Actall Pty Ltd v Pacific Bay Development Pty Ltd

[2005] NSWSC 1067

CITATION:	Actall Pty Limited v Pacific Bay Development Pty Limited [2005] NSWSC 1067
HEARING DATE(S):	22-24/08/05
JUDGMENT DATE :	7 November 2005
JUDGMENT OF:	Burchett AJ
DECISION:	Plaintiff's proceeding dismissed with costs.

CATCHWORDS:	Contract - rescission - clause 28 of standard form contract for the sale of land - sale "off the plan" - plan not registered in specified period - whether vendor had done "everything reasonable" to have plan registered in time - whether plaintiff had to show an omitted step would have contributed to registration in time - whether it was a defence that a suggested step could not possibly have achieved registration in time - whether vendor acted unreasonably and unconscionably in rescinding
CASES CITED:	Ante Maganic v Guido Ravagnani [2003] NSWSC 1063 Wardy v Hardy (2002) 11 BPR 20,227; (2003) NSW ConvR 58,514 Mannai Investment Co. Ltd v Eagle Star Life Assurance Co. Ltd (1997) AC 749 at 773 Tricontinental Corporation Ltd v HDFI Ltd (1990) 21 NSWLR 689 G R Mailman & Associates Pty Ltd v Wormald (Aust) Pty Ltd (1991) 24 NSWLR 80 Australia and New Zealand Banking Group Ltd v Pan Foods Company Importers and Distributors Pty Ltd [1999] 1 VR 29 Hardy v Wardy [2001] NSWSC 180; [2001] NSW ConvR 55-986 Plumor Pty Ltd v Handley (1996) 41 NSWLR 30 Nina's Bar Bistro Pty Ltd (formerly Mytcoona Pty Ltd) v MBE Corporation (Sydney) Pty Ltd [1984] 3 NSWLR 613 Italo-Australian Club Ltd v National Australia Bank Ltd (1989) NSW ConvR 55-461 Mitchell v Pattern Holdings Pty Ltd (2002) 11 BPR 20,241 Walker v Chanrich Properties Pty Ltd (2003) 11 BPR 21, 289 Executive Builders & Developers Pty Ltd v Roddam (2003) 11 BPR 21, 305 Churnin v Pilot Developments Pty Ltd (2003) 11 BPR 21,603 Kierzkowski v Goldsbrough [2005] NSWSC 597 Hunyor v Tilelli (1997) 8 BPR 15, 629 Jones v Dunkel (1959) 101 CLR 298 In re Jackson & Haden’s Contract [1906] 1 Ch 412 Schenk v ACN 081 123 140 Pty Ltd (2002) 11 BPR 20 Pierce Bell Sales Pty Limited v Frazer (1973) 130 CLR 575 Selkirk v Romar Investments Ltd [1963] 1 WLR 1415 Champtaloup v Thomas [1976] 2 NSWLR 264 Woodcock v Parlby Investments Pty Ltd (1988) 4 BPR 9568 AJDJ Pty Ltd v Pacific West Developments Pty Ltd [2001] NSWSC 1174
PARTIES:	Actall Pty Limited (plaintiff) Pacific Bay Development Pty Limited
FILE NUMBER(S):	SC 2132/04
COUNSEL:	Mr R J Powell SC and Mr T W Marskell (plaintiff) Mr B Coles QC and Mr D Pritchard (defendant)
SOLICITORS:	MBT Lawyers, Coffs Harbour (plaintiff) Fishburn Watson O'Brien (defendant)

LOWER COURT JURISDICTION:

- 19 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BURCHETT AJ

7 NOVEMBER 2005

2132/04 ACTALL PTY LIMITED v PACIFIC BAY DEVELOPMENT PTY LIMITED

JUDGMENT

1 HIS HONOUR: The question of law raised by this case relates to the construction, and effect in particular circumstances, of Clause 28 of the 2000 Edition of the Standard Contract for the Sale of Land. That clause has already been considered by the Courts on a number of occasions; but, as well, the Courts have considered a variety of cases concerning more or less similar clauses which may differ from each other and from this clause in their effect. I direct attention to the state of the authorities because it is necessary to bear in mind the singularity of each particular clause and the set of legal issues it raises. What I have to decide is whether the vendor, the defendant Pacific Bay Development Pty Limited (“Pacific Bay”), became entitled to rescind the contract pursuant to clause 28.

2 The contract in question was entered into on 15 November 2002 in respect of a villa to be constructed on a proposed Lot 40 in an unregistered plan relating to a strata development on a substantial scale at Coffs Harbour. By the contract, the plaintiff Actall Pty Limited (“Actall”) agreed to purchase the villa “off the plan” at the price of $603,500.00, paying a deposit of $30,175.00. Clause 28 provided:

“28.1 This clause applies only if some of the land is described as a lot in an unregistered plan.

28.2 The vendor must do everything reasonable to have the plan registered within 6 months after the contract date, with or without any minor alteration to the plan or any document to be lodged with the plan validly required or made under legislation.

28.3 If the plan is not registered within that time and in that manner -
28.3.1 the purchaser can rescind; and
28.3.2 the vendor can rescind, but only if the vendor has complied with clause 28.2.
28.4 Either party can serve notice of the registration of the plan and every relevant lot and plan number.
28.5 The completion date becomes the later of the completion date and 21 days after service of the notice.
28.6 Clauses 28.2 and 28.3 apply to a plan that is to be registered before the plan is registered”.

(Wherever a word is italicised in clause 28 as I have reproduced it, this reflects the original.) Clause 28 was amended by a special clause 44, as follows:

“44.1 Clause 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’.
44.2 The 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.”

3 When the date 28 February 2004 had passed, there had been no extension of time by the vendor under Clause 44.2 and the plan had not been registered. Indeed, as at 28 February 2004, there was no prospect of the plan being registered for some time because the necessary building works had not been completed. By notice dated 15 March 2004, headed “NOTICE OF RESCISSION”, Pacific Bay notified Actall that the plan “was not registered on or before 28 February 2004” and that “the Vendor rescinds the Contract for Sale”.

4 The plaintiff’s response to the defendant’s notice was to bring the present proceeding for specific performance of the contract. At the hearing, much evidence was tendered and it was argued for the defendant that this evidence revealed a situation in which it could not be said that any failure on the part of the defendant caused or materially contributed to the delayed completion of the building works. But the plaintiff’s contention is that the issue is a much simpler one. Counsel for the plaintiff argues causation is not a relevant question under Clause 28, sub-clause 28.3.2 of which imposes a condition on any rescission by the vendor based on delay in the registration of the plan, this condition being that the vendor “has complied” with its obligation under Clause 28.2 expressed by the words requiring that it “must do everything reasonable to have the plan registered” within the specified period.

5 The plaintiff’s proposition receives unqualified support in the decision of Bryson J (as he then was) in Ante Maganic v Guido Ravagnani [2003] NSWSC 1063. That case involved the same standard Clause 28. Bryson J (at para 6) took it to be established by the decision of the Court of Appeal in Wardy v Hardy (2002) 11 BPR 20,227; (2003) NSW ConvR 58,514 “that compliance with Clause 28.2 is a condition precedent to availability of the vendor’s right to rescind”. In para 9, Bryson J said:

Registration within six months was feasible with highly expeditious handling and good fortune but could easily have been defeated by events, even if the vendor had acted reasonably and complied in the fullest way with clause 28. Interventions by the weather, industrial events, the responses of Council, unavailability of contractors or of materials and the fortuitous influence of events, could prevent achievement of the six months objective, which was the best imaginable outcome. However, these circumstances do not much affect the condition precedent, with which the defendant is to comply, and he is to persist whether or not circumstances turn against him; the vendor has to contribute his doing everything necessary towards attaining the contemplated outcome. If he does so, he will have complied with the condition precedent even if the plan is not registered within time. If he does not do so he does not obtain the contractual right of rescission.”

Having then found (at para 39) that “the application for development consent was conducted in a dilatory manner, and not at all in conformity with clause 28.2”, Bryson J dealt with the central issue in the following terms (in para 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.”

This was plainly the ratio decidendi of the judgment, although his Honour did add (in para 42):

“If it is important, however, I would find that the dilatory conduct of affairs in these respects did have a significant adverse effect on the time [at] which Council’s development consent was available.”

6 The decision in Ante Maganic v Guido Ravagnani turned on the contractual requirement that a rescission by the vendor must comply with Clause 28.3.2, which is expressed as a condition precedent. It seems to me that when a right is given by a contract to one party unilaterally to alter his own contractual relations with another party upon certain terms, which are the condition of the right, those terms must be strictly adhered to: cf the remarks of Lord Hoffmann in Mannai Investment Co. Ltd v Eagle Star Life Assurance Co. Ltd (1997) AC 749 at 773. As Samuels JA said in Tricontinental Corporation Ltd v HDFI Ltd (1990) 21 NSWLR 689 at 705:

“[I]t is meaningless to speak of the substantial performance of a condition precedent. Either it has been performed, or it has not. If it has, performance enlivens the obligation to which the stipulation is a condition precedent. If it has not, the obligation does not arise.”

His Honour had already made it clear (at 704):

“[W]here a provision lays down an act by one party as a condition precedent to the existence of an obligation on the part of the other party, the condition precedent will not be fulfilled until the former party does an act that strictly matches that described in the contract.”

See also G R Mailman & Associates Pty Ltd v Wormald (Aust) Pty Ltd (1991) 24 NSWLR 80 at 94. This part of the judgment of Samuels JA in the Tricontinental case was expressly adopted by Kenny JA in Australia and New Zealand Banking Group Ltd v Pan Foods Company Importers and Distributors Pty Ltd [1999] 1 VR 29 at 46-47. Her Honour made it clear that a term of a contract which was a condition precedent was therefore “to be strictly observed.”

7 In Ante Maganic v Guido Ravagnani, reference is made to the decision of the Court of Appeal in Wardy v Hardy. That was an appeal from an earlier decision of Bryson J in Hardy v Wardy [2001] NSWSC 180; [2001] NSW ConvR 55-986. Wardy v Hardy also concerned the standard clause 28, but it did not raise the question of causation which arose in the later case, and arises before me; however there are indications in the reasons of Mason P (with whom Giles JA and Ipp AJA agreed) that Clause 28 should be understood as Bryson J later understood it in Ante Maganic v Guido Ravagnani. Mason P, who affirmed the decision below, quoted extensively from the reasons that Bryson J had given, without any suggestion of disapproval. He noted (at paras 46 and 48) that Bryson J had held the clause was “imperative in its effect” and that “it is the defendant’s not doing everything reasonable, not the consequent delay, which constitutes failure to comply with cl. 28.2.” Mason P ( at para 51) quoted a passage in which Bryson J had said of certain failures to comply with cl. 28.2 that:

“ [I]f relevant , those failures plainly had an adverse impact on the prospects of having the plan registered within six months after the contract date” (emphasis added).

Mason P referred (at para 60) to the discussion by Bryson J of earlier decisions relating to clauses having a similar function to that of cl. 28, but expressed in general or different terms. The President commented:

“There are, or have been, some points of disagreement between judges in the Equity Division as to whether and in what circumstances delays in performance attributable to the defaults of contractors retained by the vendor were automatically attributed to the vendor in the context of general principles disentitling a contracting party from taking advantage of his or her own default.”

He went on (at para 61) to explain that Bryson J had “held that these issues did not arise with the sharply drawn terms of cl. 28” and to set out what Bryson J had said about that:

“It will be seen that under cl 28.2 it is a contractual obligation of the vendor, expressed in imperative terms, to do everything reasonable to have the plan registered within six months. The effect of this is that if some step is reasonable and is necessary for registration within six months the vendor must take that step; the obligation is not that the vendor must do everything reasonable to take the step. The vendor’s personal circumstances, knowledge of or ignorance of what is required, reliance on servants, agents or independent contractors, and the skill, knowledge and assiduity of any such agents are all irrelevant to the vendor’s obligations; if a step is reasonable, the vendor must take it. My view of the meaning of cl 28.2 is produced by the express terms of the clause, and is reinforced by the consideration that if cl 28.2 is complied with, compliance can work adversely to the purchaser, who has no control over or influence on what the vendor does, or on the vendor‘s selection of courses to follow or selection of servants agents or contractors, and has no control over the conduct or effectiveness of any such agents, but is bound by the vendor’s decision if the vendor rescinds after compliance. The only protection the purchaser has against rescission is the stringency of the condition which the vendor must fulfil if he is to have a right to rescind. It would be inconsistent not only with the express terms of cl 28.2 but also with the purpose of cl 28 as a whole if inefficient or ineffective measures by the vendor or someone by whom the vendor acted could contribute to the vendor’s gaining a right to rescind.”

Mason P then cited a further passage from the judgment of Bryson J in which Plumor Pty Ltd v Handley (1996) 41 NSWLR 30 was distinguished. After the quotation of both these passages, the President (in para 63) said:

“I respectfully agree.”

The President continued his judgment by referring to an argument that the interpretation Bryson J had given to cl 28.2 “effectively imposed a non-delegable obligation on the vendor, [which] was unreasonable.” Mason P said of that argument (at para 64):

“This in my view misconstrues the judge’s approach to cl 28.2. That clause is in the nature of a condition [emphasis added] which imposes on the vendor an obligation ‘to do everything reasonable to have the plan registered’ within the time stated. The vendor’s conditional right to rescind is available ‘ only if the vendor has complied with cl 28.3 [scil. 28.2]’.”

8 The decision in Plumor Pty Ltd v Handley which has been referred to is illuminating. There, a clause in a contract imposed an obligation on the purchaser to obtain the consent of the Foreign Investment Review Board within fourteen days and provided that if it was not obtained in time “then in that event either party shall be entitled to rescind this contract.” The clause required the purchaser to apply for the consent within twenty-four hours. McLelland CJ in Eq referred to two submissions that breaches of the requirements of this clause precluded the purchaser from exercising the right of rescission. His Honour said (at 34):

“There is a further difficulty with both these submissions. Compliance with the express obligation imposed on the defendant to ‘apply for the said consent within twenty-four (24) hours of the date of this contract’ is not, by the terms of special condition 28, made a condition of the exercise by the defendant of the right of rescission conferred by that provision, nor should there be any implication to that effect. It is only if noncompliance with that obligation had a sufficient causal relationship with the defendant’s failure to obtain the requisite consent within the fourteen day period that the defendant would be precluded from exercising the right of rescission arising by virtue of that failure, in accordance with the principle to be later discussed. If that failure would have occurred in any event, non-compliance with the obligation would not affect the defendant’s right of rescission: see Nina’s Bar Bistro Pty Ltd (formerly Mytcoona Pty Ltd) v MBE Corporation (Sydney) Pty Ltd [1984] 3 NSWLR 613 at 614F, 620E-621F and 631G-632D; Italo-Australian Club Ltd v National Australia Bank Ltd (1989) NSW ConvR 55-461 at 58336-58337.”

The weight of the reasoning in this passage rests, it will be observed, upon the premise that the contract does not, either expressly or impliedly, make compliance with the relevant obligation a condition of the power of rescission. Clause 28 of the present contract is to the opposite effect.

9 In Nina’s Bar Bistro, the Court of Appeal was concerned with a contract for the sale of a restaurant business which contained a condition that, if the consent of a lessor was not obtained by a particular date, either party could terminate the agreement by written notice. The purchaser attempted so to terminate, but the vendor claimed the purchaser was not entitled to do so because the failure to obtain the lessor’s consent was contributed to by the purchaser’s own default. It will be seen that, as in Plumor, the relevant contractual provision did not contain any express condition limiting the right to terminate. In his consideration of the problem, Mahoney JA had no difficulty about the purchaser’s obligation to do what it could to obtain the consent, and he posed (at 620) the question whether the purchaser’s failure “deprived it of the right which otherwise it would have had to terminate the agreement”. Dealing with that question, he continued:

“I do not think that compliance with such obligations constituted a condition precedent, as such, to the exercise either of the right to terminate for failure to complete on the specified day, or the right to terminate under cl 5(f) of the agreement. Thus, for example, if it appeared clearly that, if the obligations had been performed in full, the lessor’s consent would not have been obtained, the fact of non-compliance with them would not, in my opinion, have prevented the exercise of the right to terminate under cl 5(f).”

So it was because compliance with the obligation to seek the consent was not a condition precedent to the right to terminate that Mahoney JA considered (with the agreement of Glass JA) the purchaser could terminate unless its default was shown to have contributed causally to the failure of the lessor to consent. Similarly, in Italo-Australian Club Ltd , there was a right of rescission of an agreement for the sale of land if a development approval was refused, being an approval for which the purchaser was to make, within seven days, an application to be pursued with diligence and expedition. Mahoney JA (with whom Kirby P and Samuels JA relevantly agreed) referred to Nina’s Bar Bistro . He said (at 58,336-58,337):

“Upon the construction of the agreement there in question, I held that compliance with the purchaser’s obligation in that regard did not constitute a condition precedent, as such, to the exercise of its right to terminate for failure to complete on the specified day or its right to terminate under the relevant clause of the agreement. …The effect of a ‘best endeavours’ clause is to be determined in the context of the document in which it appears. In the Nina’s Bar case the relevant clause was, in my opinion, not a condition precedent as such to the purchaser’s right to terminate under the relevant clause in the sense that compliance with it, as such, destroyed that right. There was, in that case, an unexpressed assumption in the relevant clause that if default under the ‘best endeavours’ clause resulted in the consent not being obtained, then because the purchaser was in default, it could not rely upon what its own default had produced.
There is, I think, to be found in the present clause an assumption of that kind.”

Nina’s Bar Bistro was also cited with approval by Powell JA in Mitchell v Pattern Holdings Pty Ltd (2002) 11 BPR 20,241 at 20,260. That was a case in which a contract for the sale of a strata unit described by reference to an unregistered plan contained no provision similar to cl 28.3.2 of the present contract.

10 The distinction between (a) the position where a right of rescission by one party is expressly made subject to compliance with a precondition, and (b) the position where, the power of rescission not being subject to any such precondition, a challenge to any rescission must be mounted in reliance upon the general principle that a party to a contract may not take advantage of his own default, was emphasised too by Young CJ in Eq in Walker v Chanrich Properties Pty Ltd (2003) 11 BPR 21, 289 at paras 9, 15 and again in Executive Builders & Developers Pty Ltd v Roddam (2003) 11 BPR 21, 305 at para 28. The point was also noted by Santow JA in Churnin v Pilot Developments Pty Ltd (2003) 11 BPR 21,603, where his Honour made it clear (at para 52) that Wardy v Hardy created a binding precedent so far as the effect of cl 28 of the standard form of contract is concerned. He stated the conclusion (in para 56) that cl 28.3 had the effect of “making compliance with [the obligation in cl 28.2] an express condition precedent to the [scil. vendor’s] right of rescission”. He distinguished the case before him as depending upon a different principle, the principle of Plumor Pty Ltd v Handley, that a party is not entitled to rely on an event resulting from that party’s wrongful act. In a very recent case involving cl 28 of the standard form contract, Palmer J held that the vendor had not “done everything reasonable to procure registration of the plan of the subdivision within the period provided in cl 28.2 of the contract” and that “[a]ccordingly, the [vendor] was not entitled to rescind….under cl 28.3”: Kierzkowski v Goldsbrough [2005] NSWSC 597 at para 42.

11 The conclusion reached in Ante Maganic v Guido Ravagnani, in my respectful opinion, is not only consistent with the authorities I have discussed; it is also consistent with what fair and reasonable contracting parties might be thought to have wished to achieve in the drafting of their contract. For it is clear that the purchaser of a lot in an unregistered plan is to a significant degree in the hands of the vendor. It is the vendor who will have responsibility for the necessary applications and the performance of the necessary work. If the vendor is dilatory, in the absence of a provision such as cl 28.3.2, a purchaser who would rather settle late than never may find it necessary to accept the hazards of a costly proceeding fated to turn on difficult issues of causation. It seems to me that the express provision of cl 28.3.2 is designed to avoid these issues by laying down a clear condition precedent with which the vendor must comply in order to be able to rescind. That strict and literal compliance not only follows from the nature of a condition precedent as a matter of principle, but was actually intended when the clause was drafted, is confirmed by the contrast, in its immediate context in the document, with cl 29 which would apply to any other condition than the critical one expressed in cl 28. Clause 29 also seeks to put a limit on the power of rescission that would arise in a case where it applies, but notably softens the stringency of the condition by the insertion of the word “substantially”; clause 29.5 provides that “[a] party can rescind under this clause only if the party has substantially complied with cl 29.4”.

12 The plaintiff’s primary case on the facts was put on a quite narrow basis, but it is necessary, though briefly, to recount the circumstances that led up to the situation in which that case must be understood and evaluated. Just over a week after the contract was signed, the defendant, on 27 November 2002, called for construction tenders. It was, at the same time, taking steps to obtain development approval from Coffs Harbour City Council. On 25 February 2003, a construction company, M & A Hawkins Constructions Pty Limited (“Hawkcon”), was chosen as the preferred tenderer. Thereafter, unavoidable delays occurred in the obtaining of official consents, those delays particularly involving a question relating to the Bushfire Safety Authority. On 22 June 2003, Hawkcon amended its tender price to $4,252,862.90. On 1 July 2003, the development approval issued, but on 18 July Hawkcon wrote complaining of “the seemingly endless number of delays” and demanding a contract by 25 July. The contract was not in fact signed until 18 August, and construction was not able to be commenced until 8 September 2003. The construction period nominated in Hawkcon’s tender was 44 weeks, so at that time, unless something could be done to accelerate the work schedule, there was no prospect of registration of the plan by 28 February 2004.

13 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. But the plaintiff’s case is that, once it became apparent there would be considerable delay in the commencement of the work, the defendant, being imperatively bound by cl. 28.2 to “do everything reasonable to have the plan registered on or before” 28 February 2004, was required to investigate the possibility of rescheduling the work. Counsel put it that the defendant was at least bound to ask the question whether Hawkcon could do it (at some reasonable extra cost, of course) more quickly, or whether another contractor could be substituted or brought in to do part of the work so as to achieve that end. After all, there was nothing fixed in the stars about the precise time nominated in Hawkcon’s tender. Other tenderers had taken a different view; all three of the other tenders obtained nominated somewhat shorter construction periods, the shortest being six weeks shorter. It is reasonable to infer from special condition 44 of the contract between the plaintiff and the defendant that, at the date the tenders were sought, there was no pressure at all to achieve a construction schedule that would comply with the defendant’s contractual obligation. There was plenty of time. What competitive tenders might have provided, the plaintiff argues, had time been a crucial issue, simply cannot be known since no such tenders were sought, and so far as appears not even informal inquiries were made.

14 For the defendant, the case so mounted was met by three principal arguments: (1) that the plaintiff had not in fact shown no inquiry was made into the possibility of rescheduling; (2) that had an inquiry been made, it would have been fruitless; and (3) that an inquiry as to the feasibility of rescheduling did not come within the contractual expression “everything reasonable to have the plan registered” by 28 February 2004 which the defendant “must do”.

15 As to the first point, the fact of the matter is, of course, peculiarly within the knowledge of the defendant, and the case brought by the plaintiff, whether by direct evidence or by raising an inference, “is to be weighed according to the proof which it was reasonably within the means of one party to produce or of the other to contradict”: Hunyor v Tilelli (1997) 8 BPR 15, 629 at 15, 631, per McLelland CJ in Eq, cited by Young CJ in Eq in Walker v Chanrich Properties Pty Ltd at para 20. In the present case, this principle is reinforced by the rule in Jones v Dunkel (1959) 101 CLR 298 since, although Mr Hogendijk, who came to the defendant as development manager on 21 July 2003, was called to give evidence, his predecessor in that position and other persons who were, on the evidence, intimately concerned with the progress of the matter before 21 July 2003 were not called to give evidence. Mr Hogendijk, who admitted he was aware “there had been some prior discussion” of rescission of the contract, admitted too in cross-examination that he did not seek “to inquire of Hawkcon if there were any possibility of abridging the 44 week construction period”. He also acknowledged he was not aware of anyone else at the defendant asking that question. There is no reason to doubt Mr Hogendijk’s evidence on this point or to hesitate to draw an inference from his failure to become aware of any inquiry as to the possibility of abridging the time. He was the new development manager who must have familiarised himself with a project which had been so delayed (it was six months behind schedule as compared with what the previous development manager had anticipated in February). Indeed, the general circumstances tend to confirm the unlikelihood of such an inquiry; for it is clear from the defendant’s file that the question engrossing consideration during the middle of 2003 was the possibility of rescission of the sale contracts in order to obtain higher prices. But there is no reference to any attempt to reduce the construction time with a view to complying with cl.28. In my opinion, the plaintiff has established the defendant in fact made no attempt to ascertain whether this could be done.

16 The defendant’s second argument fails on the law as I have held it to be. The question is not whether the step not taken would have achieved registration of the plan on time, but whether it was a step falling within the defendant’s obligation.

17 The defendant’s third argument denies that the making of the inquiry would have been a reasonable step. Viewed theoretically, in the abstract, this argument raises questions of degree depending on when the matter might have been raised – whether a few weeks before the end of the period, or as soon as it became clear that a commencement to fit the original schedule would not occur. The defendant’s argument was that the tender period of 44 weeks could not have been bettered, as to which reliance was placed on the affidavit of Mr Hawkins, a principal of Hawkcon, who was not cross-examined. Mr Hawkins stated:

“If at any time, whether before or after tendering or entering into the Contract, I had been requested at any time by the Defendant to carry out the construction works in respect of the Project 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 went on to refer to shortages of tradesmen on the east coast of Australia, including Coffs Harbour, in the year 2003. His affidavit discusses whether it was feasible to employ extra gangs or to share the work with another contractor, which on this site would, he says, have led to “significant problems”, particularly because of very restricted physical access. Given that construction could only commence on 8 September 2003, a fact the plaintiff does not challenge having regard to the bureaucratic problems, Mr Hawkins said his company “could not possibly have completed construction by 28 February 2004” and he expressed the view the suggested alternative of the involvement of other builders could not have solved the problem. So far as the question of access to the site is concerned, Mr Hawkins’s view was supported by the evidence of Mr Duckworth, a quantity surveyor who was the project coordinator for the development.

18 Mr Hawkins’s affidavit was read subject to relevance, but it seems to me the question whether a step that was not taken could conceivably have contributed to the achievement of the contractual requirement must be relevant to whether it was a reasonable step within cl.28. The view of the law which I have accepted does not put a purchaser to the hazard of proving that what was omitted actually would have ensured success; but, on the other hand, a vendor is not required to take a step that cannot possibly achieve success. In this unusual case, the plaintiff accepts the defendant could not avoid the delays to the commencement of the building works. On the evidence, there is then no escape from the conclusion that the suggested inquiry as to the feasibility of a reduction of the construction time could not possibly have altered the outcome. For that reason, I find it could not be said it was a step that was reasonable to take and must be taken within cl. 28.

19 The plaintiff then seeks to rely in the alternative on a line of cases which is generally associated with the standard condition in a contract for the sale of land enabling the vendor, where the purchaser insists on an objection or requisition as to title which the vendor is unable or unwilling to comply with, to rescind the contract. One of the best known examples of the principle governing such a case is In re Jackson & Haden’s Contract [1906] 1 Ch 412, where Collins MR referred (at 420) to an earlier judgment of Turner LJ who had said:

“[T]he word ‘unwilling,’ in a condition of sale of this description, is not to be considered as giving an arbitrary power to the vendor to annul the contract. I think that in a case where the vendor annuls the contract on the ground of unwillingness, he must shew some reasonable ground for unwillingness; thus, for instance, he may shew that if he proceeds to comply with a requisition, he will be involved in expenses far beyond what he ever contemplated, or be involved in litigation and expenses which he never contemplated, and for avoiding which he reserved to himself the power of annulling the contract. But to say that a vendor, upon a condition of that description, could annul a contract brevi manu, without attempting to answer any of the requisitions that are made on the part of the purchaser, would be opposed both to principle and authority; for that would, in truth, be giving to the vendor the power of saying that that which was intended as a sale, and was a sale, shall, in truth, be no sale at all.”

The reasoning on which this principle is based, is, of course, applicable outside the immediate area of conditions permitting rescission in respect of requisitions. In Schenk v ACN 081 123 140 Pty Ltd (2002) 11 BPR 20,375, Bryson J referred to the principle (at 20,380) in the context of the principle to which I referred earlier in these reasons of Plumor Pty Ltd v Handley . His Honour concluded (at 20,383) that “pursuit of the higher price was the only thing which in reality moved the vendor to rescind.” His Honour continued:

“If the rescission had been otherwise effective, the vendor acted unreasonably and the purchasers would have been entitled to be relieved in equity against the rescission.
I find that the defendant rescinded its contract with the plaintiffs for the purpose of selling the unit at a higher price, and not for the purpose of escaping from any dilemma or difficulty encountered in endeavours to conform to its contractual obligations.”

In that case, the power to rescind which had been purportedly availed of did not arise under a clause similar in terms to clause 28, but it did arise under a clause providing that either party might rescind if a strata plan of subdivision were not registered within a required period. On the evidence, it was clear the vendor made no attempt to secure registration for the reason found by Bryson J, that is, because a higher price was sought.

20 Pierce Bell Sales Pty Limited v Frazer (1973) 130 CLR 575 was a case involving a clause in the standard form enabling a vendor, if unable or unwilling to comply with an objection or requisition, to rescind the contract. Gibbs J (at 590-591) referred to what Viscount Radcliffe said in Selkirk v Romar Investments Ltd [1963] 1 WLR 1415 at 1422-1423:

“Thus, it has been said that a vendor, in seeking to rescind, must not act arbitrarily, or capriciously, or unreasonably. Much less can he act in bad faith. He may not use the power of rescission to get out of a sale ‘brevi manu’, since by doing so he makes a nullity of the whole elaborate and protracted transaction.”

Gibbs J went on to comment:

“In the present case, there was no evidence that the respondents, in exercising their right of rescission, were acting in bad faith. … [I]t would be the merest speculation to say that they availed themselves of the power of rescission not really because they were unwilling to comply with the requisition but 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.”

But the very use of expressions such as “arbitrarily”, “capriciously”, “unreasonably”, and “bad faith” indicates that this principle has its application in fairly special circumstances. That aspect of the matter was emphasised by Glass JA in Champtaloup v Thomas [1976] 2 NSWLR 264 at 270-271. Generally, as his Honour there said, “parties to a contract are at arm’s length, and the donee of a beneficial power to rescind need only show that the conditions for its exercise have been objectively fulfilled.” See also Woodcock v Parlby Investments Pty Ltd (1988) 4 BPR 9568 at 9571. It is true that the principle enunciated by Viscount Radcliffe was applied by Davies AJ in AJDJ Pty Ltd v Pacific West Developments Pty Ltd [2001] NSWSC 1174 to a case of a rescission under the standard clause 28, but that was an example of an extraordinary situation. The building agreement by virtue of which the vendor attempted to show compliance with its obligations under the standard clause 28 was held by his Honour (in para 20) to have been “a sham”; so it was in quite special circumstances that he first held clause 28.3.2 did not justify the vendor in rescinding, and then also held (in para 31) the purported rescission was “unreasonable and unconscionable”.

21 In the present case, I have come to the conclusion that clause 28.3.2 was available to the vendor, and in that situation I do not think it can be said it was not entitled to have regard to its own financial interests in determining whether or not to rescind. The fact that it gave consideration to those interests, as is evidenced by its documents, before the right to rescind had arisen, but 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 have already held that the defendant did not fail to take any step which could conceivably have avoided the accrual of the right of rescission.

22 For these reasons, it is ordered that the plaintiff’s proceeding be dismissed with costs.

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