unconscientious. The situation is one that can readily arise under this kind of commercial transaction, which is of a very ordinary and common kind, involving the exercise of a contractual right according to a bargain that the parties – without any element that could possibly attract the intervention of equity – have made. The situation would have no different if the market had fallen and if it had been the purchaser that sought to exercise the contractual right of rescission.
I would dismiss the appeal with costs.

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LAST UPDATED: 26/07/2006