Gregory James Yeomans and Terrence James Percival Butler v Innisfail Pty Ltd No. SCGRG 93/2248 Judgment No. 4569 Number of Pages 6 Contracts Sale of Land

[1994] SASC 4569

COURT IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA KING CJ(1), MOHR(2) AND NYLAND(3) JJ

CWDS
Contracts - Sale of land - conditional upon approval by Council for erection of "at least eight two storey townhouses" - purchaser's application for ten townhouses refused - failure to comply with vendors' request to apply for eight townhouses - breach of obligation to do what was reasonably necessary to enable condition to be fulfilled - condition treated as fulfilled - failure by purchaser to complete - purchaser's breach of contract - resale for lesser price - damages for loss of bargain and loss of use of purchase price until resale. Mackay v Dick (1881) 6 App Cas 257, applied. Newmont Pty Ltd v Laverton Nickel NL (1982-1983) 44 ALR 598, considered.

HRNG ADELAIDE, 8 April 1994 #DATE 7:6:1994

Counsel for appellants:     Mr G A Britton with
   Mr C J Caldicott

Solicitors for appellants: Caldicott and Co

Counsel for defendant:     Mr M G Pickhaver

Solicitors for defendant:    Jamison and Associates

ORDER
Appeal allowed.

JUDGE1 KING CJ By contract in writing dated 11th October 1991 the plaintiffs agreed to sell and the defendant agreed to buy an allotment of vacant land at Collinswood for the price of $330,000. The contract was subject to conditions expressed, so far as material, as follows:
    "1. Notwithstanding anything elsewhere herein
    contained, the contract shall be subject in all things
    to:-
    (1) ...
    (2) ...
    (3) The vendor and the purchaser hereby agree that they
    will do all such things and execute all such documents
    as shall be reasonably necessary to enable the purchaser
    to obtain the approvals referred to in sub-clause 2 of
    this clause.
    1.(2) The receipt by the purchaser of all planning and
    building approvals for the erection of not less than
    eight (8) two storey townhouses on the land upon terms
    and conditions as approved by the Prospect City Council.

2. The purchaser hereby agreed to lodge plans with the
    Council within 30 days of the vendors' acceptance of the
    contract."

2. The defendant is a company which carried on business as a developer and builder. Its Managing Director's name is Morris.

3. The defendant, on the 5th December 1991, lodged plans for Council's approval for the erection of 10 two storey townhouses on the site. The plans were therefore not lodged within the stipulated 30 days, but nothing turns on that point.

4. In accordance with Council's procedures, the application for approval was considered by the Planning Officer who recommended approval to the Development Committee. The Committee made a recommendation to Council for approval. Council considered the application at a meeting on 28th January 1992 and refused approval. The resolution of Council as recorded in the minutes of the meeting expresses the grounds of refusal only by reference to the principles and objectives of the Metropolitan Adelaide Plan and gives no indication of the specific grounds of refusal.

5. The plaintiffs and Mr Morris met on 4th February to discuss the situation. At some time between the Council meeting on 28th January and the meeting with Morris on 4th February, the plaintiffs learned that the application had been for ten units. At the meeting, Morris indicated, in effect, that the matter of persuading the Council to reconsider its decision, was being pursued. He reported that a Councillor had indicated that attention to the stormwater disposal aspect of the plans, would assist. A meeting of the Council's Development and Planning Committee was held on 18th February. The plaintiffs attended and sought to learn why the approval had been refused and what would be required to enable a proposed development of the property to obtain approval. The minutes of the meeting record that "subsequent discussion indicated that committee members would give consideration to eight two storey units with adequate car parking and open space." On the following day, the 19th February, the plaintiffs, by a letter from their solicitors, requested the defendant to lodge within seven days plans seeking approval for eight two storey townhouses. The defendant's solicitors replied by letter dated 21st February in the following terms:
    "We refer to your letter dated 19th February 1992 and
    advise that we act for Innisfail Pty. Ltd. Our client
    was required by the terms of the contract to apply for
    not less than eight two storey town houses. The
    application for more than eight was duly lodged and the
    response by the Council was particularly to the effect
    that they would not permit two storey town houses. It
    is our view that our client has complied with the
    conditions of the contract and further that it is
    entitled to the protection of those conditions. The
    contract provides that in the event that approval is
    refused then our client is entitled to the refund of its
    deposit monies. Request is hereby made for the refund
    of our client's deposit."

6. On 25th February the plaintiffs' solicitors again wrote stating that the defendant was obliged to submit plans for eight units and reiterating the request that that be done within 7 days of the 19th February. The defendant's solicitors replied on the same date maintaining their previous position and concluding:
    "In all of the circumstances we have to advise our
    client that on the refusal of Council to approve the
    number which it applied for it is entitled to treat the
    contract as at an end and to require the return of its
    deposit."

7. On 9th March 1992 the plaintiffs gave notice to complete by 17th March. The defendants by its solicitors replied that it "does not propose to settle on 17th March as the Special Conditions of the contract have not been met."

8. On 20th March the plaintiffs' solicitors wrote to the defendant's solicitors giving the defendant three days in which to remedy the alleged default by complying with the special conditions. On 30th March 1992 the plaintiffs by letter from their solicitors to the defendant purported to rescind the contract and indicated a claim for damages, costs and interest.

9. The plaintiffs instituted these proceedings for damages, being the deficiency on resale, rates and taxes from 17th March 1992 to the 12th October 1992 being the date of settlement on the resale, and interest during that period. The defendant counterclaimed for the return of the deposit and damages for breach of contract. Following a trial in the District Court, the learned trial judge found that the defendant was in breach of the contract. He held, however, that as the plaintiffs had not proved that the Council would have approved an application to build eight units, they had not established a right to more than nominal damages. He gave judgment for the sum of $100. He rejected the counterclaim. The plaintiffs and defendant have both appealed.

10. The principal issue on the appeal was the meaning of the expression in the special conditions, "approvals for the erection of not less than eight (8) two storey townhouses".

11. Counsel for the plaintiffs contended that the defendant's obligation was not fulfilled by lodging an application for ten townhouses and that when he failed to obtain that approval he was required to do what was reasonably necessary to obtain approval for eight townhouses. Counsel for the defendant contended that the defendant was entitled to select any number in excess of seven for the purpose of its application and that the condition was not fulfilled unless approval was obtained for the number selected. The learned judge preferred the plaintiffs' construction and I have no doubt that he was right.

12. The purpose of the condition is plainly for the benefit of the defendant. The purchase price which it was prepared to pay was no doubt based upon the number of units which could be erected. The condition protected the defendant by ensuring that it was not bound to complete unless it could obtain approval for the minimum number which would justify the purchase price, namely eight. The defendant was at liberty to endeavour to obtain approval for a greater number but in my opinion it is the clear intention that the plaintiffs were entitled to insist on performance if approval could be obtained for eight. The presence of the minimum figure of eight in the contract could have no other purpose. If the defendant's contention were correct there would be no point in inserting a minimum number.

13. That being so, there was an obligation on the defendant under the contract to do what was reasonably necessary to obtain approval for eight units. It was doubtless at liberty to lodge plans for more than eight units, as it did, but when it failed to obtain approval for more than eight units it was obliged to seek approval for eight.

14. It was contended by counsel for the defendant that there had been no breach of the defendant's obligation because it was still endeavouring to obtain approval for ten units and the times stipulated in the notice to comply and to remedy default were too short. That argument must fail. When the plaintiffs insisted that the defendant apply for approval for eight units, the defendant did not indicate that more time was required but, by the solicitors' letters of 21st February and 25th February, indicated unequivocally that it treated the contract as at an end. This was a repudiation of its obligations under the contract and the plaintiffs were entitled to accept that repudiation or anticipatory breach and to rescind.

15. It follows from the above that the defendant's cross-appeal whereby it seeks a finding that the plaintiffs were in breach of contract, and damages for such breach, must fail. The finding that the defendant was in breach must be sustained.

16. The learned trial judge approached the assessment of damages on the basis that the defendant's breach of contract consisted of its failure to make and pursue an application for approval to erect eight units. The damages were to be assessed, on that view, as the loss which flowed from that failure. As it was not proved that the Council would have approved such an application, no loss was proved to have resulted from the failure to make it. I think that that approach misunderstands the true nature of the defendant's breach of contract.

17. The condition was a condition precedent to the performance of the defendant's obligation to complete the contract; Newmont Pty Ltd and Others v Laverton Nickel NL and Others (1982-1983) 44 ALR 598. It was a condition for the benefit of the defendant. The defendant's obligation to do what was reasonably necessary to obtain the approvals possessed, in my opinion, a twofold character. It was a substantive contractual obligation for breach of which the plaintiffs were entitled to damages for any loss caused by the breach; Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 per Wilson J at p.559. No such loss was proved. Its other character was that of a qualification upon the condition. It makes express what would otherwise be implied in any such contract, namely that the condition operates to relieve the party for whose benefit it was inserted, from its obligations under the contract only if that party does what is reasonably necessary to enable the condition to be fulfilled. Where the party does not do that, the condition is taken to have been fulfilled; Mackay v Dick (1881) 6 App Cas 251, unless a contrary contractual intention appears; Newmont Pty Ltd v Laverton Nickel NL supra at p.606. The defendant's failure to take reasonable steps to secure the approval for the erection of eight units left the parties in the same position as if the condition had been fulfilled or the contract did not contain the condition. The defendant was under an obligation to complete the contract. It was in breach of that obligation and the proper measure of damages was that applicable to a failure by a purchaser to complete a contract of sale. The learned judge was therefore in error in awarding only nominal damages.

18. The plaintiffs in my opinion are entitled, as damages for the loss of the bargain, to the difference between the contract price $330,000 and the price on resale $290,000, less $5,000 (the forfeited deposit); a net amount of $35,000. They are also entitled to consequential damages. The plaintiffs have claimed interest on the sum of $287,000 being the resale price less agent's commission, from 17th March 1992 to 12th October 1992 and I think that they are entitled to that. They lost the use of the money for that period in consequence of the defendant's default and gained no corresponding benefit from continued occupancy of the vacant land. The rate sought is 15 per centum per annum. No evidence was advanced in support of that rate and I think that it is excessive. I would include in the damages, as compensation for the loss of the use of the money, interest at the rate of 10 per centum per annum, that is $16,435. The plaintiff's claim for rates and taxes cannot be allowed. Interest is allowed upon the basis that the sale should have been completed on 17th March 1992. If that had occurred there would have been no further liability for rates and taxes. To allow both interest and rates and taxes would be a duplication.

19. Interest to the date of judgment in the District Court, at a rate and for a period fixed by the Court, or a lump sum in lieu thereof, must be included in the judgment; District Court Acts.39. I would allow a lump sum. In assessing the lump sum I bear in mind that the amount allowed for loss of bargain has been lost to the plaintiffs since 17th March 1992. I also bear in mind that the interest component of the damages accrued as a loss between that date and 12th October 1992. I would include in the judgment the sum of $4,800 in lieu of interest.

20. In my opinion the plaintiffs' appeal should be allowed. The damages should be increased to $51,435. With the inclusion of $4,800 interest the amount of the judgment should be $56,235. The judgment of the District Court should therefore be varied by increasing the amount thereof to $56,235 with costs applicable to a judgment of that amount. The order as to the costs of the counterclaim should be affirmed.

JUDGE2 MOHR J    I agree with the decision of King CJ in this matter.

JUDGE3 NYLAND J I agree.