Churnin v Pilot Developments Pty Ltd

[2003] NSWCA 391

CITATION:	Churnin & Ors v Pilot Developments Pty Limited [2003] NSWCA 391
HEARING DATE(S):	3 September 2003
JUDGMENT DATE:	22 December 2003
JUDGMENT OF:	Handley JA at 1; Santow JA at 13; Foster AJA at 61
DECISION:	(1) Appeals dismissed with costs; (2) Leave granted for the parties to submit orders, in agreed form, if consequential orders are now required in light of the orders made by Ipp JA on 31 July 2003.
CATCHWORDS:	CONSTRUCTION - Interpretation of contract - Subdivision - Right to rescission - Vendor of apartments required to proceed with all due expedition to procure subdivision - The builder's failure to proceed diligently - Affect on vendor's obligation - Vendor's requirement to use 'best endeavours' to cause the work to be done - Proper and workmanlike manner - Time within which completion is required.
CASES CITED:	Cavallari v Premier Refrigeration Company Pty Ltd (1952) 85 CLR 20 Hardy v Wardy (2001) 10 BPR 19,055; [2002] ANZ ConvR 261 Hawes v Cuzeno Pty Ltd (1999) 10 BPR 18,011 Hawkins & Anor v Pender Bros Pty Limited & Anor (Supreme Court of Queensland Court of Appeal, 29 August 1995, unreported) Masters v Belpate Pty Ltd (2001) 10 BPR 18,527 Plumor Pty Ltd v Handley (1996) 41 NSWLR 30 Wardy v Hardy (2002) 11 BPR 20,227; (2003) NSW ConvR 56-034 Woodcock v Parlby Investments Pty Ltd (1988) 4 BPR 9568
PARTIES :	Brian CHURNIN and Anor (First Appellants) Richard GLOVER (Second Appellant) Marcelle PEARSN and Anor (Third Appellants) David BLACKMAN and Anor (Fourth Appellants) David BLCKMAN and Ors (Fifth Appellants) Brendan MASON and Anor (Sixth Appellants) Grant CHEETHAM and Anor (Seventh Appellants) Michael FITZSIMONS (Eighth Appellant) PILOT DEVELOPMETNS PTY LIMITED (Respondent)
FILE NUMBER(S):	CA 40622/03
COUNSEL:	B WALKER, SC/ I FAULKNER, SC/ J NEAL (Appellants) B W RAYMENT, QC/ S BALAFOUTIS (Respondent)
SOLICITORS:	Picone & Co (Appellants) Piper Alderman (Respondent)

LOWER COURTJURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	SC2031/00; SC2444/01; SC3283/01; SC3298/01; SC3300/01; SC3386/01; SC4025/01; SC4715/01
LOWER COURT JUDICIAL OFFICER :	Windeyer J

CA 40622/03
SC 2031/00
SC 2444/01
SC 3283/01
SC 3298/01
SC 3300/01
SC 3386/01
SC 4025/01
SC 4715/01

HANDLEY JA
SANTOW JA
FOSTER AJA

22 DECEMBER 2003

Brian CHURNIN and Anor & 7 Ors v PILOT DEVELOPMENTS PTY LIMITED

Judgment

1 HANDLEY JA: In these consolidated appeals I have had the benefit of reading the reasons for judgment of Santow JA in draft. His description of the facts and the history of the proceedings enables me to proceed directly to the questions of construction which arise.

2 Clause 9 of the contract is headed “Work”, and deals generally with the construction of a home unit building on the site “in accordance with the draft strata plan annexed” and “the requirements of all relevant authorities”. While the clause does deal with quality issues it also has a wider operation. The promise by the vendor in cl 9.1 that it “will use its best endeavours to cause the following work to be done in a proper and workmanlike manner” not only defines in terms the manner in which the work will be done but it also requires the whole of the work to be completed namely “the construction of a building”.

3 The vendor would be in breach of this obligation if the work was not finished even if the work that was done was done in a proper and workmanlike manner. In truth it was a composite promise requiring construction of the entire building to the designated standard.

4 The work also had to be done in accordance with the requirements of all relevant authorities. These would include the development consent and the conditions it contained relevant to the construction of the building. The consent required construction substantially in accordance with identified plans and otherwise as specified in particular conditions. These included the Conditions of Consent identified under a heading in those terms (1-17), together with relevant conditions under the headings Traffic Conditions/ Civil Works Conditions (18-29), Alignment Conditions (30-32), Service Authority Conditions (33-42) and Landscape Conditions (46-48).

5 Clause 9.1 defines the nature of the vendor’s obligation of performance (“use its best endeavours”), but not the time within which performance was required. This would therefore be required within a reasonable time which would be fixed having regard to all the circumstances of the case. See Cavallari v Premier Refrigeration Company Pty Ltd (1952) 85 CLR 20, 26. The latter would include the time required after construction of the building to complete the subdivision by registering the strata plan (cl 10.7) within the 24 months period to prevent a right of rescission arising under cl 10.8.

6 Clause 10.7 is part of a clause headed “Registration of Strata Plan”. In many circumstances an obligation to complete an ordinary subdivision would extend to the completion of any road, drainage or other works specified in the draft plan or conditions of approval and the same construction would normally apply to a an obligation to complete a strata subdivision. However this construction is displaced by the express terms of this contract. Clause 9.1 which refers to the doing of building work and the construction of the building only requires from the vendor “its best endeavours” while cl 10.7 requires the vendor to proceed “with all due expedition”. The nature of the vendor’s obligations under these clauses are different.

7 The existence of cl 9 headed “Work” dealing generally with that subject matter and cl 10 headed “Registration of Strata Plan” dealing with that subject matter supports a narrow construction of the latter rather than a broad construction which would cover “Work”. The statement in cl 9.1 that it is “without prejudice to any other express or implied condition of this Contract” does not support a construction of cl 10.7 which would treat it as applying to the completion of the building. Its purpose is to make the vendor’s obligations under cl 9.1 subject to the other provisions in clauses 9 and 10 which permit departures from the draft plan.

8 It is not possible to draw a sharp distinction between an obligation to construct a building with all due expedition and an obligation to construct it in a proper and workmanlike manner because any failure in the latter respect would prevent or delay completion. Clause 10.7 construed as applying to the construction of the building must therefore require completion not only with “all due expedition” but also “in a proper and workmanlike manner” thus exposing a fundamental inconsistency between the clauses if cl 10.7 is construed as applying to the construction of the building.

9 The obligation under cl 10.7 is to “complete the subdivision” and comply with the council’s “conditions of approval in respect of the subdivision”. The development consent, which pre-dated the contracts by some months, specifically identified three conditions as “Strata Subdivision Conditions”. This context provides a compelling reason for reading the words in cl 10.7 “comply with all council’s conditions of approval in respect of the subdivision” as referring only to those separately identified conditions.

10 This construction is further strengthened by the requirement in cl 9.1 that the building work comply with the requirements of all relevant authorities. These would include, as I have held, the conditions of the development consent relating to the construction of the building. The distinction also reflects the dual character of the development consent which was “to erect and strata subdivide a residential flat building”.

11 Work would be required outside the building to comply with Strata Subdivision Condition 45 that suitable easements for services and internal stormwater be created. This would require drains and services conduits to be constructed on the property.

12 In my judgment therefore cl 10.7 only governs the vendor’s obligations after the building has been constructed and as such it applies to the work and other matters and things which then have to be done if the strata plan is to be registered. The vendor was not in breach of its obligations under cl 9.1 relating to the construction of the building and nor was it in breach of its separate obligation under cl 10.7 relating to the registration of the plan of strata subdivision. It was therefore entitled to exercise its rights of rescission under cl 10.8. I therefore agree that the appeals fail and that the orders proposed by Santow JA should be made.

13 SANTOW JA:

INTRODUCTION
The central issue in these eight actions is whether the respondent development company was entitled to rescind the contract under which it agreed to sell a particular apartment in a strata title development at Clovelly, in each case to the particular appellant purchaser. The trial judge, Windeyer J, held that the vendor company was entitled to rescind pursuant to special condition 10.8 of each relevant contract. Accordingly, each of the six actions for specific performance and the two actions for damages failed.

14 The essential issue on appeal was this: where the failure to complete the strata title subdivision was caused (as is not disputed) by delay by the builder engaged by the respondent, was the respondent thereby in breach of clause 10.7 of the contract and so precluded from exercising rescission rights under clause 10.8? Clause 10.7 required that the vendor “proceed with all due expedition to complete the subdivision and comply with all Council’s conditions of approval in respect of the subdivision”. Clause 10.8 gave a right of rescission if the plan of subdivision was not registered within 24 months of the date of the contract.

15 An additional issue was raised in argument which became the subject of a late Notice of Contention by the respondent. It is in the following terms:

“The respondent contends that the decision of Justice Windeyer of 2 July 2003 should be affirmed on the ground that:

(a) The obligations expressed in clause 10.7 of the special conditions to the respective contracts do not arise until after the work contemplated by clause 9.1 is completed.

(b) The work contemplated by clause 9.1 was not completed before the date for rescission referred to in clause 10.7 of the special conditions to the respect contract.

(c) Accordingly, there was no relevant breach of clause 10.7.”

16 The Notice of Contention thus concerned the relationship between clause 10.7 and the earlier clause 9.1. The latter required the vendor to use its best endeavours to cause the defined “work” to be done in a proper and workmanlike manner, namely construction of a building generally in accordance with the draft strata plan, requirements of all relevant authorities and schedule of finishes.

17 The issues raised by the Notice of Contention were dealt with in argument. It was left for this Court to determine whether leave should be given for its late filing. The appellants did not advance any specific objection leaving this Court to determine whether leave should be granted.

18 The appellants however objected to the respondent adducing further evidence. This was evidence of the Randwick Council’s Notice of Determination of the respondent’s development application. That was said to bear upon the Notice of Contention because it identified the conditions of the development approval in respect of the subdivision. The affidavit of Ms Banton of 18 September 2003 establishes that this material was before the trial judge and was referred to during the trial.

19 The Notice of Determination should be admitted.

20 The respondent contends that the only “conditions of approval with respect to the subdivision“ within the meaning of clause 10.7 were:

“ Strata Subdivision Conditions

43. Prior to release of the plan of strata subdivision the applicant shall provide Council with a Developer/Subdivider certificate for the property.

44. The applicant shall provide Council with a survey plan of the property prior to receiving strata subdivision approval.

45. Suitable easements for services and internal stormwater lines shall be created as required. The minimum easement width over any stormwater line is to be 0.9 metres.”

21 I shall return to that issue later. Since the Notice of Contention raised a question of construction of the contract which was a pure question of law, leave should be granted for its filing out of time.

22 I now set out the grounds of appeal:

“1. His Honour erred in holding:

(a) that the Respondent had complied with clause 10.7 of the respective contracts; and

(b) that the Respondent was not in breach of its obligations under contract clause 10.7.


2. His Honour ought to have held and declared on the facts as found:

(a) that the Respondents’ right to rescind was available only if the Respondent had complied with contract clause 10.7;

(b) that in breach of contract clause 10.7 the Respondent did not proceed with all due expedition to compete the subdivision and comply with all Council’s conditions of approval in respect of the subdivision;

(c) that the breach precluded the Respondent from rescinding the respective contracts; and

(d) that the respective contracts were not rescinded.


3. His Honour should have upheld the Plaintiffs’ claims and should have made orders requiring the Respondent to specifically perform the respective contracts.”

23 Consequential orders, in particular for specific performance or damages, were sought. I turn now to the salient facts and relevant terms of the contracts of sale.

SALIENT FACTS

24 The respondent was registered as proprietor of a large piece of land in Clovelly. The respondent intended to construct a twenty-eight unit home unit development. The average sale price was over $500,000.

25 Randwick Council granted development approval on 14 October 1998. Building approval was granted on 23 July 1999.

26 In March and April 1999, contracts were entered into between the respondent and each of the appellants for the sale and purchase of one of the units of the property. The contracts were “off the plan”. The vendor entered into these contracts before a contract with the builder was signed.

27 A strata plan was not registered within twenty-four months of the date of the contracts (see cl 10.8 “the date of the contracts”). When the twenty-four month periods expired in March and April 2001, the vendor purported to rescind.

28 The site proved a difficult one with requirements for stabilisation and shoring, to enable construction in accordance with the plans and to protect adjoining properties.

29 On 6 May 1999 the respondent entered into a contract with G & N Developments Pty Limited trading as RMA Design and Constructions (“RMA”) for the construction of the building. The contract provided for completion within forty-six weeks of the commencement of work, the date of commencement as defined being 9 June 1999. The contract contained the normal provisions for extension of time in certain events. The original date for practical completion was 26 April 2000, and the agreed extended date was 5 February 2001. An occupation certificate was not issued until 4 September 2002 and the strata plan was not registered until 19 November 2002.

30 The trial judge found that an efficient builder would have completed the project within the two year period. He records the difficulties that arose during construction. He found that the failure to register the plan of subdivision within the two years was caused by the builder’s failure to proceed diligently. He also found that the vendor had not breached its obligations under clauses 9.1 and 10.7 of the contract. The appellants contend that the respondent failed to comply with clause 10.7. Contrary to the view of the trial judge, they contend that the clause imposed an absolute obligation on the vendor “with all due expedition to complete the subdivision and comply with all Council’s conditions of approval in respect of the subdivision” and “obtain the consent of the Council to the plan [of subdivision] and thereafter to lodge the same for registration”. The vendor’s failure to fulfil that obligation is said to preclude it from rescinding. This is so, even though the breach was not the fault of the respondent but of the builder.

Contractual Terms

31 It is convenient that I now set out those relevant terms of the contract.

“ 9. WORK
9.1 Without prejudice to any other express or implied condition of this Contract, before completion the Vendor will use its best endeavours to cause the following work to be done in a proper and workmanlike manner. The work comprises the construction of a building generally in accordance with the draft strata plan annexed and marked “C”, the requirements of all relevant authorities and the schedule of finishes (annexed and marked “SF”).

………

10. REGISTRATION OF STRATA PLAN
10.1 Wherever herein appearing the following expressions shall have the following meanings:

“ the plan ” shall mean the Vendor’s proposed strata plan of subdivision;

“registration” shall mean registration by the Land Titles Office of the plan as a strata plan and “register” and “registered” shall have corresponding meanings;

“the Council” shall mean the Council of the City of Randwick;

…..


10.7 the Vendor shall proceed with all due expedition to complete the subdivision and comply with all council’s conditions of approval in respect of the subdivision and the Purchaser shall not raise any objection or requisition or make any claim for compensation in respect of any work carried out by the Vendor or its agents pursuant to the said conditions of approval and the Vendor shall obtain the consent of the council to the plan and thereafter to lodge the same for registration.

10.8 In the event that the plan shall not have been registered within twenty four (24) months of the date hereof or within such further period as the parties may mutually agree upon in writing, either party may thereafter rescind this Contract whereupon the provisions of clause 19 hereof shall apply.

………”


DISPOSITION OF THE APPEAL
Appellants’ case

32 The appellants submitted that clause 9.1 dealt essentially with quality issues requiring the vendor to “use its best endeavours” to cause the specified construction work to be done “in a proper and workmanlike manner” and “generally in accordance with the draft strata plan”, “the requirements of all relevant authorities” and the schedule of finishes. That “best endeavours” obligation had to be read with clause 10.7, since clause 9.1 is “without prejudice to any other express or implied condition of this contract”. On the other hand clause 10.7 did not use the language of best endeavours but was said to be expressed in absolute terms.

33 In the appellants’ submission although the clause contained no express time limit, it imposed an absolute obligation upon the vendor “with all due expedition” to “complete the subdivision” and “comply with all Council’s conditions of approval in respect of the subdivision”. That absolute obligation was said to involve completing construction in sufficient time to enable the plan of subdivision to be registered within the twenty-four month period in clause 10.8.

34 As this did not occur, the appellants’ contention is that the vendor was in breach of clause 10.7 and therefore not entitled to rescind under clause 10.8.

35 The principle invoked was that stated in Plumor Pty Ltd v Handley (1996) 41 NSWLR 30 by McLelland CJ in Eq at 34:

“… that a party to a contract is not entitled, as against the other party, to rely on an event resulting from the first party’s wrongful act.”

36 Pursuant to the Notice of Contention the respondent submitted that clause 9.1 defined the vendor’s obligations with respect to “the work” and Clause 10.7 did not deal with construction work at all but operated only as regards “Registration of the Strata Plan” and compliance with the Council’s three conditions in the subdivision approval [para 8]. Clause 9.1 only required the vendor to “use its best endeavours” to cause the work to be done. Since the judge found that the vendor had complied with its “best endeavours” obligations under clause 9.1 it was entitled to rescind the contracts under clause 10.8.

37 On the respondent’s construction, clause 10.7, appearing as it does in a clause headed “Registration of Strata Plan”, is directed not to the vendor’s construction obligations with respect to “the works”. Rather it is directed to what is entailed by “registration of the strata plan”. That, argues the respondent, entails no more than, post-construction, completing the subdivision and complying with Council’s conditions of approval in respect of the subdivision; that is to say, carrying out the post-construction steps for that purpose.

38 Thus the respondent seeks to meet the appellants’ contention that clause 10.7 imposes a strict or absolute obligation upon the vendor with respect to the matters to be carried out under clause 10.7. It seeks to confess that result but avoid its consequence excluding from the ambit of clause 10.7 the relevant construction work, contending that it is governed wholly by clause 9.1. The respondent argues that as it clearly did use best endeavours to construct, including the shoring and stabilising, as required by clause 9.1, the more stringent provisions of clause 10.7 have no separate application to that construction work.

39 The trial judge, though not dealing in terms with this argument, observed that “completing the subdivision required completion of the development in accordance with clause 9.1 and registration of the strata plan of subdivision”; see Red, 96 at [11]. I agree. More precisely I consider that clause 9.1 is directed substantially at quality requirements of construction connoted by the reference to “cause the work to be done in a proper and workmanlike manner”, embracing a definition of the work which comprises “construction of a building generally in accordance with the draft strata plan … the requirements of all relevant authorities and the schedule of finishes …”. The reference to “generally” in that context supports the interpretation that clause 9.1 does not cover those aspects of construction dealt with under clause 10.7. Clearly, when clause 10.7 refers to the obligation to “complete the subdivision and comply with the conditions in respect of the subdivision” that necessarily entails constructing the home unit development, doing so in conformity with the strata plan and the development conditions generally. The expression “conditions in respect of the subdivision” is in my view wider than the narrow concept of the three specific conditions of the subdivision. Thus shoring and stabilising are an essential part of the work contemplated by clause 10.7, referable to the conditions of approval, though subject also to any quality or related obligations derived from clause 9.1.

40 The respondent’s contention is that it is only those three earlier quoted conditions which appear under the heading “Strata Subdivision Conditions” which constitute “Council’s Conditions of Approval in respect of the subdivision” within clause 10.7. Whereas the appellants correctly contend that in clause 10.7, to “complete the subdivision” comprehends completion of the development thereby entailed. This embraces all building and related conditions necessary to build the development, on the basis that these are all “conditions of approval in respect of the subdivision”, in the broader sense connoted by the emphasised words. That still leaves in addition the predominantly quality requirements of clause 9.1. I agree with this construction of the two clauses, and their relationship.

41 However, while that disposes of the Notice of Contention, the question still remains whether clause 10.7 has the strict and absolute effect contended for by the appellants. An immediate difficulty with that construction is that it has such a harsh and oppressive operation. If it were correct, the vendor would be disentitled to invoke clause 10.8, even if the reason for the failure to comply with clause 10.7 was by reason of acts of the builder, even events of force majeure, totally outside any possible control by the vendor.

42 The appellants sought to answer this difficulty by treating the relevant clause as a risk allocation clause, which recognised that the vendor alone was in a contractual relationship with the builder. Thus the appellants argue that the risk of failure to complete in time, be it for whatever reason, should fall on the vendor. If correct, that would entail some harsh and anomalous consequences. First, even the vendor who had done everything reasonably possible to comply with clause 10.7 could be sued for damages, should the 24 month time table not be met. Second, the asymmetric result would be that the purchaser could rescind under clause 10.8 but not the vendor, since on this construction only the vendor would be relying on its wrongful act.

43 The appellants rely upon the decision of Bryson J in Hardy v Wardy (2001) 10 BPR 19,055; [2002] ANZ ConvR 261 and the decision on appeal upholding the trial judge sub nom in Wardy v Hardy (2002) 11 BPR 20,227; (2003) NSW ConvR 56-034.

44 In that case, the relevant contract was in distinctly different terms, which I quote below with particular attention to clause 28.2 and 28.3:

“ 28 Unregistered plan
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.”

45 It will be appreciated that that clause 28 is expressed in the imperative with the word “must” and qualified only by the word “reasonable”.

46 That wording lead Bryson J to conclude as follows:

“[8] 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.”

47 Bryson J then referred to a contrary decision of Hodgson CJ in Eq in Masters v Belpate Pty Ltd (2001) 10 BPR 18,527 where he expressed disagreement with an earlier decision of Bryson J in relation to a similar clause in Hawes v Cuzeno Pty Ltd (1999) 10 BPR 18,011.

48 In Masters v Belpate (supra) the relevant obligation was expressed in essentially similar terms: “A6.1 The Vendor must do everything reasonably necessary to have the plan registered within the plan registration time”.

49 In Masters v Belpate at [64]-[65] Hodgson CJ in Eq made these observations:

[64] However, there are other matters which may be considered matters of specialist expertise, which a developer would normally leave to an architect, engineer or builder: to an architect, the drawing of plans and supervision of building works, to an engineer, similar tasks; and to a builder, actual execution of the work. In those matters, in my opinion the independent contractors should not be regarded as agents of the developer in carrying out the developer's role in obtaining registration of the strata plan. Accordingly, delays attributable to independent contractors in carrying out those tasks would not ipso facto involve a breach of the vendor's obligation. Thus, where a builder caused delay by walking off the site because of problems the builder had which were unrelated to the job, that was not considered a breach of the vendor's obligation: Woodcock v Parlby Investments Pty Ltd (1998) 4 BPR 9568.

[65] However, even where delay arises from the conduct of independent contractors in carrying out matters of specialist expertise, there may be associated breaches by the vendor/developer itself, for example in selection of the contractors, in provision of instruction and information, in monitoring progress, and/or in failing to replace the specialist expert when this should have been done.”

50 The case cited by Hodgson CJ in Eq, Woodcock v Parlby Investments Pty Ltd (1988) 4 BPR 9568 was one in which the vendor gave no express contractual promise that the plan would be registered or that all things necessary for registration would be done. Nor was the vendor’s right of rescission expressly made conditional on performance of any such promise. Accordingly, the contract, as Bryson J pointed out, was significantly different in its terms from contracts incorporating a version of clause 28. In Woodcock Young J said at 9571: “special conditions like clause 26 are usually construed as subject to the circumstance that only a party who is not at fault can rely on the condition”.

51 I have earlier referred to Plumor Pty Ltd v Handley (supra) where McLelland CJ in Eq stated the principle as being “… that a party to a contract is not entitled as against the other party, to rely on an event resulting from the first party’s wrongful act”.

52 In Wardy v Hardy (supra) in the Court of Appeal Mason P found it unnecessary to resolve the differences of opinion which are to be found in what Mason P described as “obiter discussion in the three cases”. This was because “Masters and the discussion in it of the then Chief Judge in Equity did not involve Cl 28.2 or any similar provision”. I have earlier quoted the two clauses. I consider that it is unnecessary to enter into the debate as to whether A6.1 was indeed indistinguishable from clause 28.2 or whether a distinction can be drawn by the addition of the word “necessary” in A6.1. Certainly, were the clauses indistinguishable, Mason P’s agreement with the construction Bryson J made of clause 28.2 would in actuality mean that there was a binding decision of the Court of Appeal preferring the view of Bryson J to Hodgson CJ in Eq. However, given the clear caveat that Mason P expressed and the fact that the clause in the present case is distinct again from clauses in Masters and Hardy, that is an issue for another day.

53 It is necessary now to turn attention to the actual words of clauses 10.7 and 10.8. Proceeding on the basis that clause 10.7 does apply to building works, it is expressed in imperative terms, namely that “the vendor shall proceed with all due expedition to complete the subdivision and comply with all Council’s conditions of approval in respect of the subdivision ….”. However, there is no stipulated time for these matters to be carried out, but rather the reference is to all due expedition. That is a significant difference between the respective clauses in Masters and Hardy. There in each case the time was precisely specified by which the relevant things had to be done, namely the plan registration time in the first case and six months after the contract date in the second case. Moreover, the verbal expression “shall proceed” is not expressed with the imperative emphasis of “must do” in the other two cases.

54 Taking then the language of clause 10.7, I start with the meaning of the word “proceed”. It is defined in the Macquarie Dictionary as being “to move or go forwards” or “to go on with or carry on any action or process” or simply “to go on to do something”. These shades of meaning share the common notion of deliberate progress. But they do not suggest an absolute and unqualified requirement that falls upon a vendor to bring about the completion of the subdivision in compliance with the Council’s conditions of approval, come what may, or beyond what is within the power of the vendor to accomplish. The word “shall” in contrast to the stronger word “must” supports that interpretation.

55 Then turning to the time period within which this is to be accomplished, there is as I have said no precisely defined time limit and certainly not one referable to the twenty-four months in clause 10.8. Moreover, the word “due” qualifies the “expedition” required. The word “due” in this context clearly means in the words of the Macquarie Dictionary, “rightful; proper; fitting as in the expression ‘due care’ or ‘in due time’”. The alternative shade of meaning of “adequate” or “sufficient” as in “a due margin for delay” is similarly language falling short of the unqualified and absolute character of clause 28.2 in Hardy.

56 There is a further difference. Clause 10.8 does not, as was common ground, contain the equivalent to clause 28.3 in Hardy, namely making compliance with clause 10.7 an express condition precedent to the right of rescission in clause 10.8. It was common ground between appellants and respondent on appeal, that this was a case where no choice was required to be made between Bryson J’s view in Hardy and Hodgson CJ in Eq’s view in Masters. Rather this was a case where, as in Woodcock v Parlby Investments Pty Limited what brought clause 10.7 into play was the general law principle that a party is not entitled to rely on an event resulting from that party’s wrongful act.

57 Given the findings of the trial judge as to the absence of fault on the part of the vendor in the failure to have the plan registered within two years, such failure being attributable to the respondent’s builder’s failure to proceed diligently and not to any failure on the part of the vendor to follow up the builder or to substitute another, I consider that clause 10.7 was not breached by the vendor even assuming clause 10.7 covers the construction phase. I would adopt what was said by Windeyer J on these matters at 28-9 (Red, 102-3):

“[28] ……… While the matter is not easily resolved it seems to me that there are different obligations in different factual situations. What is clear is that the contract wording is of paramount importance. A vendor has obligations in selecting contractors; a vendor who can see that delays are occurring must overcome them if they can be overcome: for instance, a surveyor who delays should be replaced by a surveyor undertaking to perform within a fixed time; a project manager not following matters through should be replaced. If a builder in default can be replaced so as to fulfil the contractual obligations that should be done.

[29] The particular contract terms 10.7 and 10.8 do not require the vendor to proceed with all due expedition to complete the subdivision within two years, although of course the expectation is that will be done. Failure to complete within two years triggered the right to rescind if the vendor was not in default of its obligations under cl10.7 and the default was the cause of the failure to complete within time. The requirement for causal connection was discussed by Powell JA in Mitchell v Pattern Holdings Pty Ltd [2002] NSWCA 212 in reasoning which, although obiter there, I consider convincing and which I follow. Proceeding with all due expedition could not have required the vendor to do the building work itself. Apart from anything else it would not have had the licence to do so. The clause requires the vendor to do what it can do. While the decisions are difficult to reconcile I do not consider the Court of Appeal decision in Hardy requires a finding that fault on the part of any contractor must be laid at the feet of the vendor under the contractual provisions I am considering. I have come to the view that there is no absolute obligation.”

58 I would adopt also what was said by Helman J in Hawkins & Anor v Pender Bros Pty Limited & Anor (Supreme Court of Queensland Court of Appeal, 29 August 1995, unreported), though by way of dicta. This was in relation to a covenant to use best endeavours to obtain and retain certain approvals to erect a nursing home and retirement village and to proceed with “all due expedition” in the construction thereof.

“Para (a) of CL 4 requires the first defendant to use its “best endeavours”. The proper construction to be put upon those words was considered by the Full court on the appeal in the previous proceedings. Shepherdson J, with whose reasons Thomas and Williams JJ. Agreed, concluded that they imposed upon the first defendant the obligation to do all that it reasonably could in the circumstances to achieve the contractual object, but no more. It was not required to go beyond the bounds of reason, and was not required to act in such a way as to bring ruin upon itself – see Hawkins v Pender Bros Pty Ltd [1990] 1 Qd R 135, at 151-152.
A similar construction should, I think be put upon para (b): the obligation was to proceed with all due expedition, but not beyond the bounds of reason, and not to the point of ruin.”

OVERALL CONCLUSION

59 Clause 10.7 does not place an absolute obligation upon the vendor to accomplish what clause 10.7 entails. Rather it calls for the vendor to do all that is within its power to accomplish in carrying out what clause 10.7 entails as regards completing the subdivision and compliance with conditions of approval in respect of the subdivision. So construed, there was no contravention of clause 10.7 by the vendor and thus no impediment in the vendor rescinding pursuant to clause 10.8.

ORDERS

60 I consider that the appeals should be dismissed and the appellant should pay the costs on appeal of the respondent. In light of the orders made by Ipp JA on 31 July 2003 there may need to be consequential orders following the dismissal of the appeal and I would invite the parties to submit orders in agreed form for that purpose.

61 FOSTER AJA: I have had the advantage of reading in draft form the judgment of Santow JA, in this appeal. I agree with the orders proposed by his Honour and, generally, with his reasons. I wish to add the following comments.

62 The Notice of Contention filed in the proceedings found its origin in discussions occurring during the hearing of the appeal. There emerged an approach to the construction of clause 10.7 of the special conditions which posited that the obligations imposed on the vendor by that clause could not, as a matter of timing, arise until the construction work contemplated in clause 9.1 had been completed.

63 As that construction work had not reached completion before the expiry of the two year period contemplated in clause 10.8, the non-fulfilment by the vendor of any obligations imposed by clause 10.7 could not operate to preclude it from exercising its right of rescission.

64 These arguments are encapsulated in the Notice of Contention. Upon full consideration, I am satisfied that they should be rejected and the Notice of Contention dismissed.

65 Although clauses 9.1 to 9.6 deal with the topic of “Work”, the “work” comprising “the construction of a building generally in accordance with the draft strata plan annexed ………, the requirements of all relevant authorities and the schedule of finishes annexed…..”, the clauses make no provision for the timely completion of the work. They relate to the doing of the work “in a proper and workmanlike manner” and require (clause 9.1) that the vendor “will use its best endeavours” to achieve this result. Clauses 9.2 to 9.6 deal with alterations and finishes, installed items and defects in the work.

66 The only relevant references to the time in which things shall or can be done, appear in clauses 10.7 and 10.8. Although these clauses appear under the topic of “Registration of Strata Plan”, which suggests that they may deal only with circumstances arising after the construction of the building, I am satisfied that their proper interpretation requires that they have an operation during the period of construction.

67 The learned primary judge, in paragraph 26 of the judgment under appeal, said: “It is of course apparent that clause 10.7 is tied to clause 9.1 as delay in 9.1 obligations would run over to 10.7.” I respectfully agree. I am satisfied that the obligation imposed by clause 10.7 that “the Vendor shall proceed with all due expedition to complete the subdivision and comply with all Council’s conditions of approval in respect of the subdivision”, necessarily relates to the construction of the building and not merely to the registration of the strata plan of subdivision when construction is complete.

68 In paragraph 11 of his judgment, Windeyer J noted that “In the long run no reliance was placed upon special condition 9.1 of the Contract”, the plaintiff’s case being based upon special condition 10.7. His Honour said:-

“If the vendor had not performed its obligations under that clause it was in breach. If it was in breach, and the breach brought about failure to obtain registration within 24 months, it was not entitled to rely upon the right given by 10.8. This was not in dispute. What was in dispute was whether or not Pilot had “proceeded with all due expedition to complete the subdivision (meaning the strata subdivision) and comply with council conditions of approval in respect of the subdivision”. Completing the subdivision required completion of the development in accordance with Clause 9.,1 and registration of the strata plan of subdivision.”

I agree, with respect, with this formulation of the basic issue in the case.

69 There had, of course, been very considerable delays occasioned by the fault of the builder. These delays, inevitably, meant that the strata plan could not be registered within the 24 months period contemplated in clause 10.8. The question for decision was whether, in these circumstances, the respondent vendor had failed to “proceed with all due expedition to complete the subdivision” and had therefore committed a breach which disentitled it to rely upon the right to rescission given by clause 10.8. The decisive consideration was whether the respondent should be held responsible, as a matter of construction of clause 10.7, for delay occasioned by the fault of the builder.

70 I am in respectful agreement with both the trial judge and Santow JA that the cases referred to in their respective judgments, which deal with the construction of clauses of different wording, are not of material assistance in determining the proper construction of clause 10.7. I also agree with them that the clause does not impose upon the vendor “some absolute non-delegable obligation”. In my opinion, the words “shall proceed with all due expedition..” must necessarily be read with, and take meaning from, the terms of clause 9.1. Under that clause the vendor is required to “use its best endeavours to cause the….work to be done in a proper and workmanlike manner.” The trial judge’s findings of fact, not the subject of appeal, indicate that the vendor did use its best endeavours to achieve this result. In the circumstances, I am satisfied that there was no demonstrated failure on its part, relevantly, to “proceed with all due expedition.”

71 Consequently, the respondent was not prevented from exercising its right to rescind under clause 10.8, with the result that this appeal must be dismissed.

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Last Modified: 12/23/2003