Maloy v Jelacic

[2003] NSWSC 23

CITATION:	Maloy v Jelacic [2003] NSWSC 23
HEARING DATE(S):	11/12/02, 12/12/02
JUDGMENT DATE:	10 February 2003
JURISDICTION:	Equity Division
JUDGMENT OF:	Barrett J
DECISION:	Specific performance ordered.
CATCHWORDS:	CONVEYANCING - matters arising between contract and completion - contract conditional on vendors obtaining building certificate - whether vendors complied with requirement to take all reasonable steps - whether purported rescission by vendors valid - whether purchaser entitled to specific performance
CASES CITED:	AJDJ Pty Ltd v Pacific West Developments Pty Ltd [2002] ANZ Conv R 267 Bryan v Maloney (1995) 182 CLR 609 Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126 Schenk v ACN 081 123 140 Pty Ltd [2002] ANZ Conv R 280
PARTIES :	Patricia Margaret Maloy - Plaintiff John Jelacic and Nigel David Pridham - Defendants
FILE NUMBER(S):	SC 4478/02
COUNSEL:	Mr P.B. Walsh - Plaintiff Mr S.Y. Reuben - Defendants
SOLICITORS:	Champion Legal - Plaintiff George Bassil & Associates - Defendants

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

MONDAY, 10 FEBRUARY 2003

4478/02 – PATRICIA MARGARET MALOY v JOHN JELACIC & ANOR

JUDGMENT

1 These proceedings concern a contract for the sale of a residential property at 64 Hancock Drive, Cherrybrook. The contract was made on 26 November 2001 between the defendants, Mr Jelacic and Mr Pridham, as vendors and the plaintiff, Mrs Maloy, as purchaser upon a sale by auction. The defendants had built a house on the site. It was virtually complete when the property was auctioned on 26 November 2001, although certain final approvals remained to be obtained from the Hornsby Shire Council. Some persons who had shown interest in bidding at the auction expressed concern about this. As a result, the contract for sale contained two special conditions as follows which were inserted in handwritten form shortly before the auction:

“19. The within Contract is subject to and conditional upon the vendor obtaining a Building Certificate from Hornsby Shire Council.
20. Completion is to take place on the later to occur of the following:
(a) 42 days of the date hereof; or
(b) within 21 days of the vendors providing the purchaser with a copy of the Building Certificate referred to in special condition 19 hereof:
provided further in the event of the said Building Certificate not issuing within six months from the date hereof, either party may rescind this contract and in which respect clause 19 [of the printed conditions] shall apply.”

2 It will be necessary to examine the circumstances relevant to satisfaction of the first of these special conditions and the operation and effect of both. For the moment it is sufficient to record that between the date of the contract and July 2002, the defendants were in contact with Council officers about matters relevant to the obtaining of the certificate required by the special conditions and had done some further work on the property with a view to bringing about a state of affairs in which the Council would be willing to issue the certificate. By 8 July 2002, the defendants had not made any application for the issue of the certificate and no certificate had been issued (in fact, an application was not made until 4 October 2002). By notice given on 8 July 2002, the defendants purported to rescind “pursuant to our right specified in Special Conditions 19 and 20”.

3 By her summons filed on 9 September 2002, the plaintiff seeks a declaration that she is entitled to have the contract specifically performed and carried into execution, together with certain orders directed towards securing performance by the defendants. The latter, for their part, filed a cross-claim on 30 October 2002 by which they seek a declaration that they have, by notice dated 8 July 2002, validly rescinded the contract. The validity of the purported rescission is logically the first matter to be considered.

4 It is common ground that the defendants were obliged to do whatever was reasonably necessary on their part to cause the certificate envisaged by special conditions 19 and 20 to be issued by the Council. Clause 29 of the printed form of contract provided as follows:

“29.1 This clause applies only if a provision says this contract or completion is conditional on an event.
…
29.4 If anything is necessary to make the event happen, each party must do whatever is reasonably necessary to cause the event to happen.
… “

5 Special condition 19 is a provision of the kind referred to in printed clause 29.1. This is because it says that the contract itself “is subject to and conditional upon” the act (or event) of obtaining by the defendants to which it refers. To this extent, printed clause 29.4 makes explicit one aspect of the obligations that would in any event form part of the contract in accordance with principles most recently referred to by members of the High Court in Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126 at 142. The defendants were under a positive contractual obligation towards the plaintiff to take all steps on their part reasonably necessary to procure the issue by the Council of the relevant certificate so that the plaintiff might have the benefit of the contract, coupled with a negative obligation not to hinder or prevent satisfaction of the condition in special condition 19. The positive aspect is aptly described as an obligation to take all reasonable actions that were appropriate or needful to be done to ensure that the certificate was issued by the Council to the defendants: cf AJDJ Pty Ltd v Pacific West Developments Pty Ltd [2002] ANZ Conv R 267

6 A recent summary of principles regulating the exercise of a right of rescission of the kind given by special condition 20 is to be found in the following passage in the judgment of Bryson J in Schenk v ACN 081 123 140 Pty Ltd [2002] ANZ Conv R 280 referring to a contract conditional on the registration of a strata plan:

“Each of many decisions in this field is a decision on the particular contract in question, but some recurringly important general principles, which are applicable in the present case, were stated in Plumor Pty Ltd Handley (1996) 41 NSWLR 30 at 34 and 35 by McLelland CJ in Eq. The principles there stated and now relevant are to the effect that a party to a contract is not entitled, as against the other party, to rely on an event resulting from the first party's wrongful act; that if the failure by the rescinding party to obtain some relevant consent or registration within the contractual period resulted from any default by him in the performance of express or implied obligations, that party is not entitled to exercise a right of rescission otherwise available; and that causation of the failure to obtain consent or registration by the wrongful act must be proved unless the terms of the contract make obtaining the consent or registration a condition for the exercise of the right of rescission. Another important principle, stated by McLelland CJ in Eq at p35 and p36, is that the plaintiff bears the onus of proof on the issue of whether not obtaining the requisite consent or registration within the period specified resulted from a breach by the rescinding party of contractual obligations. This principle must be taken with the qualification, expressed by McLelland CJ in Eq in Hunyor v Tilelli (1997) 8 BPR [97667] 15,629 at 15,631: ‘It is necessary however to bear in mind that all evidence is to be weighed according to the proof which it was reasonably within the means of one party to produce or of the other to contradict. This has particular significance in respect of evidentiary facts which are peculiarly within the knowledge of one party rather than the other ...’ (and McLelland CJ in Eq referred to authority).
…
There are also circumstances in which the purchaser may be entitled to equitable relief against a rescission even though the rescission was made in accordance with the terms of the parties' contract. There are a number of grounds for equitable intervention. In summary the right of rescission must be exercised reasonably but this summary should not be substituted for the law as stated in Selkirk v Romar Investments Ltd [1963] 1 WLR 1415 at 1422; and see Woodcock v Parlby Investments Pty Ltd (1988) 4 BPR 9568 (Young J). Part of the passage in Selkirk was referred to and followed by Gibbs J in Pierce Bell Sales Pty Ltd v Frazer (1973) 130 CLR 575 at 590.”

7 There is, of course, no dispute in the present case that the circumstance by reference to which the right of rescission conferred by the proviso to special condition 20 was exercisable arose when, at the end of the six months period, a building certificate had not been issued; or that, in a purely literal sense, it was then open to the defendants to rescind, as they purported to do by the notice of 8 July 2002. The contest between the parties in relation to the purported rescission centres upon the question whether the defendants’ conduct was such as to disentitle them to exercise the contractual right of rescission made available by special condition 20. That question is to be answered by examining the defendants’ conduct and assessing it against the criteria already identified.

8 An important element of context relevant to that question is special condition 18 of the contract:

“The Purchaser acknowledges that they have read the Interim Occupation Certificate which is annexed hereto and further also acknowledges that they have read and understand the contents of condition no. 25 of Hornsby Shire Council Development Approval No. 370/99 in respect of Fire Control Team conditions annexed hereto requiring the creation of a Restriction as to User in accordance therewith. The Purchaser further acknowledges and understands the contents of the letter of submissions prepared by Ken Willis & Associates, Consulting Town Planners, addressed to the General Manager Hornsby Shire Council dated 16 November 2001 in support of an application pursuant to S96(1A) Modification of Consent No. 370/99 in respect of the subject land annexed hereto seeking to modify and to reduce the impact of condition no. 25 Fire Control Team conditions as contained in Hornsby Shire Council’s Development Approval No. 370/99 and in respect of which the Vendors will prior to completion create the modified Restriction as to User and shall comply with Council’s requirements in relation thereto and shall create and register such instrument pursuant to S88B of the Conveyancing Act 1919 as amended and the Purchaser hereby agrees not to make any objection, requisition or claim for compensation by reason of any delay occasioned by the compliance of the Vendor with such requirements of Hornsby Shire Council in relation to the approval, consent and registration in respect thereof whatsoever.”

9 The annexed interim occupation certificate included the following:

“The following matters are outstanding:
1. Compliance with condition No 25 of Development Consent No. 370/99.”

10 The development consent (also annexed) contained a clause 25 headed “Fire Control Team Conditions” running to 19 subclauses covering two pages. These provisions were concerned with measures to reduce risk of serious damage by fire, the property being in a wooded area with bushland adjoining. Of particular significance in the particular circumstances is clause 25.18:

“Any timber deck is to be constructed from hardwood and a minimum gap of 8mm is to be allowed between decking timbers. No part of the deck is to form an integral part of the dwellings structural integrity i.e. no cantilever beams are to be used. The area under any timber deck is to be kept free of all combustible materials.”

11 The “letter of submissions” referred to in special condition 18 was another annexure to the contract. It is a letter dated 16 November 2001 sent to the Council by Mr Willis, who had prepared and lodged the development application on behalf of the defendants in 1999. He was a consultant town planner retained by them in relation to their building project. In the letter of 16 November 2001, Mr Willis stated that clause 25.18 was the only aspect of condition 25 of the development consent causing difficulty: whereas the condition required, in clause 25.18, that timber decking be of hardwood with a spacing of not less than 8mm, the decking in place was of treated pine with a spacing of about 5mm. Mr Willis went on to say, however, that the clause 25.18 requirement was more stringent than the relevant Australian standard, AS 3959, although condition 25 was, he said, “obviously intended to require compliance of the structure with AS 3959”. On that basis, he regarded it as “commonsense” that condition 25 should be varied (this assessment may have been based on the fact that a related requirement referred to in clause 25.19 was expressed by reference to compliance with AS 3959). On the defendants’ behalf, he sought several modifications, including modification of clause 25.18 by deletion of “from hardwood and a minimum gap of 8mm is to be allowed between decking timbers” and insertion instead of “in accordance with Clause 3.13 of AS 3959”.

12 I mention next another aspect of condition 25 of the development consent, namely, the defendants’ stated intention of creating a restriction as to user as required by condition 25. It is not necessary to set out in full the relevant clauses of condition 25. It is sufficient to say that they contemplate the creation, pursuant to s.88B of the Conveyancing Act 1919, of a restrictive covenant in favour of the Council to ensure certain physical matters in relation to the land of a fire precautions kind. Special condition 18 made it clear that settling of the terms of the necessary s.88B instrument would be an element of the process of satisfying the condition 25 requirements, whether in their original form or as they might be varied as a result of the application made by Mr Willis.

13 It is clear that, as matters stood when the contract for sale was concluded on 26 November 2001, the interim occupation certificate the defendants then held would not be superseded or supplemented by a building certificate of the kind contemplated by special conditions 19 and 20 unless certain further work was done in relation to flyscreens, gutter guard encasing of poles in fire proof material and, in addition, either clause 25.18 of the development consent was satisfied by changing the construction of the deck to accord with the specifications set out in that clause or the attempts to obtain variation of clause 25.18 in the manner proposed in Mr Willis’s letter proved successful. It is also clear, in my judgment, that, at the time the contract was concluded, the defendants’ were prepared to do the work on the peripheral aspects and that their preferred solution with respect to clause 25.18 was that based on Mr Willis’s letter. As will be seen presently, they did not at that time appreciate what would be required, in terms of work, to satisfy clause 25.18 – indeed, the evidence suggests that neither of them was aware of what the clause said. They were pinning their hopes on Mr Willis’s succeeding in his attempts to persuade the Council to vary that clause. The evidence of Mr Pridham (who, at that point, was much more closely involved in matter than was Mr Jelacic) is that it was not until January 2002 that he appreciated what would be involved, in terms of additional work, in satisfying clause 25.18. The aspect related to the creation of the restrictive covenant was not, I think, seen as presenting any difficulty. It was merely a matter of settling the actual terms of the instrument with the Council.

14 In January 2002, Mr Willis met at the site with Mr Gunnee, an Inspector with the New South Wales Rural Fire Service whose functions extended to advising the Council on fire protection matters. The Council’s practice was apparently to work closely with the Rural Fire Service (specifically, Mr Gunnee) on planning matters involving properties exposed to particular bushfire risks. As a result of the meeting in January 2002, it appeared that Mr Gunnee’s main concern related to the decking timbers. Mr Willis thought that there was little, if any, chance of the Council’s modifying its position on the decking timbers and agreeing to the variation he had sought (the Council’s file contains a note by Mr Gunnee dated 18 January 2002 stating that “Fire Control” had examined the application made by Mr Willis and “are NOT, at this time prepared to offer any variation to those conditions originally recommended” [emphasis in original]) . Mr Willis made this position known to Mr Pridham soon after 11 January 2002.

15 Mr Pridham’s said in cross-examination that he spoke to Mr Gunnee in late January 2002 and asked whether, if the decking timber was replaced with hardwood, the Council’s requirements with respect to condition 25 would be satisfied. The cross-examination continued:

“Q. What do you say he said to you?
A. He said it was more complicated than that. He had said that the bearers and joists to the house were an integral part of the structure and it didn’t comply with condition 25.
Q. When he told you that, what was your action?
A. I said I’d ring him back. I didn’t realise that that was another requirement.
Q. On hearing it did you stop and think to yourself, if that’s what I have to do to get the building certificate, I have to do it?
A. No.
Q. You didn’t?
A. No.
Q. Why not?
A. Because it is as close to impossible as you can probably get in the building department.”

16 There is reference here to the part of clause 25.18 to the effect that no part of the deck was to form “an integral part of the dwellings [sic] structural integrity”. That, plus the stipulation that no cantilever beams were to be used, meant that the deck had to be, in effect, free standing. In fact it was not. As was made clear particularly in the evidence of Mr Jelacic, the house had been constructed in such a way that the beams supporting the outside deck extended into and formed part of the walled dwelling area in such a way that, had the beams been cut at the point where they proceeded from the deck into the house itself, the deck would have collapsed. With that aspect of clause 25.18 in place, the clause presented a significantly greater obstacle than simply replacing treated pine floorboards with differently spaced hardwood boards.

17 Once Mr Pridham came to realise this, he turned his mind to the possibility of alternative measures that might obviate the need for both replacement of the decking timbers and the major building work involved in bringing the supporting beams into compliance with clause 25.28. Some time around the end of January, he spoke to Mr Gunnee again and canvassed with him the idea of installing a sprinkler system that would cause water to be sprayed on relevant timbers in the event of fire, thus (it was no doubt hoped) allowing the decking and beams to remain as they were and to secure an appropriate variation of the clause 25.18 requirements. Mr Gunnee was sufficiently receptive to this idea to give Mr Pridham the name of a consultant in the relevant field. Mr Pridham contacted the consultant, Mr McMcMonnies of Building Code and Bushfire Hazard Solutions Pty Ltd.

18 Mr McMonnies provided to Mr Pridham a report dated 19 February 2002 from which it is clear that Mr McMonnies had undertaken a quite comprehensive review of the situation against the background of the development consent conditions. The report commences:

“This document relates to a Hornsby Shire Council Development Application approval No. 370/99 for the property known as 64 Hancock Drive Cherrybrook. The owner is seeking an alteration to Clauses 25.3.2, 25.18 and 25.19.”

Mr McMonnies said nothing about the sprinkler idea which, it seems, was not pursued. He did, however, formulate proposals allowing the treated pine flooring and the existing beams arrangement to continue, but in the context of additional safeguards, including laying of a non-combustible sheet as the final finish laid on top of timber work and enclosing of the underside of timber deck support joists in timber mesh screening secured by battens screw fixed to the base of the joists. Mr McMonnies’ idea, clarly enough, was that his report should form the basis of a renewed approach to the Council in an attempt to obtain some variation of the development consent conditions. Mr Pridham’s evidence was that the alternative put forward by Mr McMonnies was found to be unworkable as the additional material would put unacceptable extra stresses on the structure, while the covering of the floor would entail water run-off creating further drainage problems. It was apparently for these reasons that Mr McMonnies’ proposals were not placed before the Council by the defendants.

19 On 5 March 2002, the defendants’ solicitor, Mr Bassil, wrote to the Council on their instructions. He referred to the application for variation of the development consent condition 25 made by Mr Willis’s letter of 16 November and continued:

“We are instructed that council has not provided a formal response to the application and our clients have requested that we provide them with advice in relation to the matter which could be construed as a deemed refusal.
Before embarking upon litigation, we ask that you signify council’s willingness to discuss this matter further at a mutually convenient time in council’s chambers.
We await your early reply. In the event that we do not receive your reply within seven (7) days from the date hereof, we will presume that council does not wish to discuss this matter further and in particular, that council has refused our client’s Application for s.96 (1A) Modification of Consent No 370/99.”

20 On 12 March 2002, the Council town planner, Ms van der Zanden, replied to Mr Bassil’s letter, saying that, after discussions with Mr Willis on 5 March 2002, “tentative arrangements” had been made for an on-site meeting “to discuss some outstanding matters in relation to the abovementioned development application”. Such a meeting took place on 9 April 2002 and was attended by Mr Pridham, Mr Willis, Mr Gunnee and Ms van der Zanden. I accept as reliable the account of that meeting given by Mr Willis in paragraphs 21 and 22 of his affidavit:

“21. The meeting proceeded by discussion of the following individual items of concern which were raised and which were discussed.

· Treated pine decking used instead of hardwood, contrary to Condition 25.18.

Mr Pridham offered to change the decking from treated pine to hardwood and stated:
‘I am prepared to change the decking to hardwood in order to try to get the certificate’. (Referring to the Occupation Certificate for the building.)

· As to the joists supporting the decking timbers, it was stated that aluminium Alcor flashing needed to be placed on the joists prior to fixing of decking timbers.

Mr Pridham undertook to do this.

· It was suggested in respect of Condition 25.3.1 of the Development Approval that the underside of the house should be sheeted with fibro cement sheeting.

Mr Pridham stated ‘I am prepared to do that’.

· Metal screening on all opening windows and doors was required (to prevent the entry of sparks, hot ash and embers into any space or cavity wall etc as per clause 25.10/25.15 of the Conditions of Development Consent).

Mr Pridham undertook to do this to the building.

· A metal gutter guard was required – Condition 25.12.

Mr Pridham undertook to attend to this.
22. It was stated by Mrs Van Der Zanden at the meeting of 9 April 2002 that it appeared that there was now no need to modify the consent in the form that the application took and it should be withdrawn. I agreed to withdraw the application on behalf of the proprietor.”

21 The account of the meeting recorded in the Council’s file by Ms van der Zanden by way of file note of 9 April 2002 was as follows:

“Following on-site meeting of Tuesday 9 April, 2002, between applicant (Nigel Pridham) + Kelly v/d Zanden (HSC), it was resolved that applicant would take appropriate measures to protect against fire, in accordance with original DA plans, applicant is now willing to adhere to condition No 25.
Accordingly, it was resolved that the applicant withdraw the Section 96(1A) application and prior to the issue of an occupation certificate, Bill Gunnee will re-inspect the site to ensure all fire conditions have been satisfied in accordance with DA 370/99. Ken Willis to forward letter.”

22 After the meeting of 9 April 2002, the defendants undertook work on the property at a cost of some $25,600 for materials and labour, inclusive of GST. Mr Jelacic had spoken to the plaintiff after 9 April 2002 to tell her what was happening. He told her that the work would take about six weeks. The work was complete by the end of May 2002. Mr Gunnee inspected the property twice while the work was in progress, once on 19 April in company with Mr Pridham and again at the end of April. Mr Gunnee told Mr Pridham that he (Gunnee) would be away on holidays for most of May and that there was no one else who could take his place for inspections during that time. Mr Jelacic contacted Mr Gunnee some time in the period 26 to 28 June and told him the defendants were ready for his final inspection, whereupon Mr Gunnee said that he would carry out an inspection. Mr Jelacic’s evidence of what followed is in the following paragraphs of his affidavit:

“22. I later had a telephone conversation with Mr Gunnee and I said to him:
‘Is everything okay?’
Mr Gunnee said:
‘Everything is fine. In fact you have gone overboard but there is a small hole to be closed up. When you fix that, just fax the confirmation through to me. I won’t re-inspect. I will accept your word and I will forward a memo of my approval to the Building Section at Council.’
23. After 10.00 pm on 1 July 2002 I forwarded a fax to Mr Gunnee advising that the work had been completed, a copy of which is annexed hereto and marked with the letter ‘B’.
24. On or about 3 July 2002 I rang Mr Gunnee and said:
‘Have you sent the memo to the Building Section?’
He said:
‘I have received your fax, I’m going to be in the Cherrybrook area later today, I will inspect the required repair and if the works are done I will send the memo.’
I have not received any form of advice from Mr Gunnee relating to this matter.”

23 This was elaborated in the cross-examination of Mr Jelacic:

“Q: … [D]o you agree with me that in this conversation Mr Gunnee said to you something to the effect that all that is necessary to satisfy the fire control conditions is to do a small amount of work in one corner?
A. Yes.
Q. And he conveyed to you or you understood him to be saying to you that there really wasn’t much that required much work that required to be done before that problem was going to be sorted out?
A. Are you talking about my understanding? You know, we are talking about Mr Gunnee. I didn’t have an understanding because Mr Gunnee then told me that he wouldn’t require to go back and inspect, that if I sent a fax he would take my word on the fax being sent to him that the work had been done. When I rang him to tell him I faxed him and rang to confirm whether he received the fax, he then told me he was going to go out and actually inspect it. He told me he was going to do that that day. It was 3 July. I was aware Nigel was on site. I put Nigel on notice and he never turned up and never received any notice that he actually done it, so I had no confidence that it had been done.
Q. Brynmor Constructions sent a fax on or about 1 July to say you carried out the work that he mentioned?
A. Yes. I sent him a fax. I had no confident of it being received or anything being done about it.
Q. You sent him the fax because you had carried out the work that Mr Gunnee mentioned?
A. That’s correct.
Q. By 1 July as far as you understood there was nothing further to be done on you and Mr Pridham’s part to satisfy the council for fire control and condition 25?
A. I couldn’t say that, not in my mind at that time. I don’t know what would satisfy the council. I had no confidence whatsoever, and I wouldn’t say that.
Q. To the extent you had been given a checklist by the council of things to do?
A. I hadn’t got one.
Q. You were of the view that you had done all the things you had been told to do?
A. Hadn’t been given a checklist, Mr Gunnee gave us nothing on paper.
Q. You had done everything Mr Gunnee told you to do by 1 July?
A. I couldn’t say that because Mr Gunnee gave me instructions over the telephone, and I wasn’t sure what his instructions – whether what we did complied with the instructions until he checked the thing. I couldn’t be sure.
Q. But you attempted as best you could to comply with the instructions he had given?
A. Yes.
Q. So far as you were concerned, you had no reason to suppose that what you had done was not accurate?
A. Correct.”

24 After the events thus related, Mr Jelacic continued with attempts to bring matters to a conclusion and to obtain a building certificate. The steps he took are summarised as follows in paragraph 30 of his affidavit:

“(a) I arranged a site inspection from the Council on 23 August 2002 as shown by the documents which are Exhibit NDP1-9 (to the affidavit of Nigel Pridham sworn 29 October 2002).
(b) I provided a draft of a positive covenant to the Council by 23 August 2002.
(c) I completed the Application for a Building Certificate dated 4 October 2002, a copy of which is Exhibit NDP1-7 and lodged it with Council together with the necessary fee.
(d) I arranged a site inspection of the property on 11 October 2002 as shown by Exhibit NDP1-8.”

25 At Mr Jelacic’s request, the property was, on 23 August 2002, inspected by a Council officer, Mr Fredericks. His inspection report stated that certain matters (which were described) needed to be attended to and that a further inspection would be required. The report also contained the following notations:

“ * Note: Alteration to positive covenant to be checked by council.
* Council to seek confirmation from Bill Gunnee that deck and enclosed foundations are satisfactory.”

26 On 11 October 2002 – that is, one week after the lodgment by the defendants of an application for a building certificate - Mr Fredericks carried out another inspection and issued a report detailing work to be done. On 21 October 2002, Mr Fredericks wrote to Mr Jelacic as follows:

“Dear Sir/Madam
Application for Building Certificate – Section 49 (D) of the Environmental Planning & Assessment Act, 1979.
Premises: Lot 7420 DP 736848 (No. 64) Hancock Drive, Cherrybrook
_______________________________________________________
I refer to the above application.
A recent inspection of the site has revealed that the following matter(s) will need to be addressed to Council’s satisfaction, before a certificate can be issued:
1. Completion of a satisfactory final inspection relating to the dwelling house approved under Development Consent No. 370/99.
Yours faithfully”

27 Mr Fredericks gave evidence under subpoena. His involvement with the property began with the request by Mr Jelacic which resulted in the inspection of 23 August 2002. After becoming involved, Mr Fredericks had communication more than once with Mr Gunnee. Mr Fredericks became aware that, in Mr Gunnee’s opinion, the property had an adequate level of fire control. When considering the application for a building certificate, however, Mr Fredericks was concerned with more than Mr Gunnee’s view. This is made clear in the following part of his cross examination:

“Q. Despite what Mr Gunnee told you prior to 11 October, you still regarded the property as not being in compliance with what you regarded as the Fire Control Tem Conditions; is that correct?
A. Despite what he had said?
Q. Yes.
A. I was still ensuring compliance with the conditions of consent, yes.
Q. So that when your requirements, when I say yours I mean the council’s requirements, were necessarily different from Mr Gunnee’s requirements, it didn’t necessarily have to be identical?
A. I wouldn’t say they have to be. I was just ensuring that the conditions had been complied with. I can’t say what he was looking at. He is the fire control expert.
Q. Could I summarise it this way and you tell me if you agree. If Mr Gunnee said a property didn’t comply with Fire Control Team Conditions then there was no way that council would approve the property for fire control conditions?
A. That’s right.
Q. But conversely, if Mr Gunnee said that there was an adequate level of fire control in respect of the property, it didn’t necessarily mean that the council would pass the property in respect of fire control?
A. Once I was aware of that – I was still making sure that I was assuming that that is what I had to do, to make sure they complied, because there’s a lot of history involved. There’s a deck, there’s a property, it is quite confusing. My job is to make sure the conditions are complied. It wasn’t until recently I was informed by my senior, if Bill Gunnee says that, there is no need to file other conditions. I make sure all conditions are complied with. That’s my job. That’s what I go to do. I am not the expert in fire control.
Q. Who was the senior you were referring there?
A. Simon Evans is his name.
Q. When did that occur?
A. Only recently.
Q. How recently?
A. Prior to the letter of the 27th.
Q. So just prior to the 27th November, a couple of days prior?
A. Yes.”

28 It is clear from this that, until shortly before 27 November 2002, Mr Fredericks’ approach – no doubt reflected in his reports and generally in his dealings with the defendants – was that Mr Gunnee’s state of satisfaction was only part of the relevant issue and that there remained the wider question of satisfaction of the conditions of the original development consent. In the minds of the defendants, this included the major issue of the beams supporting the deck and the fact that they also supported the house. Correspondence between Mr Gunnee and the plaintiff’s solicitors in the lead-up to these proceedings makes it clear that Mr Gunnee realised that compliance with the condition concerning the beams, if literally enforced, would entail demolition of the house; also that, by the time he had come to find the situation acceptable, Mr Gunnee did not see drastic measures of that kind as necessary. As a result of the site meeting on 9 April 2002, the defendants had been led to think that the work they later carried out at a cost of over $26,000 would resolve matters and avoid the need for the variation of the development consent they had sought through Mr Willis. Having done that work, they sought appropriate confirmation from Mr Gunnee that all was satisfactory. Mr Gunnee’s response by phone to Mr Jelacic was that “everything is fine” and that the defendants had “gone overboard”, although there was still “a small hole to be closed up”. Mr Gunnee in due course provided to the Council a confirmation that matters had been attended to in a way that met his concerns.

29 When in the August to October period attempts were made to bring matters to a satisfactory documentary conclusion, the defendants initially found themselves in a position where Mr Gunnee’s apparent clearance was not seen as putting an end to matters and Mr Fredericks, the Council officer then working on the matter, approached his task by reference to the development consent conditions. But this approach on Mr Fredericks’ part was later modified. After the discussion with his superior officer referred to in the above transcript extract, Mr Fredericks proceeded on a different footing, namely, that if Mr Gunnee was happy with aspects relevant to fire protection, any non-compliance, in a literal sense, with condition 25 was not to operate as a barrier to the issue of a building certificate. It was this that caused Mr Fredericks to write to Mr Jelacic as follows on 27 November 2002:

“Dear Mr Jelacic:
Application for Building Certificate – Section 149 (D) of the Environmental Planning & Assessment Act, 1979.
Premises: Lot 7420 DP 736848 (No. 64) Hancock Drive, Cherrybrook
_______________________________________________________
I refer to the above application, the following matter(s) will need to be addressed to Council’s satisfaction, before a building certificate can be issued.
1. Complete the lower ground floor deck.
2. Amend Clause 16 of the 88B Instrument to include the following wording:
‘Decking timbers are to be hardwood and a minimum gap of 8mm is to be allowed between the decking timbers. Any exposed bearers or timbers forming part of any deck are to be fully protected from fire in accordance with relevant sections of AS 3959. The area under the timber deck is to be kept free of all combustible materials.’
3. The 88B Instrument shall be registered with the Land Titles Office, evidence of which shall be submitted to Hornsby Shire Council.
4. Once these matters have been addressed the Applicant shall apply for a final Occupation Certificate for Development Application No.370/99.
Upon issue of the Occupation Certificate the Building Certificate shall be issued under Section 149 (D) of the Environmental Planning & Assessment Act, 197.
Yours faithfully.”

30 Item 2 in this letter seems to me to make it clear that, as a practical matter, the Council had abandoned the part of the original clause 25.18 concerned with absence of beams supporting the deck also extending into and being part of the house. That aspect was effectively replaced by the requirement that beams be protected from fire in accordance with AS 3959. This reflected the de facto position reached at the meeting of 9 April 2002.

31 As a result of what transpired at the site meeting on 9 April 2002, the defendants were content to abandon their application for variation of the development consent condition 25. Both Ms van der Zanden and Mr Willis (professional town planners) seem to have been of the view that, with a program of work acceptable to Mr Gunnee having been identified in general terms and the defendants being willing to carry out that work, there was no need for the condition to be varied. Between mid-April and the end of May 2002, the defendants carried out works which they thought would meet the specifications laid down by Mr Gunnee at the meeting of 9 April. After the work had been done and Mr Gunnee became available again, he was asked to inspect the result and, having done so, expressed himself to be satisfied, save as to “a small hole to be closed up”. As to that one remaining matter, he asked to be given written confirmation when it had been completed. The confirmation was given on 1 July 2002. Thereafter, however, the defendants heard nothing from Mr Gunnee except for his statement to Mr Jelacic on or about 3 July 2002 that he would expect the property again later that day. The defendants did not any steps to pursue matters further with the Council until some time shortly before Mr Fredericks’ first inspection on 23 August 2002. The course of events in which Mr Fredericks was involved led to his letter of 27 November 2002 spelling out exactly what had to be done to obtain a building certificate.

32 The significance of the letter of 27 November 2002, so far as the Council’s position is concerned, emerges from the following part of Mr Fredericks’ cross-examination:

“Q. It appears, by looking at your letter of 27 November 2002, that the council appeared to have dropped the other two conditions which you referred to in the 11 October --
A. What were those two conditions, sorry?
Q. They were: Ensure that all the openings in the subfloor area are enclosed and protected and that the suggestion that they provide flashing along the top edge of the skylight?
A. Yes. They are not mentioned on that letter.
Q. I am just asking this. Does the fact that they are not mentioned in the letter mean that the council has dropped those requirements or not?
A. Yes.
Q. Was there any particular reason for that?
A. Because it was brought to my attention that Bill Gunnee was satisfied and therefore I didn’t need to seek compliance with those conditions.
Q. So, as far as you are concerned, the only outstanding matter was what you recall, complete the lower ground floor deck?
A. As of when?
Q. As of 27 November 2002?
A. The outstanding matters are those ones listed in the letter.
Q. I’m sorry, yes. So that we would still need to obtain the 88B instrument?
A. Yes.
Q. And we still need to obtain the final occupation certificate for the development application?
A. You still need to obtain those.
Q. And once we have got those items, then a building certificate might issue in respect of the property?
A. Yes.”

33 Read in conjunction with Mr Fredericks’ report of 23 August 2002 regarding the requirements to be met in order to obtain a final occupation certificate (all of which related effectively to the carrying out of particular works of a relatively minor kind) and Mr Fredericks’ evidence, the letter of 27 November 2002 represents what may safely be regarded as a blueprint for the obtaining of a building certificate. In the circumstances existing today (and as they have existed since 27 November 2002), I am satisfied that the defendants know perfectly well what they need to do to obtain a building certificate, that it is within their power to take all necessary steps without any difficulty and at relatively modest cost and that, upon completion of those steps, the Council will issue a building certificate.

34 If it was possible for the defendants to reach that position by 27 November 2002, it becomes necessary to ask whether they could, by the application of reasonable effort and diligence, have reached the same position before their purported rescission on 8 July 2002. In my view, they could have. Had the defendants pursued matters with greater diligence after the meeting of 9 April 2002 and completion of the work identified at that meeting, there is no reason to suppose that they could not have reached in a relatively short time the position that emerged clearly on 27 November 2002. The evidence makes it clear that Mr Gunnee was satisfied with the state of the building in early July; also that no work of any relevance to Mr Gunnee’s concerns was done after the end of May, except for the small amount that Mr Gunnee identified to Mr Jelacic in late June and which Mr Jelacic arranged to be done almost immediately. Mr Gunnee made it clear that all he needed at that point was Mr Jelacic’s written confirmation that the small amount of remaining work had been done. Mr Jelacic provided that by fax on 1 July 2002. It is true that Mr Gunnee then said that he would make another inspection and, so far as Mr Jelacic and Mr Pridham are aware, never did so. But it is disingenuous of Mr Jelacic to say, in effect, that he was then thrown into a virtually irreconcilable state of confusion and uncertainty as to the Council’s position. The work that had been done resolved Mr Gunnee’s concerns. That was made clear by Mr Gunnee in the conversation with Mr Jelacic related in paragraph 22 of the latter’s affidavit. The defendants could (and should) have proceeded in early July to take the steps involving Mr Fredericks that they eventually took much later. Had they done so and had they generally acted with greater application and diligence, there is no reason to think that the events involving Mr Fredericks, his acceptance of Mr Gunnee’s word as the final determinant on fire protection matters, the Council’s receipt of a positive report from Mr Gunnee and the final blueprint in Mr Fredericks’ letter of 27 November 2002 would not have unfolded in exactly the way they did, but at a much earlier time and in a much speedier fashion.

35 It seems to me clear that, on any objective assessment, the defendants should be taken to have been aware by early July that a building certificate was virtually within their grasp. They knew in early April what had to be done. They viewed Mr Gunnee as the key decision maker. They did everything he requested at the 9 April 2002 meeting and after Mr Gunnee’s inspection of late June. But, having attended to all those matters, they paused. The clear and logical logical course of action on the part of vendors committed to assuring to the purchaser the benefit of the contract would have been to follow up matters with the Council by way of application for the necessary certificate, secure in the knowledge that they had done everything that had been identified as necessary to satisfy the outstanding requirements. But, having reached such a position in early July where the opportunity to follow through and obtain the necessary building certificate had presented itself, they did not take that opportunity. Rather, they took the quite inconsistent course of giving notice on 8 July 2002 to rescind the contract.

36 It is necessary to refer briefly to the aspect concerning the restrictive covenant. It is true that the wording of the necessary instrument was not settled and that this prerequisite to the grant of a building certificate remained outstanding. But the wording cannot have been in any way difficult or controversial: indeed, the evidence suggests that the drafting was progressed smoothly and quickly once begun. This aspect therefore cannot be seen as any legitimate source of obstacle or delay.

37 It is also necessary to refer to the defendants’ stated reasons for not wishing to proceed with the contract. It was put to Mr Pridham that this unwillingness was a product of a belief on the defendants’ part that they could now get more than the contract price. He denied this, saying that he did not think that the value had increased since the sale and that, in any event, the defendants intended to keep the property and let it to tenants. Mr Jelacic explained the defendants’ fear that, because of the way the beams supporting the deck also supported the house, the defendants (or their associated building company) might be exposed to an ongoing risk of liability on the basis emerging from the High Court’s decision in Bryan v Maloney (1995) 182 CLR 609. As to the latter matter, it should be said at once that a vendor who, between contract and completion, develops an apprehension that the sale may expose him to a risk of theoretical future claims by a subsequent owner of the property is not thereby entitled to abandon his contractual obligations. The two matters mentioned are essentially irrelevant to the central question whether the defendants acted with the requisite degree of faithfulness to their bargain with the plaintiff.

38 The defendants sought to present the events involving the Council as some form of bureaucratic wilderness from which they could find no ready escape. There is some measure of justification in this, at least to the extent that apparently unusual fire protection issues arose and some uncertainty existed from time to time, so that the matter was outside the general run of cases. But a survey of the whole of the events makes it sufficiently clear that the real cause of the continuing absence of a building certificate must be laid at the feet of the defendants. In the weeks following the sale, they took no active steps towards satisfying the necessary conditions, pinning their hopes, as I have said, on Mr Willis’s succeeding in his attempts to persuade the Council to vary clause 25.18. That was a legitimate attitude at that stage but once it became clear that that strategy would not be successful, the onus was on the defendants to pursue the avenues clearly mapped out by the Council on 9 April 2002. I am satisfied that, at all subsequent stages, the Council acted with reasonable speed as and when requests were made of it. The weak link was the defendants’ lack of diligence and tenacity in making those requests (particularly the application for a building certificate) and keeping up a reasonable degree of pressure on the Council.

39 In my judgment, the circumstances which led to the defendants as vendors appearing to have the right of rescission purportedly exercised by them arose out of their own failures to comply with their contractual obligations to the plaintiff as purchaser. They did not take all reasonable actions that were appropriate or needful to be done to ensure that the building certificate was issued. Non-issue of the certificate resulted from the defendants’ breaches of contract. They have it within their power to obtain the issue of the certificate by taking the steps specified in items 1, 2, 3 and 4 of Mr Fredericks’ letter of 27 November 2002. Reliance by the defendants on the purported right of rescission should be prevented by the grant to the plaintiff of equitable remedies in enforcement of her rights as purchaser.

40 The plaintiff is entitled to the relief sought in the summons. Specific performance will not in this case entail an unacceptable degree of ongoing supervision by the court. The cross-claim must be dismissed and the defendants must pay the plaintiff’s costs. I direct that draft short minutes of orders giving effect to this judgment be prepared by the plaintiff and served on the defendants within 14 days from today; that any amendments sought by the defendants be notified to the plaintiff within 7 days of service of the draft short minutes; and that there be filed by delivery to my Associate not later than 28 days from today either agreed short minutes or the plaintiff’s draft short minutes plus the amendments sought by the defendants.

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Last Modified: 02/10/2003