Joseph Street Pty Ltd v Tan

[2010] VSC 586

E0

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 5948 of 2008

JOSEPH STREET PTY LTD (ACN 094 588 271) JONATHON O'DWYER PRUE O'DWYER	Plaintiffs
v
KHAY TEK TAN GWEK LIENG REGISTRAR OF TITLES	Defendants

AND BETWEEN:

KHAY TEK TAN GWEK LIENG	Plaintiffs by Counterclaim
v
JOSEPH STREET PTY LTD (ACN 094 588 271) JONATHON O’DWYER PRUE O’DWYER	Defendants by Counterclaim

---

JUDGE:	J FORREST J
WHERE HELD:	Melbourne
DATES OF HEARING:	11, 12 March, 15, 16, 17 June, 5, 6, 9 and 10 August 2010.
DATE OF JUDGMENT:	17 December 2010
CASE MAY BE CITED AS:	Joseph Street Pty Ltd & Anor v Tan & Anor
MEDIUM NEUTRAL CITATION:	[2010] VSC 586

---

SALE OF LAND – Contract - Units on proposed plan of subdivision – Specific performance - Contract subject to implied and express conditions to use best or reasonable endeavours to register plan of subdivision – Whether vendors exercised ”best endeavours” in registering plan of subdivision – Whether defendants entitled to rescind the contract for sale – Estoppel – s. 173 Planning and EnvironmentAct 1987 – Expert witness – Alteration of opinion – Obligation to Court – Order 44.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr G.D. Bloch	Hughes Legal Pty Ltd
For the Defendants	Mr F. Lim	Francis Lim

HIS HONOUR:

Introduction

1. In September 2005, Mr Jonathon O’Dwyer, the second plaintiff,[1] entered into a contract of sale (“the contract”) with the defendants, Mr Khay Tek Tan and his wife Gwek Lieng (“the vendors”) for the purchase of a unit “off the plan” at 459-461 Mitcham Road, Mitcham.  Subsequently, he and the third plaintiff, his wife Prue, were nominated as the purchasers.[2]

   [1]In July 2007 Joseph Street Pty Ltd, the first plaintiff, was nominated as the purchaser.  Its role can be ignored.

   [2]It will be seen that there is an arid issue as to whether Mrs O’Dwyer or Joseph Street has a right to enforce the contract.  I have therefore referred solely to Mr O’Dwyer as the purchaser.  He was, in fact, the driving force behind the purchase.

1. The unit was one of 6 constructed on a residential property (“the property”) subdivided by the vendors.

1. The contract contained a clause enabling Mr O’Dwyer or the vendors to rescind in the event that a plan of subdivision was not registered within 15 months of the date of the parties entering into the contract.  In September 2007, the vendors purported to rescind the contract pursuant to that clause.

1. Mr O’Dwyer now seeks specific performance of the contract.  The primary issue is whether the vendors’ rescission is valid.  Mr O’Dwyer contends that the rescission is vitiated by the breach by the vendors of the requirement (said to be both express and implied) that they use “best endeavours” to register the plan of subdivision of the property with the Registrar of Titles.

1. A secondary issue arose in the course of the trial and necessitated its adjournment.  The vendors belatedly contended that the lapse of a security bond, provided in lieu of a cash deposit, (as required by the contract) precludes Mr O’Dwyer from relying upon either the implied or express terms and, so it is argued, the vendors’ rescission is valid.

1. Finally, there is a contention by Mr O’Dwyer that the vendors’ conduct (in the form of various pieces of correspondence authored by the vendors’ solicitors) estops the vendors from rescinding the contract.

The trial

1. Mr O’Dwyer, his wife and father Damien, each gave evidence.  Two expert witnesses were called by Mr O’Dwyer, a Mr Peter Tyrrell, a building surveyor and Mr Ian Johnson, a builder.  Mr O’Dwyer’s solicitor, Mr Gerard Hughes, also gave evidence.

1. Mr Khay Tek Tan, the first defendant and the prime mover of the subdivision, gave evidence.  He called Mr Terry Fraser, the vendors’ solicitor, Mr Richard Simpson, a surveyor, retained by him, and Mr Geoffrey Green, the Manager of City Planning at the City of Whitehorse (“the Council”).

1. I should mention here that the third defendant, the Registrar of Titles has, in accordance with his usual practice, not entered an appearance and has taken no part in the proceeding.[3]

   [3]Exhibit P1.

1. At the outset of the trial the vendors maintained a counterclaim in relation to the caveat that had been lodged over the unit by Mr O’Dwyer.  The counterclaim was abandoned prior to the conclusion of the evidence.

Factual background

1. In March 1999, the vendors purchased the property located on a block of 2143 square metres, and were registered as joint proprietors.[4]  At the time of purchase an old house was located on the property which was then leased by the vendors until just before it was demolished.

   [4]T 213

1. On 9 April 2003, an initial planning permit (“the Development permit”) was issued by the Council to the vendors allowing the development of six units on the property.[5]

   [5]Exhibit P3A.

1. On the same day, the Bendigo Bank approved a loan to the vendor of $1.493 million.[6]

   [6]T 214.

1. A further permit (“the Planning permit”) was issued on 4 May 2005 by the City of Whitehorse.  It permitted subdivision into six lots and the removal of an easement.  It also provided the following:

Prior to certification of the Plan of Subdivision, the owner of the land shall enter into a s 173 agreement with the responsible authority which covenants that:

(a) the land will be developed in accordance with the plans and the conditions of the development permit;

(b) prior to occupation of any new dwelling proposed for the site, the common property driveway and drainage infrastructure (internal to the site) shall be fully constructed;

(c) all costs associated with the preparation and registration of the agreement shall be borne by the owner.

Should a s 173 Agreement be entered into for the development of this site, all construction works, tree retention and drainage works will be covered by the Agreement. This requirement will only be necessary if separate titles are required prior to completion of the development.

1. Although it did not form part of the permit, an arborist’s report was required to be attached to the permit.[7]  It provided that units 1 to 4 were to be constructed first, apparently to protect the trees located on the site.

   [7]Exhibit P3B.

1. In 2005, Mr O’Dwyer was on the lookout for a potential investment property.  He learnt of the development of the property which was marketed by Phillip Webb, a real estate agent and saw a glossy brochure displaying the proposed units.  He inspected the property with the agent in September 2005.  At that time, the property was undeveloped.[8]

   [8]T 70-71 (11 March 2010).

1. Mr O’Dwyer signed the contract for the purchase of Unit 6 (“the unit”) on 18 September 2005 at the offices of Philip Webb Real Estate in Box Hill.[9]  He regarded the purchase as an investment and expected the unit to be built within about 15 months.[10]

   [9]Exhibit P2, T 216.

   [10]T 73 (11 March 2010).

1. Mr O’Dwyer paid the agent, a Mr Kinda, a cheque for $1,000 which was placed in the agent’s trust account.[11]  However, Mr Kinda suggested that Mr O’Dwyer provide security in the form of a deposit guarantee rather than a cash deposit.[12]

   [11]T 94 (11 March 2010).

   [12]T 95 (11 March 2010).

1. On 23 September, the vendors paid the sum of $3,000 to Gumleaf Development Pty Ltd (“Gumleaf”), the builder they hoped would construct the units.  Mr Tan, who carried out the negotiations, dealt primarily with Mr McCarten, a director of Gumleaf.[13]

   [13]T 223.

1. On 30 September 2005, a deposit bond in the form of a “deposit power guarantee” (“the guarantee”) issued by Vero Insurance Limited was taken out by Mr O’Dwyer and his wife and forwarded to the vendor’s agent.  It provided a maximum amount of $18,500 and expired on 18 November 2006.[14]  Notwithstanding that general condition 6.1 made no mention of the deposit being provided in this form, no objection was taken at that time by the vendors to this form of security.

   [14]Exhibit D1.

1. On 14 October 2005, the vendors wrote to Mr O’Dwyer informing him that “We will have to reschedule a settlement date to 30 January 2007”.  This was said to be due to an “unforeseenable (sic) delay in obtaining the building permit from the Whitehorse Council”.[15]

   [15]Exhibit P4.

1. On 19 October 2005, Mr O’Dwyer’s solicitors forwarded documents to the vendors’ solicitors nominating Mr O’Dwyer and his wife, as the nominees, with the transfer of land describing the O’Dwyers as the transferees.

1. On 28 October 2005, Mr O’Dwyer’s solicitor responded by letter stating that his clients were “not agreeable to any extensions of time for registration of the plan of subdivision in this matter” [16]. It was also noted that building works had not commenced. It may be observed, at this point, that the contract did not provide for a fixed date of settlement. Rather, settlement was to occur 14 days after the registration of the plan of subdivision or the issue of the certificate of occupancy.[17]

   [16]Exhibit P5.

   [17]Exhibit P2.

1. On 2 November 2005, the vendors entered into a building contract (“the building contract”) with Gumleaf for the construction of the six units in 378 days.[18]  On the same day, and in a separate document, a Deed of Agreement (“the agreement”) was entered into between the vendors and Gumleaf.[19]  The indicative progress payments schedule within the building contract allowed for handover in May 2007 of Units 5 and 6.  The agreement provided for a staged development as required by the development permit, where units 1, 2, 3 and 4 were to be completed to “lock-up” within 420 days, but the completion of all the units was to be 500 days from the commencement of the initial works.[20]  This was an extension on the time allotted under the building contract.

   [18]Exhibit P6.

   [19]Exhibit D3.

   [20]T 223.

1. On 4 November 2005, the vendors’ solicitors sent a facsimile[21] to Mr O’Dwyer’s solicitors advising that the building works should be completed by mid-November 2006 and that his client expected to be in a position to comply with their obligations under the contract.  On that day, a deposit of $46,700 was paid by the vendors to Gumleaf.[22]  Prior to the demolition of the existing residence, power, water and sewerage were disconnected and the tenants left the premises.[23]

   [21]Exhibit P8.

   [22]Exhibit D6.

   [23]T 227.

1. In early December 2005, demolition of the existing residence commenced[24] and once completed, Gumleaf commenced work on the construction of units 1, 2, 3 and 4.  Mr O’Dwyer visited the site regularly after September 2005 and during 2006 to inspect the progress of the works.[25]  He thought that Units 1, 2, 3 and 4 were at about “lock up” stage in mid 2006 and at that time the walls and brickwork were being erected on Units 5 and 6.[26]  He said that as he understood the contract, the unit would be built within 15 months.[27]

   [24]Exhibit D6.

   [25]T 89-90 (11 March 2010).

   [26]T 89 (11 March 2010).

   [27]T 72 (11 March 2010).

1. In fact the agreed schedule shows that by 9 October 2006 all the units had reached lock up stage with Unit 3 being the final unit to reach that stage.[28]

   [28]T 260.

1. Mr Simpson of Carson Simpson Pty Ltd (“Carson Simpson”), land surveyors and development consultants engaged by the vendors, inspected the site and submitted a Plan of Subdivision and associated documentation to the Council on 20 October 2006.[29]

   [29]Exhibit P21.

1. On 2 November 2006, the Council certified compliance with s 21 of the Subdivision Act.[30]  On the date of certification of the plan, the Council (through Ms Aranga, the subdivisions planner) sent a pro forma letter, to Carson Simpson, noting that the plan of subdivision had been certified by the Council and setting out a table listing outstanding requirements to be met prior to issuing the statement of compliance.[31]

   [30]Exhibit P9.

   [31]Exhibit D16, T 412-T 416.

1. On 8 November 2006, Carson Simpson wrote to Mr Tan enclosing the Council’s letter of 2 November, as well as the certified plan of subdivision and other associated notes.

1. In about October/November 2006, the construction works began to fall behind schedule; work on the fitout slowed and continued to slow to a snail’s pace during the early months of 2007.[32]

   [32]T 228.

1. On 18 December 2006, Mr O’Dwyer lodged a caveat over lot 5 claiming an estate in fee simple.

1. On 8 January 2007, the plan of subdivision was lodged with the Registrar of Titles,[33] but it was not accompanied by a statement of compliance.  This is important, as without the statement, the plan could not be registered.

   [33]Exhibit P10.

1. After meeting with Mr Tan,[34] on 22 February 2007 the vendors’ solicitor sent a fax to Mr McCarten of Gumleaf, noting “serious concern that building activity at the site has, in recent months, slowed considerably”.[35]  Correspondence in a similar vein was sent by Mr Fraser to Gumleaf on several occasions during the first half of 2007.[36]

   [34]Exhibit P 30.

   [35]Exhibit D7.

   [36]Exhibits D8 and D9.

1. On 23 March 2007, Mr O’Dwyer’s solicitors wrote to the vendors’ solicitors (“the March letter”) asking for 30 days notice prior to settlement.[37]  The vendors’ solicitors responded to that letter in the following terms:

We are currently seeking assurances from our builder in relation to the completion date.

We are pushing for a completion date by 31 May 2007.

At this stage we are unable to confirm the completion date but we are hopeful that the May date can be achieved.

Unfortunately we are not yet in a position to provide a definite answer in respect of the date and can simply assure you that we are doing all that we can to achieve completion at the earliest possible date.

We thank you for your patience and will be in contact with you when further details are to hand.[38]

[37]Exhibit P11.

[38]Exhibit P 12.

1. On 12 July 2007, the first plaintiff, Joseph Street, a trustee company controlled by the O’Dwyers was nominated as the purchaser.[39]

   [39]Exhibit P 19.

1. On 26 July 2007, and pursuant to s 436A of the Corporations Act, Mr Dean McVeigh of Foremans Business Advisors was appointed administrator of Gumleaf.[40]

   [40]Exhibit D11.

1. On 27 July 2007, the vendors’ solicitors wrote to Gumleaf complaining about the suspension of building works and enquiring as to when they would be completed.

1. On 13 August 2007, the vendors’ solicitors wrote to an officer of the Bendigo Bank seeking an initial loan of $100,000 to complete the building works and stating:[41]

It is clear that the units are now worth substantially more and that providing the remaining three contracts can be terminated (I believe that the right to terminate has arisen in favour of either party) then improved prices should be readily achieved.

It seems to me therefore that it would be appropriate to advise the existing purchasers that the contracts are no longer on foot (some of the buyers may prefer to pay a little extra to retain their unit) and to get on with the letting of a fresh contract for completion.

[41]Exhibit P13.

1. On 20 August 2007, the vendors were advised of Mr McVeigh’s appointment as a voluntary administrator of Gumleaf and told of an “in principle agreement” to progress the completion of the building works.

1. On 30 August 2007, the Federal Court appointed a voluntary administrator of Gumleaf[42] and notice of that appointment was received by the vendors on 5 September 2007.

   [42]Exhibit D11.

1. On 19 September 2007, the vendors’ solicitors sent the following letter to Mr O’Dwyer’s solicitors, purporting to rescind the contract:[43]

I refer to previous correspondence in relation to this matter and advise that despite all the efforts that both my client and this office have made to obtain completion of the building it is now clear that the builder was unable to complete the building and the builder is now under administration.  My clients are unclear as to when it will be possible for them to recommence work.  The contract of sale is pursuant to Special Condition 7 conditional upon the approval by the Registrar of Titles of the Plan of Subdivision within 18 months of the day of sale namely 20 March 2005.  Pursuant to sub-paragraph 7.2 of Special Condition 7 my client hereby rescinds the contract of sale.  All moneys paid by the purchaser are now refundable and I have instructed the agent to make the appropriate refund.

[43]Exhibit P14.

1. On 9 October 2007, the vendors entered into “terms of agreement” with Dean Lucas of Demax Constructions to complete the remainder of the work on the units.[44]  In essence, he was to supervise the sub-contractors and was entitled to a mark-up of 20% on the sub-contractor’s charges.

   [44]Exhibit P15.

1. On 31 October 2007, Joseph Street lodged a caveat in relation to the unit.

1. On 24 November 2007, the vendors received an offer from Robert and Veronica Coleman to purchase the unit for $486,000, which was later withdrawn on 26 February 2008.

1. On 11 March 2008, a Certificate of Occupancy was issued.[45]

   [45]T 438.

1. On 19 March 2008, after the payment of the sum of $35,000 to the Council, the Statement of Compliance was issued by the Council, noting the date of certification as 2 November 2006.[46]

   [46]Exhibit P9.

1. On 1 April 2008, the Plan of Subdivision was registered by the Office of Titles.

1. On 14 April 2008, the vendors’ solicitors received a letter from Mr O’Dwyer’s solicitors advising that they were holding a cash deposit of $18,500 as stakeholders.[47]

   [47]Exhibit P24.

1. On 2 May 2008, the writ in this proceeding was issued.

The contract of sale

1. The contract was in a standard REIV form with a number of additions and alterations[48]. 

   [48]Exhibit P2.

1. Of relevance to the dispute between the parties are the following contractual provisions:

(a)The contract of sale was stipulated to be subject to the plan of subdivision being registered.

(b)Mr O’Dwyer “and/or under nominee” was the nominated purchaser.

(c)The purchase price was $370,000 including GST.

(d)The deposit of $18,500 (of which $1,000 had been paid to the agent) was payable by 22 August 2005.

(e)The balance of $351,500 was payable at the expiration of 14 days after the registration of the plan of subdivision or the issue of a certificate of occupancy whichever be the later.

(f)The contract of sale was conditional upon a plan of subdivision being approved by the Registrar of Titles within 15 months from the day of sale.[49]

[49]Exhibit P 2, Special condition 7.1.

(g)In the event that the building works were not completed within 15 months, the purchaser had the option to terminate:

This contract is subject to and conditional upon completion of building works in accordance with the attached plans and conditions within 15 months from the date hereof, failing which the purchaser may, at his option, terminate this contract of sale.  The vendor agrees to at its cost to rectify in a proper, workmanlike manner any defects that may be set out in a written report of an independent consultant appointed by the purchaser.  Until those defects are completed to the satisfaction of the independent consultant, the purchaser shall not be obliged to complete settlement.[50]

[50]Exhibit P 2, Special condition 7.

(g)If the plan of subdivision was not approved within 15 calendar months from the date of sale, then

either party shall have the right, prior to the Plan of Subdivision being approved as aforesaid, by giving notice in writing to that effect to the other party to rescind this Contract of Sale and thereupon all moneys paid hereunder shall be refunded to the Purchaser without deduction and subject as aforesaid thereafter neither party shall have any action, right, claim or demand against the other hereunder or arising from or out of the rescission hereof or the failure of the Vendor to procure approval of the Plan of Subdivision.[51] (emphasis added)

(g)The vendor

at its own expense and with all reasonable expedition will use its best endeavours to procure that the Plan of Subdivision is approved by the Registrar of Titles within six months from the Day of Sale.[52]

[51]Exhibit P 2, Special condition 7.2

[52]Exhibit P 2, Special condition 7.3.

It was agreed by the parties that the reference to six months was a slip and should have read 15 months.  If it be necessary, I would order rectification of the contract to reflect the clear intention of the parties.

The legislative scheme in relation to registration of a plan of subdivision.

1. The starting point is the issue of a planning permit pursuant to s 61 of the Planning and Environment Act 1987 (Vic). The subdivision of the property and the commencement of works are dependent upon such a permit. Here, as is the norm, the development permit and the planning permit were issued by the Council under this provision.

1. The next step is to obtain registration of the subdivided titles. The process is set out in s 5 of the Subdivision Act 1988 (Vic) which details the procedure for certification of registration of plans. Section 5(3) sets out a series of requirements before the Registrar of Titles can issue a title to subdivided land:

(a)       prepare a plan in accordance with this Act and the regulations; and

(b)      …

(c)submit the plan to the Council for certification together with an application in the prescribed form; and

(d)      obtain a statement of compliance from the Council; and

(e)lodge the certified plan at the Office of Titles for registration together with –

(i)an application in the form approved by the Registrar;

(ii)the statement of compliance obtained under paragraph (d); and

(iii)the prescribed information in respect of the street address and lot location of each lot on the plan; and

(f)in addition to any other fee payable under this Act, pay to the Registrar the fee, if any, prescribed under the Survey Co-ordination Act 1958 for the maintenance of the survey control network.

1. In relation to this dispute, the practical effect of the three conditions of the contract was that Mr O’Dwyer could rescind the contract if:

(a)the works were not completed; and/or

(b)the plan of subdivision was not registered within 15 months.

The vendors were also entitled to rescind if the plan of subdivision was not registered within 15 months.  It was on this basis that the vendors rescinded the contract in September 2007.

1. Section 173 of the Planning and Environment Act 1987 provides an alternative method of satisfying the responsible authority as to fulfilment of the requirements contained in the planning permit other than actual compliance.  The section enables an Authority to issue a statement of compliance, without the specified conditions being implemented, provided an agreement is entered into between the Authority and the developer.

Responsible authority may enter into agreements

(1) A responsible authority may enter into an agreement with an owner of land in the area covered by a planning scheme for which it is a responsible authority.

(2) A responsible authority may enter into the agreement on its own behalf or jointly with any other person or body.

(3) A responsible authority may enter into an agreement under subsection (1) with a person in anticipation of that person becoming the owner of the land.

(4) Despite anything in this Division, if an agreement entered into with a purchaser in anticipation of the purchaser becoming owner is registered by the Registrar of Titles, it does not bind the vendor unless the vendor assumes the purchaser's rights and obligations under the agreement.

First issue – Did the vendors use their best or reasonable endeavours to secure the registration of the plan of subdivision?

Matters which were not in issue

1. The express term of the contract (special condition 7.3) required the vendors to exercise, with all reasonable expedition, their best endeavours to ensure that the plan of subdivision was approved within the period of 15 months.  In the event that it was not approved, either party had, from 15 December 2006 (the end of the 15 months period), the right to rescind the contract (special condition 7.2) – that right was exercised by the vendors on 19 September 2007.[53]

   [53]See [42] above.

1. It was not in issue that for the life of the contract an implied term also existed requiring the vendors to use reasonable endeavours to ensure compliance with the terms of the contract.[54]  Accordingly, given the existence of the express term, the practical effect of the implied term was that after the expiry of the express term on 15 December 2006, the vendors were obligated to take all reasonable steps to secure the registration of the plan of subdivision until the date of the purported rescission.

   [54]See Earle Cameron (Industrial) Pty Ltd v Comprador Properties Pty Ltd (Unreported, Supreme Court of NSW, Hodgson J, 22 November 1985) 13.

1. If Mr O’Dwyer establishes a material breach of the obligation to exercise best or reasonable endeavours, then it was not in issue that the rescission was inoperative.  Nor is it in issue that he is ready, willing and able to complete the contract if specific performance is granted.

1. Although it was not addressed specifically by the parties, I take it not to be in issue that the onus of proof lay with Mr O’Dwyer to establish that the vendors had breached either the express or implied conditions.[55]

   [55]Plumor Pty Ltd v Handley (1996) 41 NSWLR 30;  Masters v Belpate Pty Ltd [2001] NSWSC 169 [58].

The submissions of the parties

1. There are two components to Mr O’Dwyer’s case. He contends that best endeavours would have resulted in the plan of subdivision being registered prior to the notice of rescission being delivered. He says that by failing to employ a s 173 agreement the vendors acted unreasonably. It is argued that by using a s 173 agreement (specifically provided for in the planning permit), the vendors could have achieved registration of the plan of subdivision by August 2006. Alternatively, regardless of whether a s 173 agreement was entered into or not, Mr O’Dwyer asserts that if the building works had been carried out with reasonable expedition, then it would have been possible to register a plan of subdivision by the end of that year. In essence, both these contentions turned upon the acceptance of the evidence of the expert witness Mr Tyrrell, with some support from the Council officer, Mr Green. Finally, it was said that if breach was not established, then the vendors were estopped from relying upon the notice of rescission.

1. The vendors argue that the exercise of reasonable endeavours did not require consideration of a s 173 agreement. They relied upon the evidence of their then solicitor, Mr Terry Fraser, and their surveyor, Mr Richard Simpson. Alternatively, they contended that in any event, a s 173 agreement had no application to a small development of residential units in inner metropolitan Melbourne. They also argued that it was, in practical terms, impossible to register a plan of subdivision prior to April 2008, given the insolvency of the builder, Gumleaf, which delayed completion of the construction of the units by at least 12 months and required the appointment of a substitute builder in October 2007, at an additional cost of nearly $500,000.

Principles relating to “best endeavours” and “reasonable endeavours”

1. It was not suggested by the parties that there was any material difference in the obligation imposed upon the vendors whether categorised as “best endeavours” or “reasonable endeavours”.

1. There are many cases where a party’s agreement (either explicitly or impliedly) to use “best” or “reasonable” endeavours has been the subject of judicial scrutiny.  For instance, in Terrell v Mabie Todd & Co Ltd,[56] the defendant undertook to use its best endeavours to promote sales of fountain pens and ink bottles incorporating the plaintiff’s inventions, and they were obliged to do what they reasonably could in the circumstances.  The English Court of Appeal held that the standard of reasonableness was that of a reasonable and prudent board of directors acting properly in the interests of their company and applying their minds to their contractual obligations to exploit the inventions.[57]

   [56][1952] 2 T.L.R. 574.

   [57]Ibid 576.

1. In Brauer & Co v James Clark Ltd,[58] a case involving shipping licences, Lord Denning held that unless a “fundamentally different situation” had unexpectedly emerged, the vendor must show that all reasonable steps were taken, concluding that there was an obligation which required the vendor to act with reasonable promptitude.

   [58][1952] 2 All ER 497.

1. In Transfield Australia Pty Ltd v Arlo International Ltd,[59] Mason J held that a clause requiring a licensee to exercise its best endeavours necessitated a

standard of endeavour which is measured by what is reasonable in the circumstances, having regard to the nature, capacity, qualifications and responsibilities of the licensee, viewed in light of the particular contract.[60]

In Hospital Products Ltd v United States Surgical Corporation,[61] Gibbs J noted that:

On the other hand, an obligation to use ”best endeavours” does not require the person who undertakes the obligation to go beyond the bounds of reason; he is required to do all he reasonably can in the circumstances to achieve the...object, but no more.

[59](1980) 144 CLR 83.

[60]Ibid 101.

[61](1984) 156 CLR 41, 64.

1. The sale of units, apartments or blocks of land “off the plan” has become common practice in Australia in recent decades.  Often contracts are drawn up with conditions similar to those in this case – namely an express condition relating to the vendor using “best “or “reasonable” endeavours to effect the registration of a plan of subdivision so as to provide title to the purchaser.

1. In Earle Cameron (Industrial) Pty Ltd v Comprador Properties Pty Ltd,[62] Hodgson J explained that the test of reasonableness is different to a test of necessity.  If a person had to do no more than was necessary, he could satisfy the obligation by doing the bare minimum  required to fulfil the condition.  On the other hand, if he or she is required to do what is reasonable, that would necessitate more than the bare minimum. 

   [62](1986) NSW ConvR 55-305.

1. Earle Cameron involved a contract which was conditional upon a purchaser obtaining developmental approval.  One of the questions at trial was that of the reasonableness of the steps taken by the vendor to procure the approval of the council.  His Honour considered that test to be as follows:

On the other hand, if he is required to do what is reasonable, he may well have to do more than this bare minimum.  However, I do not think he would necessarily have to take every step which could possibly be helpful to that end, and which a person seeking that end on his own account might consider it worthwhile and “reasonable” to do.  Rather, he must do what is reasonable in all the circumstances, having regard to his position as a contracting party.[63]

[63]Ibid [12].

1. In Woodcock v Parlby Investments,[64] Young J was required to determine whether, in a similar situation, (i.e. a rescission by a vendor of a unit purchased off the plan), the vendor was able to rescind where the building had not been completed.

   [64][1989] NSW ConvR 55-454.

1. The argument at trial in Woodcock did not turn specifically on an express provision within the contract, but whether the vendor could rely upon the rescission if it was shown that the vendor had been at fault for not registering the subdivision earlier.  In reality, this was another form of the reasonableness test.  His Honour said as follows:

However, no matter what the precise of the formulation of the principle, there is no case where the fault of an independent contractor of the vendor has been held to be the fault of the vendor to debar the vendor from relying on such condition.  In my view the fault of an independent contractor cannot be said to be the fault of the vendor within the meaning of such principle.  Of course, if the vendor is personally at fault in choosing an incompetent contractor or in obstructing that contractor’s progress, he will be guilty of fault within the meaning of the principle.[65]

[65]Ibid, [8].

1. In Masters v Belpate Pty Ltd,[66] Hodgson CJ dealt with a specific condition requiring the vendor to do everything “reasonably necessary” to have a plan registered.  A number of the observations made by his Honour are relevant, it seems to me, to the determination of the issues in this case:

It is common ground that the obligation imposed by Condition A6 is objective, that is, it is not conditioned on the subjective knowledge or ability of a particular vendor.  However, I accept that breach of the obligation may be more readily shown in the case of a major developer, with enhanced ability to get service from expert consultants.  For example, a delay by a small developer in replacing a dilatory consultant might be excusable, although a similar delay by a large developer with an array of consultants on call might not be.

…

My opinion is that Condition A6 should be read as a promise by the vendor, as a developer, that the vendor will, as a developer, “do everything reasonably necessary” to have the plan registered within the plan registration time.  In my opinion, that meant that, in relation to matters of the kind usually attended to by a developer, that is, matters not involving specialist expertise, the vendor’s obligation is unqualified.  This would, in my opinion, include such things as co-ordinating the documentation necessary for the application, co-ordinating specialist contractors, and negotiating with councils and adjoining owners and the like.  In relation to these matters, in my opinion the vendor/developer would be fully responsible or any deficiencies or delay in work done by its agents, if this work is left to agents.

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 work; 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.

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 instructions and information, in monitoring progress, and/or in falling to replace the specialist expert when this should have been done.

The final matter which requires brief consideration is the relationship between a breach of obligation, such as Condition A6, and the expiration of the time with which the strata plan has to be registered.  In Sanctuary Investments Pty Ltd v St Gregory’s Armenian School Incorporated Young J said that one must “look at whether the person seeking to rescind the contract materially contributed to the non-performance of the condition on which it now bases its rescission.  In my opinion, this means that if the time would plainly have expired, even if the breach had not occurred, the breach will not preclude the vendor relying on the condition.  However, in my opinion, if one could say that, if the breach had not occurred, there as a substantial chance that the condition would have been fulfilled, that would be enough to deprive the vendor of the right to rescind.  If the vendor’s breach has deprived the purchaser of such a substantial chance of this kind, in my opinion, that is enough to enable one to say that the breach has materially contributed to the non-fulfilment of the condition, so that the vendor is precluded from rescinding.[67] (emphasis added and citations omitted)

[66][2001] NSWSC 169.

[67]Ibid [60]-[66] with some deletions.

1. In Hardy v Wardy,[68] Bryson J was of the view that if a step is reasonable, the vendor must take it.  Issues such as personal circumstance, knowledge, ignorance, or reliance on agents by the vendor are irrelevant.[69]  In that case, the operation of the contract provided that either party could rescind the contract if the plan of subdivision was not registered in 6 months.  The vendor did not lodge the application himself, but gave his son authority to act on his behalf.  His son lodged the plan for subdivision, but did nothing more to progress the application.[70]

   [68][2001] NSWSC 1141.

   [69]Ibid [8].

   [70]Ibid [7] [15].

1. His Honour concluded that active measures were taken to deliberately delay the registration of the plan and that a possible motive for such delay was the recent increase in the value of the property.  His Honour refused the defendant’s claim for rescission and ordered specific performance; also making it clear that the vendor did not fail because of motive or purpose because, on the whole, the conduct of the subdivision application involved a failure to comply with the contractual undertaking to take reasonable steps.[71]

   [71]Ibid [27].

1. In Campbell v Turner[72] Wilson J was concerned with a contractual clause for the registration of plans of subdivision within a certain period.  His Honour held the standard of reasonableness should be:

that of a reasonable and prudent landowner acting properly in his own interests; there was no obligation to act in such a way as to “face ruin”.[73]

[72][2007] QSC 331.

[73]Ibid [123].

1. There appears to be some disagreement between judges at first instance in New South Wales as to the manner of determining objectively whether a party under such a contractual obligation has or has not acted reasonably.  For my part, I would follow what was said by Hodgson J in Masters and Earle Cameron – namely, that in determining whether a vendor has acted reasonably, it is necessary to take into account the circumstances of the vendor.  It would be wrong, I think, to equate the vendors’ situation in this case with that of a substantial developer with decades of experience in developing and selling land.  This is consistent with the approach to the test of reasonableness in a tort setting.

1. Finally, I should refer to the decision of the Court of Appeal in this State in Etna v Arif.[74]  In that case the contract of sale contained provisions similar, if not identical, to those in this case.  The contract of sale was conditional upon registration of the plan of subdivision; the vendor covenanted to use its best endeavours to procure registration of the plan of subdivision and if the plan of subdivision was not registered by the specified time, then either party, was entitled, at any time after that date, but prior to the registration of the plan, to rescind the contract of sale.

   [74][1999] 2 VR 353.

1. Batt JA said as follows:[75]

The contract, then, is expressed to be conditional upon (that is, defeasible upon failure of) certification and registration by the plan registration date. The vendor is to use his best endeavours to procure certification and registration by that date. It does not follow that the vendor may then stop using best endeavours. On the contrary, it goes without saying that the vendor is to continue to use best endeavours after the plan registration date. It is simply that, after that date, either party may rescind, though not if the vendor's continued best endeavours have, before rescission, resulted in certification and registration. The expression "but before the plan is registered" in special condition 2.5.1 is the reason why it goes without saying that the vendor continues to be under an obligation to use best endeavours after the plan registration date.

…

For the reasons I have given, the appellant as vendor was bound to continue to use best endeavours until either party rescinded or the best endeavours resulted in the plan's being certified and registered. That simple term, based on the contractual language, is virtually dictated by the parties' willingness to be bound if the plan should be registered after the plan registration date. The implication of that term does not mean that, if the other members of the court agree, the court is making a different contract for the parties. Rather, it is effectuating the contract which they made. (emphasis added)

[75]Ibid, [52]-[55].

1. I think the following principles relevant to this case can be distilled from this excursus:

·    A purchaser bears the onus of proof of establishing that a vendor acted unreasonably in not affecting registration of the plan of subdivision prior to the date of purported rescission.

·    The obligation upon a vendor to use best endeavours to secure the registration of the plan of subdivision is discreet and not affected by other obligations the vendor may have under the contract.

·    The obligation to use best endeavours continues until the plan is registered or either party rescinds the contract.

·    For the purpose of this case the obligation to use best endeavours required a vendor to take all reasonable steps in the circumstances to register the plan of subdivision.

·    In determining whether a vendor has acted reasonably or unreasonably, the court looks at all the circumstances surrounding the action or inaction of a vendor in securing the registration of the plan of subdivision.

·    Factors to be considered in determining whether the actions of a vendor are reasonable in the circumstances are: the experience of the developer, the size of the development in question, the ability to obtain independent advice and the extent of the resources available.

·    A vendor is not responsible for the faults or defaults of an independent contractor, such as a builder or architect, which may lead to delay or potential delay.

·    However, where there are delays attributable to the acts of independent contractors, a vendor still has an obligation to take all reasonable steps to secure registration of the plan.  Germane to this case is the reasonableness of the steps taken to secure an alternative builder, and what advice (if any) had been sought from professional advisors when it became apparent that the original builder may fail.

·    Those acts or omissions that are identified as being unreasonable must have made a material contribution to the delay in registering the plan of subdivision.  In this case, Mr O’Dwyer would need to show that if all reasonable steps were taken then there was “a substantial chance” that the plan of subdivision would have been registered prior to the purported rescission on 19 September 2007.

The requirements for registration of the plan of subdivision

1. I have set out at paragraph [54] the key components of s 5(3) of the Subdivision Act, the provision which entitles the Registrar to issue a title of subdivided land.

1. Apart from the application form, there are two essential requirements, namely the lodging with the Registrar of:

(a)the plan of subdivision; and

(b)the statement of compliance issued, in this case, by the Council.

1. Here the evidence discloses that the plan of subdivision was lodged in January 2007 but the statement of compliance was not issued until March 2008 and the plan approved on 1 April 2008.

1. The manner in which a statement of compliance is issued by the Council was explained by Mr Green, of the Council. Essentially, the Council must be satisfied that the terms of the planning permit have been complied with, or in the case of a s 173 agreement, will be complied with. The planning permit imposes a series of conditions, some which have to be met to the satisfaction of the council and others requiring approval or agreement from a third party service provider: (in this case United Energy, Telstra, Yarra Valley Water and Melbourne Water).

1. As I have said, the planning permit also enables the vendors to enter into a s 173 agreement which obviates the necessity to complete the construction of the works to the council’s satisfaction, i.e. compliance with the conditions of the planning permit. The usual form of the agreement, as I understand it, contains a series of undertakings as to the performance of works and can be registered against the title.[76]

   [76]T 417- T 418.

1. It was clear from the course of events in this case, and the evidence given by a number of the witnesses, that once the plan of subdivision and the certificate of compliance are lodged with the Registrar, it takes only a very short time (measured in a couple of weeks) for the plan to ensue.

1. The question to be resolved, therefore, is whether the vendors used reasonable endeavours in relation to the filing of each of these documents.

Did the vendors exercise reasonable endeavours in filing the plan of subdivision.

1. As I mentioned earlier, Mr O’Dwyer’s case rested substantially on the expert opinion of Mr Peter Tyrrell, a Licensed Surveyor.  In his evidence-in-chief, Mr Tyrrell adopted the opinion that he expressed in a report of 3 March 2010 (“the March report”).[77]

   [77]Exhibit P 20.

1. In the March report, Mr Tyrrell expressed the opinion that once the building had progressed sufficiently to be measured,, then steps could have been taken to register the plan.  In his report he said this:

… I believe that there is practically no reason why the subdivision application was not submitted to Council as early as 23 May 2006.[78]

In his evidence he opined that, at the time that the footings for each of the units had been completed it was possible to survey each of the internal and external boundaries and then prepare a plan of subdivision, i.e. before the walls of the units had been erected and well prior to the completion of the lock up stage.[79]

[78]Exhibit P 20, p 9.

[79]T 91 – 92.

1. He rejected the proposition that it was necessary to wait until shortly prior to lock up, or to wait until the brickwork was in place.  Rather, he said that the plan be lodged very early in the piece – once the footings were down.  It was his view that if the survey and resultant plan was submitted in May 2006, then each of the other relevant steps, namely certification by the Council, lodgement at the Titles Office, Statement of Compliance and, finally, registration, could have been achieved by August 2006.[80]

   [80]Exhibit P20, p 9 - 10.

1. It is of note that Mr Simpson, the surveyor, carried out his inspections and site work in October 2006 and submitted the plan of subdivision with associated documentation to the City of Whitehorse on 20 October 2006.  This resulted in the plan of subdivision being certified by the Council on 2 November 2006, and lodged with the Registrar of Titles on 8 January 2007, without the statement of compliance.[81]

   [81]Exhibit P21.

1. It emerged in cross-examination that Mr Tyrrell had provided an earlier report to Mr O’Dwyer’s solicitors, dated 27 July 2009 (“the July report”),[82] in which he said as follows to the question “Could any of (sic) all the steps required for registration of the plan of the subdivision have been taken at an earlier date?”

Lock up stage for the units was achieved by 20 August 2006 which is an appropriate time for the surveyor to submit a plan for certification.  The plan was certified by Council on 2 November 2006 and lodged with the Titles Office on 8 January 2007 without a Statement of Compliance.

The timing of each of the preceding steps in this subdivision appears to be reasonable by comparison with statutory time constraints and industry reality.

The next step in the process was satisfying Council’s requirements and/or planning permit conditions in order to obtain the statement of compliance.

As stated earlier in this report I believe that it would have been possible to obtain the statement of compliance from Council by 18 December 2006.

The Statement of Compliance was issued by Council on 19 March 2008, 15 months after 18 December 2006. (emphasis added)

[82]Exhibit D4, p 8 – 9..

1. There was no reference in the March report to his previous opinion in the July report as to the reasonableness of the lodging of the plan of subdivision in January 2007.  Indeed the paragraph I have just emphasised was excised, without explanation, in response to an identical question posed by the solicitor[83] and replaced by the paragraph I have set out at [88] above. There was no indication whatsoever as to why he had changed his opinion in the March report. I took the matter up with Mr Tyrrell in the course of his cross-examination by counsel for the vendors:

   [83]Exhibit P 20, p 8.

COUNSEL:  “You have stated in your opinion as “With reasonable diligence” rather than “concentrated effort I believe the plan could have been registered within two months of the 18 December 06, say 20 February 07, allowing for the Christmas break”.  Why the change in your two reports?

---Well, it gets back to the same thing, I suppose, where I mentioned the lock-up.  I was asked to review that and consider it, and I did.  That’s - - -

JUDGE:  Asked by? Asked by whom?---The solicitor that instructed me.

Was this done in writing? Did he write to you or was it communicated by telephone?---No, we discussed the report. We just discussed it verbally.

Is there mention in your second report of those discussions?---No, there’s not Your Honour.  I just amended the report to make what I believe something that was achievable.

Would it not have been relevant in the second report, Mr Tyrell, to have mentioned, bearing in mind the obligations under Order 44 that you discussed this matter with the solicitor for the plaintiff?---It may well have been, Your Honour.  I wasn’t aware of the need to do that, specifically.  I did consider this, I wasn’t coerced in any way.  It was pointed out to me that perhaps the dates were a bit soft, “something that was achievable” could have been more specifically put. And I was quite happy to do that.

It was more that specifically put, it was a sea-change, wasn’t it? It went from lock-up to footing?---No, yes, well, I suppose I mentioned lock-up.  Lock-up is sort of seen as a fairly significant stage of progress in the building of the units by council, and it’s a term that’s used a lot, and I used that there, but our practice is that we would measure the buildings, in my practice, we would measure the buildings at a much earlier stage.  And I think I’ve been mentioning that in the first report, it’s probably been a bit misleading.[84]

[84]T 92 – 93.

1. The expert witness Code of Conduct (which Mr Tyrrell agreed to abide by) provides as follows:

1.A person engaged as an expert witness has an overriding duty to assist the court impartially on matters relevant to the area of expertise of the witness.

2.        An expert witness is not an advocate for a party.[85]

The Code goes on to require the expert to state:

3(d)The facts, matters, and assumption on which each opinion expressed in the report is based.

[85]Form 44A Supreme Court (General Civil Procedure) Rules 2005.

1. Although the South Australian Supreme Court Rules concerning the provision of expert reports are expressed differently, their underlying purpose, it seems to me, is similar to that of Order 44 and in particular rule 44.03.  In Harris Scarfe Ltd (Receivers and Managers Appointed (in liq) & ors v Ernst & Young & Ors (No 6),[86] Bleby J said of the purpose of the Rule and accompanying  practice directions:

Another is to ensure that where an expert has changed or qualified his or her opinion, that change or qualification is made known to all interested parties.  Yet another is to ensure transparency between experts and those instructing them so that where a client or their solicitors may have made some suggestion or questioned the opinion, resulting in some change or qualification, that change or qualification and the reason for it is revealed.  Another purpose of the Rule was to effect a change of culture among some groups of experts and those instructing them who perceived the function of the expert to be to act solely in the interests of and for the benefit of the client in forming and moulding their opinion.[87]

[86][2006] SASC 148.

[87]Ibid [19].

1. I have concluded that Mr Tyrrell’s evidence is inherently unreliable.  There is no doubt that in the July report, Mr Tyrrell expressed no criticism of the timing of the steps in relation to the lodging of the plan of subdivision in January 2007.  Rule 44.03 required him to express any qualification of his opinion which may lead to the report being incomplete or inadequate.  There was no such qualification.

1. The importance of complying with both the spirit and the terms of Order 44 is well understood.[88]   Notwithstanding the obligation contained in Rule 44.03(3). 

   [88]See Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; Investmentsource v Knox Street Apartments [2007] NSWSC 1214.

1. Mr Tyrrell in the March report did not indicate that he had changed his view or altered his report in the way I have explained. I reject the submission made on behalf of Mr O’Dwyer that Mr Tyrrell did not alter his opinion.  It is patent that he did.  In the July report he unequivocally stated that the final plan was to be prepared by the surveyor at lock up stage.[89]  Compare this to the March report in which he said the final plan was to be prepared “when the buildings have progressed sufficiently to be measured”.[90]

   [89]Exhibit D 4, p 7 – step 1.

   [90]Exhibit P 20, p 8 - step 1.

1. Expert witnesses have an overriding obligation to the court, as is made clear in the Rules and the Code of Conduct.  If an expert changes his mind as to a relevant part of his or her opinion, then the basis for that change must be stated.  This is all the more important where that alteration of opinion is bought about by a discussion with the representative of the party by whom he has been engaged.  It is fundamental, I think, that in such a situation, every piece of correspondence or discussion should be set out so as to demonstrate that there is a proper basis for the change of opinion, rather than simply a partisan approach.  Mr Tyrrell’s statement that he was not coerced by the solicitor does not afford me any great comfort.  This statement was made whilst he gave evidence for Mr O’Dwyer long after the event and after he had committed himself to his second opinion.  If the solicitor wished to raise with him any qualification to his report (which did not appear in the July report in any event), then it should have been done in writing so that it could be well understood what motivated Mr Tyrrell to change his mind.  There still remains no evidence of the discussion between Mr Tyrrell and the solicitor.

1. In my view, Mr Tyrrell seriously compromised his independence by altering a significant part of his report after a discussion with Mr O’Dwyer’s solicitor.  In Mr O’Dwyer’s written submissions the following was said:

“Of course Mr Tyrrell’s second report was produced as a result of a request from the plaintiff’s solicitors.  All such reports invariably are.”

This is not an adequate response.  Mr Tyrrell had an overriding obligation to the Court – not to the solicitor.  At the very least he should have, in his March report, explained why he had changed his opinion and have detailed the tenor of his discussion with the solicitor that had prompted his change of heart.  This is a point of substance, not nitpicking as the question of whether the plan could be lodged with the Council in May or October is of importance.  Ultimately I am forced to take an adverse view of the objectivity of Mr Tyrrell and have, in the main, put his opinion on all issues to one side.

1. I return now to the relevant facts.  Once the existing house had been demolished in December 2005, there was no dispute that work on the six units up to lock up was carried out in a timely fashion.  Although the contract provided for the work to be carried out in stages, by October that year, each of the units had reached lock up stage, been measured up and the plan of subdivision had been drawn up and submitted to the Council by the surveyor, Mr Simpson.

1. Mr Johnson, the Building Expert called by Mr O’Dwyer,[91] concluded that the construction of the six unit development would have been possible within a period of 378 days.  However, this was based on what I think were wildly optimistic and unachievable assumptions, namely:

·    All required materials being readily available;

·    All trades available at the time required; and

·    No extraordinary circumstances that would significantly affect required flow of work.

[91]Report, exhibit P 23.

1. The tenor of Mr Johnson’s evidence, was, in effect, to corroborate the opinion of Mr Tyrrell that with reasonable progress, the base of all units (whether comprised of concrete slabs or brick footings) would have been completed by 30 May 2006.  This, on Mr Tyrrell’s account, would have then enabled the site to be measured up and the plan lodged with the Council.[92]  In fact, as I followed Mr Johnson’s testimony, there was no criticism of the actual timeline in relation to construction of the units up to lock up stage.  However he went on to estimate that it would take about a year (or to be more accurate 11 months) to build the units making the various assumptions he had allowed for.[93]

   [92]T 150.

   [93]T 164.

1. This aspect of his opinion failed to address the realities of this particular development, which I shall deal with in a moment.

1. It was patently in the vendors interests, as Mr Tan explained, for the works to be completed as quickly as possible.[94]  He had obtained finance from the bank which was closely monitoring the progress of the development.[95]  A schedule of the dates of completion of particular stages of the works was tendered, [96] as well as payments made by the vendors to Gumleaf[97]  This demonstrates, I think, alacrity: so much so that the original plan for a staged construction altered so that each of the units were being worked upon at various times in 2006[98] and by October, all six were at lock up stage.

   [94]T 329, T 337, T 351.

   [95]Exhibits P 30, P 31.

   [96]Exhibit D 26.

   [97]Exhibit D 6.

   [98]Exhibit P 26.

1. In my view, the evidence of Mr Simpson, the surveyor engaged by the vendors, should be accepted on this issue.  Mr Simpson’s expertise was significant.  He was the man on the spot who had carried out many, many surveys of developments akin to this.  It was his view, which I accept, that he could not carry out a survey until the brickwork for each of the units was in place.[99]  As he put it “it’s just prior to lock up”,[100] consistent with Mr Tyrrell’s opinion in his July report.[101]  Mr Simpson rejected the suggestion in Mr Tyrrell’s March report that the plan could be prepared prior to the brickwork being constructed.

   [99]T 452.

   [100]T 460.

   [101]Exhibit D 4, p 8.

1. There was nothing in the cross-examination of Mr Simpson to cause me to have any reservations about his evidence on this point.

1. I do not accept Mr Tyrrell’s opinion that the surveying for completion of the plan of subdivision could have been conducted at an earlier stage.  I have already set out his evidence on this issue.  Even if I was prepared to take into account his evidence on this point, I would have preferred the evidence of Mr Simpson, the surveyor engaged by the vendors and familiar with the project.

1. Accordingly, I accept that the plan of subdivision could not have been submitted to the Registrar, acting reasonably, at any earlier point of time than it was.  Again, I note this tallies with the original opinion of Mr Tyrrell in the July report.  I conclude that it was reasonable for the vendors to lodge the plan of subdivision in early January 2007.

Did the vendors exercise reasonable endeavours in obtaining the statement of compliance?

1. As Mr Green, the manager of City Planning of the Council explained,[102] the statement of compliance could be issued by the Council on two separate bases:

(a)With Council approval, a s 173 agreement and accompanying agreements with the service providers; or

(b)Actual compliance with the conditions of the planning permit.

[102]T 410, T 431.

1. Whatever route is taken, central to the Council issuing a statement of compliance are the conditions contained in the planning permit.

1. The planning permit provided for a s 173 agreement in the following terms:

Should a section 173 agreement be entered into for the development of the site or construction works, tree retention and drainage works will be covered by the agreement. This requirement will only be necessary if separate titles are required prior to completion of the development.

1. The conditions of the permit required the vendors to:

(a)Ensure that the drainage conditions of the development permit were completed to the satisfaction of the Council;

(b)Ensure that the common property driveway access was constructed to the satisfaction of the Council in evidence with the recommendations of the arborist report, unless a s 173 agreement was entered into;

(c)Complete all drainage works necessary to serve the land;

(d)File a certificate by a consulting engineer, unless a s 173 agreement was entered into; and

(e)Provide physical access to the property and vehicle crossings as stipulated by the Council.

1. In addition, the Council required the vendors to enter into agreements with:-

(a)United Energy in respect of the supply of electricity to each lot;

(b)Telstra in relation to the provision of telecommunications services to each lot;

(c)Yarra Valley Water in relation to the provision of water supply services and sewerage services; and

(d)Melbourne Water in relation to the provision of drainage works.[103]

[103]I have subsequently referred to these organisations jointly as “the service providers”.

1. Finally, there were a number of other conditions relating to the payment of fees to the Council which were required prior to the issuing of a statement of compliance.  For example, $35,000 was required as the open space contribution.[104]

   [104]T 437.

1. It is also relevant that the development permit (issued in 2003)[105] required the retention of trees located on the property and obliged the common driveway to be constructed “in accordance with the recommendations contained in the arborist’s report of May 2002”.  At page 9 of the arborist report, it is stated as follows:

Units 1 to 4 will need to be constructed first.  All access to the site during the construction of these four units should be visa the existing concrete driveway.  To allow construction of units 5 and 6, the southern boundary of the TPZ of Tree No.4 will need to be moved to one metre north of the northern walls of these units.  The concrete of the existing driveway should be carefully removed far enough to the west of Unit 6 should remain in place until Unit 6 is completed.  Access onto the site for the construction of Units 5 and 6 should be along the line of the proposed new driveway.  This area should be protected by wooden matting until the building of Units 5 and 6 is completed.  The TPZ fencing should be erected on either side of the wooden matting.[106]

Should the vendors, exercising best endeavours, have entered into a s 173 agreement and obtained a certificate of compliance prior to the notice of rescission?

[105]Exhibit P3.

[106]Exhibit P3B.

1. I have set out the terms of s 173 at [56].

1. The decision of the President of VCAT, Morris J, in Solid Investments Australia Pty Ltd v Greater Geelong City Council,[107] provides an extremely helpful analysis of the nature of a s 173 agreement:

   [107][2004] VCAT 2356.

A section 173 agreement can be described as a hybrid instrument. In part such an instrument has the character of a private agreement. However it is also an instrument that forms part of the planning controls which apply to land. I will return to this issue later.

A planning scheme may provide that any use or development of land is conditional on an agreement being entered into with the responsible authority or a referral authority. A planning permit for any use or development of land may include a condition that the owner of the land, or an applicant for a permit in anticipation of the applicant becoming the owner of the land, enter into an agreement with the responsible authority under section 173 of the Act. Further, a section 173 agreement may be entered into voluntarily by a responsible authority and an owner of land.

An agreement may provide for various matters concerning the use or development of land or, indeed, any matter intended to achieve or advance the objectives of planning in Victoria.

An agreement made pursuant to section 173 of the Act binds the owner to the covenants specified in the agreement. Further, and importantly, a responsible authority may apply to the Registrar of Tiles to register an agreement relating to land (other than Crown land). The Registrar of Titles must make a recording of the agreement in the register, the effect of which is that any burden of a covenant in the agreement runs with the land affected and the responsible authority may enforce the covenant against any person deriving title from the person who entered into the covenant.[108]

His Honour subsequently described the “effect” of a s 173 agreement as follows:

It is common for a section 173 agreement to be entered into in respect of land, and then registered on the title to that land, and then for the land to be subdivided. In this case the agreement then attaches to each allotment created from the land. However in this situation a covenant imposed upon an owner imposes a separate obligation on the owner of each lot, enforceable by the responsible authority; and the owner of a lot subject to the agreement is not necessarily a party to an obligation of another owner in respect of another lot.[109]

[108]Ibid [43]-[46].

[109]Ibid [52].

1. A s 173 agreement has benefits both for the developer and for the Council. For the council, Mr Green saw the benefits as follows:

The reason we have the s 173 agreement on sub-division permits is to essentially ensure that the sub-division is directly linked to the development permit. Therefore, that the – the sub-division only occurs in accordance with the previous development permit, for the site. Now in the – in the s 173 condition there is the ability to not have to enter into the agreement if – if they complete the development prior to seeking separate titles for the units.[110]

[110]T 416.

1. As I follow it, the s 173 agreement gives the Council’s planning conditions “bite” as the agreement is registered on the title and therefore, as Morris J pointed out, attaches to each allotment thus imposing a separate obligation on each purchaser.

1. As was noted by Mr Green, the benefit to a developer is that the entry into a s 173 agreement enables the Council to issue a statement of compliance prior to the completion of the units. Sub-divided lots can be sold with the s 173 agreement, with a covenant attached, to purchasers before construction has commenced. As counsel for Mr O’Dwyer put it, in some cases before a sod is turned.[111]

   [111]T 417.

1. One other point ought to be noted before turning to the evidence. Notwithstanding the mandatory nature of the wording of the permit, the Council did not insist upon an applicant for a planning permit entering into a s 173 agreement: “The onus is on the applicant to undertake that”.[112]

   [112]Evidence of Mr Green, T 410.

1. Mr Tyrrell opined that if the option of a s 173 agreement had been exercised the plan of subdivision could have been approved by the Titles Office in August of 2006, well within the 15 month period required by special condition 7.2.

1. Mr Tyrrell said of a s 173 agreement:

…Well, by exercising the s 173 agreement that would of course remove the need for council to do that inspection (of the physical structure), yes, sir.[113]

and:-

…it needs to have checked that every item on the planning permit for subdivision has been attended to.  It will include items from the servicing authorities and their requirements, and council requirements such a payment of open space contribution, issues like that.[114]

[113]T 116.

[114]T 120.

1. Mr Green’s evidence as to the manner in which a s 173 agreement can be drawn up and entered into, was helpful. The Council itself is prepared to draw up a s 173 agreement that is in the standard template, which enables the conditions of the planning permit to be inserted within the agreement. The agreement runs for some 7-10 pages on average and can be issued at any time after the issue of the development permit or the planning permit.[115]

   [115]T 419.

1. Mr Green also noted that the planning permit required approval of specific works to the satisfaction of the service providers.  A number of these requirements were identified in Ms Aranga’s letter to Mr Simpson of 2 November 2006 in the following terms:[116]

   [116]Exhibit D 16.

The plan of subdivision for the above address has now been certified by the Council.  Please find enclosed a signed heavyweight copy for lodging with the Titles Office at your convenience.

The following table lists outstanding requirements to be met prior to the issue of the Statement of Compliance.  Contact and reference numbers are listed for each item.  Your attention to these matters will ensure prompt forwarding of the Statement of Compliance.  Please note this Statement is required for release of Title.

United Energy Ref    S-2004-03520

Yarra Valley Water Ref        15620

Engineering Clearance Inspection (Drainage and crossovers)

Compliance with Development Permit Conditions: including Landscaping Inspection etc

Open Space Levy – 5% as per condition 16 WH/14921

Certification by Consulting Engineer stating that civil works have been completed as per condition 22 of WH/13028

Please feel free to call if you have any further enquiries.

1. During the course of Mr Green’s evidence and over the luncheon adjournment, Mr Green studied the planning permit carefully and after lunch, clarified the situation in relation to the necessity of approval by the service providers.

1. Firstly, he made it clear that a statement of compliance would not be issued unless there was approval from the service providers identified in the planning permit.  He explained that this, however, did not require the actual works to be performed but the developer, as required, to have an agreement or undertaking with a particular provider that satisfied the Council.[117]

   [117]T 426.

1. Secondly, Mr Green said that agreements with each of the service providers were a regular occurrence and in his experience, were entered into so that, in combination with the s 173 agreement, the Council would issue a statement of compliance.[118]

   [118]T 431.

1. Thirdly, he agreed with counsel for Mr O’Dwyer that compliance with the conditions of the planning permit was routine and relevant to the service providers and there appeared to be no impediment to the vendors entering into a agreement with them.[119]

   [119]T 432.

1. No contradictory evidence was led on this issue and Mr Green is experienced in dealing with such applications. I accept his evidence on this point and have concluded that it would have been possible for the vendors to conclude a s 173 agreement with the Council and that appropriate agreements or undertakings could have been entered into with the various providers which would have satisfied the Council in relation to the issuing of a statement of compliance.

1. Although there was no specific evidence on this issue (apart from that of Mr Tyrrell), I am prepared to infer that it would have taken a number of months to sort out a s 173 agreement with the Council and also to obtain the necessary agreements or consents from the service providers. It may be that this could have been carried out prior to the measuring up in October, but in any event I accept that it would have been possible for a s 173 agreement and accompanying agreements with service providers to have been entered into by approximately January 2007, well before rescission of the contract.

1. Reaching this conclusion, however, does not address the fundamental question – should the vendors, acting reasonably, have entered into a s 173 agreement with the Council between late 2005 and September 2007 (the time of rescission)?

1. This analysis involves, I think, two steps. Firstly, should the vendors, acting reasonably, have considered entering into a s 173 agreement? Secondly, ensuring an affirmative answer to the first question, should the vendors, acting reasonably in these circumstances, have entered into such an agreement?

1. I accept that in carrying out this analysis, a normative judgment is required, taking into account, at least as a starting point, what was or was not done by the vendors.  I also observe that in determining what is reasonable one eschews hindsight and examines the reasonableness of the action or inaction in light of what was known at the relevant time.[120]

   [120]C/f  The examination of the reasonableness of an alleged tortfeasor’s conduct where breach of duty is alleged.  See Rosenberg v Percival (2001) 205 CLR 434 [16]; New South Wales v Fahy (2007) 232 CLR 486 [57]; Vairy v Wyong Shire Council 92005) 223 CLR 422 [60]-[61].

1. Mr Terry Fraser, the vendors’ solicitor during the relevant period, gave evidence that there was no indication on his file that anyone in his office discussed the use of a s 173 agreement with Mr Tan or that Mr Tan approached the office in relation to the effect of a s 173 agreement.[121]

   [121]T 158.

1. It is appropriate here to say something about the evidence of Mr Tan.  He was the driving force behind the project; it was not suggested that his wife, the second defendant, played any role in the development.   Mr Tan was voluble and excitable, but that is not to say that he was not a witness who was doing his best to give honest testimony in a foreign environment and in his second language.  I have considered the criticisms made of his evidence by counsel for Mr O’Dwyer who submitted that there were many occasions where Mr Tan changed his evidence as it suited his case.[122]  I have closely re-read his evidence and thought carefully about it, reflecting upon the manner in which he gave his evidence in court.  In the main, I accept his evidence, although with two exceptions which I will set out below.  I also accept the proposition advanced by Mr O’Dwyer’s counsel that Mr Tan was not devoid of business acumen – on the contrary, he followed the progress of the construction closely with a keen eye as to his own financial position.

   [122]Mr O’Dwyer’s written submissions [8.8].

1. Consistent with Mr Fraser’s evidence, it is abundantly clear that Mr Tan did not turn his mind to the question of a s 173 agreement notwithstanding the wording of the planning permit and the contents of the letter from Ms Aranga which was brought to his attention by Mr Simpson in his letter of 8 November 2006 that contained a copy of the letter.[123]

   [123]Exhibit D 16.

1. It was said on behalf of the vendors that they were not required to consider the question of entering into a s 173 agreement. This contention was premised upon the following matters:

(a)Mr Tan said that he had no knowledge of what a s 173 agreement involved at the relevant times;

(b)There was no advice from the vendors’ solicitors or the surveyor Mr Carson about entering into a 173 agreement;

(c)Their reliance upon the experience of the builder; and

(d)The contract of sale for the development planning permit did not make it mandatory for the vendors to enter into an s 173 agreement.

1. None of these arguments deals with the true issue:- what, objectively viewed, was required of a developer in the position of the vendors to comply with the obligation to use best endeavours to have the plan registered.

1. I do not accept Mr Tan’s evidence that he did not become aware of the nature of a s 173 agreement until 2009.[124] I am not satisfied that Mr Tan was sufficiently naïve that he did not know of the existence of a s 173 agreement during this time. The planning permit, of which he had a copy, made it abundantly clear that such a course was open – indeed, on one construction it was mandatory.[125] The fact that in practice it was not mandatory for the vendors to enter into a s 173 agreement is neither here nor there in this determination.

   [124]T 403.

   [125]See the opening words of Clause 3.

1. I do, however, accept that Mr Tan focused solely on completing the works and then obtaining a certificate of compliance.[126]  Wrongly, he regarded his only obligation as being to complete the construction works as rapidly as he could, (this being to his commercial benefit) and obtain the approval of the Council and the service providers upon inspection and then seek a statement of compliance.

   [126]T 487-488.

1. In any event, the issue is not resolved by an analysis of Mr Tan’s state of mind.  Rather, as I have said, the question is what would a developer, in the vendors’ circumstances, acting reasonably, have done in ensuring compliance with the obligation to exercise best endeavours to obtain registration of the plan of subdivision.

1. I think that a reasonable developer in the vendors’ position, turning his or her mind, to the obligation under the contract was obliged to seek professional advice. Given the conditions of the permit, it should have been realised that s 173 was a possible alternative route to obtaining registration of the plan and the vendors should have sought professional advice about its application to the project. I also accept the submission put by Mr O’Dwyer’s counsel that as the contract with Gumleaf had been extended to 500 days, then there was a further reason to consider whether a s 173 agreement was a reasonable alternative to awaiting the completion of the construction of the unit.

1. Accordingly, the vendors should have discussed the issue with their solicitor Mr Fraser.  I reject the suggestion that owing to Mr Tan’s limited knowledge of English (of which I am dubious), and his level of educational and professional expertise, that this is an unreasonable obligation.  Mr Tan decided that he and wife would develop a block.  It was necessary, having taken on that task and having entered into contracts with purchasers of a number of the units, that they consider the various obligations cast upon them under that contract.

1. However, the question then arises as to what would a developer in the vendors position at that time have done after receiving such advice. Would a developer, acting reasonably, have entered into a s 173 agreement? Evidence from several witnesses addressed this point.

1. Firstly, Mr Tyrrell said it was appropriate for a developer in the vendors position to do so.  For reasons I have set out, his opinion can be put to one side.

1. Secondly, Mr Green explained that the Council was highly receptive to the use of s 173 agreements.[127] He also agreed that he had seen examples of developers entering into a s 173 agreement where there had been delays in construction in a situation where the contract required approval by the Registrar within a certain period. As he put it “that’s an option they have”.[128]

   [127]T 433.

   [128]T 434.

1. Thirdly, and crucially, there is the evidence of Mr Fraser.  I think that his evidence is highly significant given his expertise as a conveyancing solicitor for many years in the Box Hill area.  In evidence-in-chief Mr Fraser was asked the following question:

Summary

1. Whilst the vendors should, acting reasonably, have sought the advice of their solicitors in relation to entering into such an agreement, ultimately I am not persuaded that the taking of all reasonable steps required the vendors to enter into a s 173 agreement. I am also satisfied that given the collapse of Gumleaf, it has not been demonstrated that the vendors acted unreasonably in endeavouring to complete the works prior to the notice of rescission. They were not in breach of their obligation to exercise best endeavours.

1. It follows that, absent a successful plea of waiver or estoppel, the claim for specific performance must be dismissed.

Mr O’Dwyers’ allegations of waiver and estoppel

1. Paragraphs 9 to 12 of the Further Amended Statement of Claim allege both waiver and estoppel in relation to the notice of rescission.  The defences of waiver and estoppel are pleaded vaguely:

The first and second defendants by themselves and/or their agents represented to the plaintiffs after 18 December 2006 on numerous occasions that registration of the plan of subdivision was imminent and that the contract of sale was extant and would soon be completed[159]

By the time of final submissions the argument was confined to one of estoppel.[160]

[159]Paragraph 9 of the further amended statement of claim.

[160][21] of the written submissions.

1. The principles of promissory estoppel are well known and were set out by Brennan J in Waltons Stores (Interstate) Ltd v Maher: [161]

In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case that the defendant would not be free to withdraw from the expected legal relationships; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.

The authority of Waltons Stores remains good.[162]

[161](1988) 164 CLR 387, 428 – 429.

[162]See for example Giumelli v Giumelli (1999) 196 CLR 101, Flinn v Flinn (1999) 3 VR 712, Fifteenth Eestin Nominees Pty ltd v Rosenberg [2009] VR 155; Metropolitan Transit Authority v Waverley Transit Pty Ltd [1991] 1 VR 181; The Commonwealth of Australia v Clarke [1994] 2 VR 333.

1. Particularly relevant to this case are issues of reliance and detriment.  In The Commonwealth v Verwayen, [163] Mason CJ said:

   [163](1990) 170 CLR 394, 412.

It follows that, as a matter of principle and authority, equitable estoppel will permit a court to do what is required in order to avoid detriment to the party who has relied on the assumption induced by the party estopped, but no more.[164]

His Honour went on to say:

Each case is one of degree.  Reliance upon an assumption for an extended period may give rise to an estoppel justifying a court in requiring the assumption be made good.  The same result may follow from substantial and irreversible detriment suffered in reliance upon the assumption or from detriment which cannot satisfactorily be compensated or remedied…

…

Evidence of detriment must be affirmatively demonstrated; this is not a case involving the exercise of judicial discretion.[165]

[165]Ibid 416.

1. Mr O’Dwyer identified three pieces of correspondence which it was said form the basis for the asserted estoppel, namely:

(a)A letter of 28 October 2005 from the plaintiffs’ solicitor to the vendors’ solicitors office in which his solicitor indicated that his clients:

require strict compliance of the time frames referred to in the contract and require urgent confirmation from you that the building works will be completed and the plan of subdivision registered within the time specified in the contract.[166]

(b)A letter of 4 November 2005 from the vendors’ solicitors responding to the 28 November letter in the following terms:

I am instructed by my clients that he has held further discussion with his builder and now expects to have the building works completed by mid-November 2006.  Accordingly, my client expects to be in a position to comply with his obligations under the contract with your client.[167]

(c)A letter from the vendors’ solicitor on 28 March 2007 set out at [35]:

[166]See [23] above.

[167]See [25] above.

1. In his written submissions,[168] counsel for Mr O’Dwyer relied upon the vendors conduct in:

(a)not rescinding the contract until ten months after the plan registration date; and

(b)maintaining silence when they knew after March 2007 that Gumleaf was asserting that it had until November 2007 to complete the contract.

[168]Submissions 21.1.2 and 21.1.3.

1. It was said on behalf of Mr O’Dwyer, that in reliance upon the assumptions or expectations created by this correspondence and, in effect, the vendor’s silence and passivity, he did not rescind the contract as he could have by November 2006 in a rising property market.  Rather, he waited for the vendors to complete the construction of the units and at the last moment, was met with a notice of rescission.

1. Mr O’Dwyer’s evidence as to the effect of the asserted representations or conduct  of the vendors upon his commercial activities was quite unpersuasive on this issue.

1. It is to be remembered, that the only funds that had been committed by Mr O’Dwyer in respect of the purchase were those utilised to acquire the deposit guarantee.[169]

   [169]T 120.

1. In relation to the effect of the letter of 4 November 2005 from the vendors’ solicitors, Mr O’Dwyer, in evidence-in-chief, said that he made a decision “to obviously stick with the property because it was, you know, near completion”.[170]  In fact, at the time of that letter, the existing house had not been demolished and no work had commenced on the building of the units.[171]  His subsequent answers in evidence-in-chief demonstrated, at least to me, that this piece of correspondence had little or no impact on him at the time.

   [170]T 72 (11 March 2010).

   [171]T 121.

1. In relation to the second letter of 28 March 2007 from the vendors’ solicitors, Mr O’Dwyer’s evidence-in-chief was that he did not become aware of the contents of this letter until 2009 through his solicitors.[172]

   [172]T 120, T 121.

1. Accordingly, I am not persuaded that there was any reliance by Mr O’Dwyer upon the contents of any of the correspondence said to underpin the claim for estoppel.  Similarly, I do not regard the vendors’ delay in rescinding the contract or its silence in relation to the prospective date of completion as matters upon which Mr O’Dwyer relied.

1. In any event, even if I had been persuaded on the reliance point, the question of whether Mr O’Dwyer acted to his detriment as a result of such an expectation has not been made out.

1. At best, there was evidence from Mr O’Dwyer that if he had known that he could not settle within 15 months he would have “obviously bought something else”.[173]  Given that his only financial investment was the purchase of the guarantee, and that no evidence was led as to any other property which he was actively considering or which he would have invested in, the evidence on this issue was paper thin.  Certainly it does not affirmatively demonstrate detriment.

   [173]T 122.

1. In summary, the evidence as to any putative estoppel is unsatisfactory and the claim is not made out.

The balance of the defences raised by the vendors

1. A not inconsiderable amount of time in submissions (both written and oral) was assigned to the consideration of two allegations made by the vendors in relation to the enforceability of the contract.  Given my ultimate conclusion is that the plaintiffs claim has failed, I propose to deal briefly with those matters.

The privity of contract point

1. I remain perplexed as to the purpose of the vendors allegation that neither the first plaintiff, Joseph Street, or the third plaintiff, Mrs O’Dwyer, had privity of  contract with the vendors, given that Mr O’Dwyer was a plaintiff in the proceeding.

1. Nettle J in Commissioner of State Revenue v Politis[174] said:

Plainly, however, under most nomination clauses the nominee would not acquire any rights as against the vendor, let alone the rights of the purchaser; for most nomination clauses constitute no more than a power in the purchaser to require the vendor to complete the contract by transfer of the land to the purchaser's nominee.  In such cases the purchaser has rights as against the vendor to have the land transferred to the purchaser or to the purchaser's nominee, at least upon payment of the purchase price. And the purchaser has an interest in the land, in the nature of an equitable fee simple (assuming that the contract provides for purchase of the fee simple), although of course that really means no more than that the contract is susceptible to an order for specific performance at the suit of the purchaser.  But the nominee does not acquire any rights as against the vendor, because the nominee is not privy to the contract.  And for the same reason, the nominee has no standing in equity to obtain an order for specific performance of the contract. He must sue in the name of the purchaser or join the purchaser as a defendant. Therefore, such if any interest as the nominee may have in the land is one which derives from the purchaser, and relevantly the most that can be said is that the nominee may acquire an interest in the land equivalent to that which the purchaser had or would have had under the contract of sale.

[174][2004] VSC 126 [15]; See also Rise Home Loans Ltd v Dickinson [2010] VSC 29; 428 Little Bourke Street Pty Ltd v Lonsdale St Café Pty Ltd & ors [2009] VSC 133.

1. More recently in Vercorp Pty Ltd & Anor v ACN 096 278 483 Pty Ltdas trustee of the Williams Family Trust (No 2),[175] McMurdo J said this:

The applicants’ case encounters an abundance of authority for the proposition that where there is a contract for the sale of land to a certain purchaser “or nominee” and an entity is nominated, nevertheless the contract remains one between the vendor and the originally named purchaser: Tonelli v Komirra Pty Ltd; Jenkins v Smyth; Lambly v Silk Pemberton Ltd; Lord v Trippe; Hurrell v Townend; Harry v Fidelity Nominees Pty Ltd; Karangahape Road International Village Ltd v Holloway; Salter v Gilbertson; Commissioner of State Revenue v Politis; David Deane & Associates Pty Ltd v Bonnyview Pty Ltd; Avzur Hotels Pty Ltd v Ivanhoe Entertainment Pty Ltd; CPG01 Pty Ltd v Kourinos.[176]

[175][2010] QSC 405.

[176]Ibid, [25].

1. There is no utility in attempting to analyse the rights of Joseph Street or Mrs O’Dwyer; nor in determining whether there was any novation of the contract by reason of the nominee clauses of the contract.  The position of the plaintiffs jointly was, I think, made clear from the start of the trial – indeed the point had been agitated before an Associate Justice prior to that.  If Mr O’Dwyer (as the original purchaser not the nominee) was successful in establishing that the rescission was invalid, then it was open for the Court to order specific performance of the contract in his favour.

1. The arguments put by the vendors in relation to privity of contract concerning Joseph Street and Mrs O’Dwyer are, to put it simply, obtuse and irrelevant to the substantive disposition of this claim.

The deposit guarantee point

1. The contract made provision for the payment of a sum of money, $18,500 as a deposit, noting that $1,000 had been paid.[177]

   [177]Exhibit P 2.

1. Rather than pay the deposit as the contract stipulated, Mr O’Dwyer provided the guarantee which expired in November 2006.[178]  The original of the guarantee could not be located, however the facsimile confirmation was tendered.[179]

   [178]Exhibit D 1.

   [179]T 18.

1. I granted the vendors leave to amend the defence to flesh out the consequences said to relate to the use of the guarantee.  In its final version,  the vendors asserted that they were entitled to rely upon its use as constituting a breach of the contract and thereby entitling them to rescind.

1. The defence (even in its final apparition) does not spell out with any clarity whether the breach is that of the use of the guarantee, per se, or its lapse in November 2006 (the expiry date being 18 November 2006).  In discussion, counsel for the vendors stated that he was not relying upon the use of the guarantee, but rather upon its lapse; he then argued that as a result of the expiry of the guarantee, Mr O’Dwyer failed to comply with Condition 6 which provided for a cash deposit or alternatively, Mr O’Dwyer should have provided a further guarantee.[180]  In their written submissions, the vendors said of the guarantee:

It must be valid for the entire duration of the contract to avoid breaching the terms of the contract in relation to payment of the deposit[181]

[180]T 743 - 744.

[181][84] of the vendors’ submissions.

1. It is necessary now to return to the facts for a moment.

1. I accept the evidence of Mr O’Dwyer that the guarantee was arranged after a discussion with Mr Kinda, the agent of the vendors.[182]  I also accept Mr and Mrs O’Dwyer’s unchallenged evidence that it was Mr Kinda who suggested that the guarantee be for a term of 14 months.[183]  No evidence was adduced from Mr Kinda or Mr Tan to dispute the O’Dwyers account.  There was no suggestion from Mr Kinda, the vendors’ solicitor Mr Fraser, or the vendors themselves that this was an unacceptable form of conforming with Mr O’Dwyer’s obligation under the contract.  Not a word was said by the vendors or their agent at any time subsequent to the acceptance of the guarantee in relation to either to its adequacy or the adequacy of the term of the guarantee.

   [182]T 120-122, T 133.

   [183]T 133.

1. Notwithstanding the terms of the contract, the vendors’ agent accepted (after encouraging its use) the guarantee.  It was this, rather than the payment of a sum of money, which provided the security for the purchase, or to put it another way, the guarantee provided “earnest performance by the purchaser and is a guarantee of, or security for, performance by the purchaser”.[184]

   [184]Brien v Dwyer (1978) 141 CLR 378, 385-387.

1. In the absence of evidence from Mr Kinda on this issue, and in the light of Mr and Mrs O’Dwyer’s evidence, it can be readily concluded that Mr Kinda knew that the guarantee would lapse in November 2006.

1. I do not accept the evidence of Mr Tan in relation to his lack of knowledge of the failure by Mr Kinda to accept a cash deposit of $18,500.  He denied such knowledge emphatically and stated that neither Mr Kinda nor his solicitor had advised him of the use of the guarantee rather than cash.[185]  This, I find, is completely out of character; he was a man who monitored closely the events surrounding the construction of the units (including their sale) and particularly the vendors finances.  It defies credulity to accept that an agent charged with accepting a cash deposit would, without the knowledge of the vendor, accept a guarantee and not, at some point of time, let the vendor know of this change of term of security.  The failure of the vendors to call Mr Kinda, in this regard, is significant.[186]  He could have settled the question once and for all.  In those circumstances, I infer that Mr Tan knew of the existence of the guarantee at some point in time after it was provided and before the notice of rescission was served. 

   [185]T 295.

   [186]See O’Donnell v Reichard (1975) VR 916; Kidman v Corstorphon [1999] VSCA 28.

1. There was, of course, no mention of the use of the guarantee (and/or its duration) as being the basis for the notice of rescission (although I accept that this would not necessarily be fatal to the efficacy of such notice).[187]

   [187]Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359.

1. The first occasion upon which any issue was raised about the use of the guarantee was in August 2009 (nearly two years after the notice of rescission) in the further amended defence filed by the vendors although at that time, it spelt out no allegation of breach, but rather simply pleaded the fact of its use.

1. The vendors relied upon two decisions of the High Court[188] to support the contention that the failure by a purchaser to make timely payment of the deposit was a breach of a fundamental term of the contract and thereby entitles the vendor to rescind.

   [188]Romanos v Pentagold (2003) 217 CLR 367; Brien v Dwyer (1978) 141 CLR 378.

1. In my view, the vendors argument should be rejected for the following reasons which I shall set out briefly.

1. The first contention of Mr O’Dwyer is that Mr Kinda, on behalf of the vendors, had authority to vary the written terms of the contract in relation to the provision of security.  Normally, such an argument would be stymied by what was said in Brien v Dwyer by Gibbs J:

It is however clear in principle that where the contract of sale expressly provides for the payment of the deposit to the agent, the authority of the agent to receive the deposit is limited by the provisions of the contract.  In the present case the authority of the agent was to receive a deposit made in accordance with cl.1.  As I have said the agent was authorised to accept a cheque, but not a post-dated cheque.[189] (emphasis added)

[189]Ibid, 395. See also Petersen v Moloney (1951) 84 CLR 91, 94-95; Markson v Cutler (2007) NSWSC 1515.

1. However here the vendors accepted that Mr Kinda had such authority.[190]  It clearly extended to accepting the guarantee as proferred by Mr O’Dwyer.

   [190]T 659.

1. Alternatively, Mr O’Dwyer contends that Mr Kinda’s actions constitute an estoppel and precludes the vendors from arguing that the contract required the payment of a deposit.

1. I accept that Mr O’Dywer did not pay the cash deposit as a result of the representations made by Mr Kinda and that in not doing so, he has suffered detriment to the extent that he has exposed himself to the risk of the contract being terminated on the basis of his failure to pay the deposit.  As I have said, I have also concluded that at some point of time shortly after Mr Kinda accepted the guarantee Mr Tan became aware of this form of security. 

1. It is necessary now to return to what was said in Brien v Dwyer by the High Court.  In that case, the agent, without the vendor’s authority and without informing the vendors, agreed to accept a post-dated cheque in lieu of the deposit which, in accordance with the terms of the contract, should have been paid at the time of the signing of the agreement.  In determining that the agent had no authority to vary the terms of the contract, Barwick CJ said:

Of course, if a vendor is aware of the failure to pay the amount of the stipulated deposit, he cannot delay in exercising what, in my opinion, is his undoubted right of rescission of the contract.  If he takes steps in performance of the contract without knowing whether or not the deposit has been paid, the ability validly to rescind the agreement might have to be decided upon general grounds in the particular circumstances.  If, without taking any such steps, a vendor fails to pursue his right to rescind, a court of equity might possibly be prepared to treat his inactivity as inordinate and as having itself led the purchaser into some position of disadvantage, in the particular circumstances of a case.  But, in my opinion, the right to rescind, arising at the very moment of the execution of the contract is not lost otherwise than by the conduct (including, perhaps, in an appropriate case, the inaction) of the vendor.[191] (Emphasis added)

And by Aicken J:

“What was done with the post-dated cheque was not done with the knowledge of, nor on behalf of, the vendor.  It was done at the behest of the purchaser and did not fall within the authority of the estate agents under the contract of sale which they had arranged.  I can see no warrant for regarding it as affecting the position of the vendor.  The vendor had not in any way acquiesced in what was done, nor did his delay in checking whether the deposit had in fact been paid in accordance with the contract operate as a waiver or in any way to the prejudice of the purchaser.” [192]  (Emphasis added)

[191]Ibid, 386.

[192]Ibid, 408.

1. Here I have concluded that Mr Tan knew of the agent’s acceptance of the guarantee, which was authorised by the vendors.  Nothing was done to alert Mr O’Dwyer as to the deficiency notwithstanding that knowledge.  Mr O’Dwyer proceeded on the basis, encouraged by letters from the vendors’ solicitors, that the contract was on foot and, indeed, with sporadic reports as to anticipated dates of settlement.

1. Moreover, the vendors accept that, given the passage of time, they have no claim in relation to the agent’s acceptance of the guarantee, rather than insisting upon a payment in  cash.  This, it seems to me, is indicative of an acceptance by the vendors of the validity of Mr Kinda’s actions.  This conclusion is consistent with the vendors actions subsequently – the ongoing construction of the unit continued with representations as to the completion date (and/or difficulties with the progress of the construction) without complaint or reference to the form of security provided by Mr O’Dwyer.

1. In these circumstances, Mr O’Dwyer has established “detrimental reliance”[193], the vendors are estopped from relying upon breach of the contract requiring the provision of a cash deposit as a basis for rescinding the contract.

   [193]Agricultural and Rural Finance Ltd v Gardiner (2008) 238 CLR 270, [96].

1. I should say that such a result accords with my perception of where the interests of justice lie on this issue.  To permit a party, some two years after the date of rescission, to rely upon a fresh inchoate argument (patently the brainchild of their new solicitor) developed (to a limited extent) during the course of the trial is unacceptable.

1. For the sake of completeness I should note that I also reject the suggestion that the payment of a sum of money by Mr Damien O’Dwyer via Mr O’Dwyer’s solicitors in 2008 in some way amounts to an admission that a cash deposit was payable under the contract.  As I see it this was simply a strategic exercise (fruitless as it turns out) to endeavour to fortify Mr O’Dwyer’s position given the lapse of the guarantee.

1. It would be possible to devote many more pages to the arguments raised by the vendors on this issue.  However, given my primary findings, it is not necessary to do any more than indicate the basis upon which I have concluded that this point fails.

Conclusion

1. (a)       Mr O’Dwyer has not established a breach of special condition 7.3 or any ongoing implied term.  The vendors’ notice of rescission is valid.

(b)I am not persuaded that the vendors’ conduct was such as to constitute an estoppel of their rescission of the contract.

(c)Mr O’Dwyer has no entitlement to specific performance.

(d)The claim against the Registrar of Titles should be dismissed.

(e)The vendors’ counterclaim is successful, to the extent that orders will be made effecting the removal of the caveats lodged by Mr O’Dwyer and (if applicable) Joseph Street.

(f)A number of the vendors’ arguments have not been successful and it is appropriate for a proportionate costs award to be made.

Orders

1. Subject to hearing from counsel, I propose to make the following orders:

(a)That the plaintiffs’ claim and the defendants’ counterclaim as to quantum be dismissed.

(b)That the plaintiffs within 14 days lodge with the Registrar of Titles a notice of withdrawal of any of the caveats lodged by them in relation to Unit 5.

1. I am not prepared to make any orders in concerning the Registrar unless there is a failure to comply with my order in relation to the removal of the caveat.

1. I will hear from the parties as to an appropriate order as to costs.