Mitchell v Pattern Holdings Pty Ltd - [2002] NSWCA 212

NEW SOUTH WALES COURT OF APPEAL

CITATION: MITCHELL v. PATTERN HOLDINGS PTY. LIMITED [2002] NSWCA 212

FILE NUMBER(S):
40220/01

HEARING DATE(S): 01/11/2001

JUDGMENT DATE: 15/07/2002

PARTIES:
JOHN JAMES MITCHELL (Appellant)
PATTERN HOLDINGS PTY. LIMITED (Respondent)

JUDGMENT OF: Powell JA Stein JA Rolfe AJA

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): ED 4171/00

LOWER COURT JUDICIAL OFFICER: Windeyer J

COUNSEL:
T.G.R. Parker (Appellant)
B.A.J. Coles QC, S.J. White and Ms. N. Obrant (Respondent)

SOLICITORS:
Blake Dawson Waldron (Appellant)
Freidman Reeves (Respondent)

CATCHWORDS:
VENDOR AND PURCHASER - Contract for sale of strata lot "off the plan" - Contract conditional on registration of strata plan "substantially in accordance with draft strata plan - Whether strata plan ultimately registered substantially in accordance with draft strata plan - Whether vendor failed to use all reasonable efforts to secure registration of strata plan substantially in accordance with draft strata plan - Whether vendor entitled to terminate contract D

LEGISLATION CITED:
Strata Titles Act 1973

DECISION:
Appeal dismissed

JUDGMENT:

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40220/01
ED 4171/00
POWELL JA
STEIN JA
ROLFE AJA
15 July 2002

MITCHELL v. PATTERN HOLDINGS PTY. LIMITED

Judgment

POWELL JA: This is an appeal from a Judgment delivered, and orders made, by Windeyer J on 26 March 2001, on which day his Honour dismissed with costs the proceedings which had been brought by the Appellant (“Mr. Mitchell”) against the Respondent (“Pattern”).
In those proceedings Mr. Mitchell had sought (inter alia) an order for specific performance of a contract made between himself as purchaser and Pattern as vendor for the sale of a strata unit to be created in a building at 6 Silva Street, Tamarama, which building was owned by Pattern and which building Pattern was then proposing to redevelop and to be made the subject of a strata subdivision.
Silva Street, Tamarama is a street which runs roughly from South to North. At a point along its length, Silva Street intersects Dellview Lane which runs roughly from West to East. The building known as No. 6 Silva Street was located on the North Eastern corner of Silva Street and Dellview Lane. The land upon which the building known as No. 6 Silva Street was erected falls from North to South on the frontage to Silva Street and from West to East along its depth.
In 1998, the relevance of which time will shortly appear, the building known as No. 6 Silva Street was a block of four two bedroom rental flats – two on each of what might be called the ground floor and first floor – and, in what might be described as a basement area two lock up garages, (see Combined AB 132-135) the building being described as “of late 1920’s vintage” (see Combined AB 103).
Although – since the building plans which are with the papers (Combined AB 132-135) appear to be incomplete – it is not possible to know with any certainty exactly what was involved in the planned redevelopment of the building, it would seem that, in the basement area, behind one of the garages, a number of internal walls were intended to be removed so as to create a laundry and storage area as well as a shower room, that area, together with the garage in front of it, to become part of one of the units on the ground floor; that, on the ground floor, a number of internal walls were to be removed and, rearranged and, in addition, cantilevered balconies were to be provided at the Eastern end of each unit; that, on the first floor, internal walls were to be removed and the internal space altered in what was to become Unit 3; that similar works were to be carried out in the other flat on the first floor, that flat to form part of Unit 4, another part of which – to incorporate a second bathroom, a second bedroom and a balcony some 4 metres in depth – to be built into what had previously been the roof void, the final part of that lot to be a car space in the open to the East of the building at the basement level.
6 According to a report (Exhibit D – Combined AB 189) prepared in December 2000 by a Mr. Ryan, a town planner and real estate valuer, on 23 December 1998 there were lodged on behalf of Pattern with the Waverley Council Development and Construction Certificate applications. That report contained the following (inter alia) (Combined AB 194):
“DEVELOPMENT AND BUILDING WORKS
The development and building works for which approval was formally sought were:

parking for three cars
laundry and storage
4 x 2 bedroom apartments
addition of cantilevered balconies, and
addition of bedroom and bathroom within the roof area, with an area of 38.4m2 (an increase of 7.96% on existing building area of 482.2m2)
The Description of Development in the Construction Certificate Application was ‘Rear balconies, roof attic conversion’ and the Value of Work was stated as $65,000.00. The Value of Work is intended to reflect only the value of the work subject to the application – not the value of all renovation and fit-out works.
………”

On 6 January 1999, the Council forwarded to residents in the vicinity of No. 6 Silva Street a letter advising of the lodgment of the application, of the availability at the Council for inspection and of the opportunity to make submissions in relation to them. That letter provoked three letters of objection from residents, the common ground of objection being the extension from the roof line, the roof top balcony and the consequential impact on privacy and views (Combined AB 195).
An assessment by Stephen Grubits & Associates, made with a view to assessing the application in terms of fire safety, which was provided to the Council in late February 1999, identified 17 matters in which insufficient detail was provided in the application for an assessment to be made, and in which compliance was required and 3 matters of non-compliance which were stated to be mostly as “… a result of insufficient detail in the provided drawing”, and detailed solutions to some at least of the matters which it had identified (Combined AB 195).
In his report (Combined AB 195), Mr. Ryan noted that the Council’s records contained a Council’s record of site inspection dated 29 March 1999 “noting ‘… that illegal works have been carried out on the building before consent’, detailing those works (as demolition of internal walls, new concrete floors, replacement of ceilings, new internal plumbing) & detailing incorrect plans compared to works carried out”.
At its meeting on 8 May 1999, Council dealt with Pattern’s Development Application and resolved that consent be granted to it subject to conditions. For present purposes, it is sufficient to note the following conditions to which that consent was made subject (Combined AB 237-238):
“1.Compliance in all respects with Plan No. A01 tables and documentation prepared by Glenn Gilsenan and Associates dated November 1998, submitted 23 December 1998 except where amended by the following conditions of consent.
………
4.To reduce the potential for noise generation and the loss of beach views from adjoining properties, the four balconies extending from the living areas shall be reduced in depth from 2100mm to 1200mm. Details shall be submitted prior to issue of the construction certificate.
5.To reduce impact on surrounding properties, the proposed changes to the roof including the installation of a room and balcony to be deleted from the application.
6.The third carspace allocated at the rear of the property shall be deleted as it impedes the manoeuvring area.
………
8.Pursuant to Section 94 of the Environmental Planning and Assessment Act, 1979 and having regard to Council’s Housing policy and a result of the likely loss of rental housing for low to moderate income groups by the proposed development, the applicant/owner to contribute the sum of $56,064 to Council’s Housing Trust Fund. This contribution to be paid prior to the issue of the Construction Certificate.
………
10.Inadequate details have been provided to allow proper assessment with regard to fire and life safety. In accordance with the report prepared by S. Grubits and Associates (ref 98/385-R1- dated Feb. 1998), engineering solutions are to be submitted together with amendments required by development consent conditions prior to the issue of the construction certificate.
……….
14.The building work must not be commenced until:
(a)a Construction Certificate has been obtained from Council or an Accredited Certifier in accordance with Section 81A(2) of the Environmental Planning & Assessment Act, 1979; and
(b)a Principal Certifying Authority has been appointed and Council has been notified of the appointment in accordance with Section 81A(2)(b) of the Environmental Planning & Assessment Act, 1979 and Form 7 of the Schedule 1 of the Regulations; and
(c)Council is given at least two days notice in writing of intention to commence the building works.
The owner/applicant may make application to Council or an Accredited Certifier for the issue of a Construction Certificate and to be the Principal Certifying Authority.
Should Council be appointed the Principal Certifying Authority, the applicant/owner is to pay an inspection fee of $237.50 in accordance with Council’s Pricing Policy prior to the commencement of any works.”
Notification of that determination (Combined AB 236-240) appears to have been forwarded to Pattern on 19 May 1999.
On 11 June 1999, Pattern wrote to the General Manager of the Council, a letter which, so far as is relevant, was as follows (Combined AB 241):
“We are writing to Council to request a review of Councils (sic) consent LD.486/98 dated 19th May 1999, items No. 5 and No. 8.
Item No. 5
‘To reduce impact on surrounding properties’. The proposed changes to the roof including the installation of a roof and balcony to be deleted from the application. Council officers have considered this under Merit Assessment DEP NO. 1 – Multi Unit Housing that, ‘the additional floor space is considered satisfactory in this regards’ and Part (ii). The likely environmental, social or economic impacts of that development states that, ‘The development is unlikely to have a detrimental impact with regard to Environmental Impacts’.
The additional area within the roof has no effect upon the bulk or height of the building or physical effect upon the surrounding area. Council’s planners considered that this was acceptable, with the addition of obscure glass to the window, which the applicant concedes.
………
The applicant therefore asks Council to consider these two items as the development will not have noticeable impact on surrounding properties from an environmental or social position.”
It seems (Combined AB 42) to have been at about this time when, having seen, on the Internet, an advertisement (Combined AB 66) for the sale “off the plan” of proposed units in the property, Mr. Mitchell inspected the property in company with a Mr. Freund, an Associate Director of Elders Real Estate, Double Bay, which had been retained by Pattern as its agent. Following that inspection, and a later inspection with Mr. Freund and with a Mr. Hughes, a Director of Pattern, Mr. Mitchell negotiated to purchase the proposed Unit No. 2 – a price of $550,000.00 was then agreed upon.
On 21 July 1999, the Council’s Development and Building Unit considered Pattern’s request for a review of Conditions 5 and 8 of the Development Approval. The report which it made (Combined AB 244) contained the following (inter alia):
“PUBLIC SUBMISSIONS
The S82 application to review the determination was notified to previous objectors from June 21-July 5. One submission was received objecting to the proposal from No. 1/45 Fletcher Street owner/occupier. The concerns raised are in relation to a loss of privacy and potential for noise generation from the roof top balcony.
The existing roofline acts as a privacy screen for a depth of approximately 1.3 m. Beyond this, the deck extends a further 2.5m which is not screened. The reduction of the balcony by 1.5 m in depth would ensure privacy is retained and noise generation minimised. Otherwise the new room and balcony is considered satisfactory with regard to DCP No. 1 – Multi Unit Housing.
DBU Assessment
The DBU examined the applicant’s request and make the following comments:
Condition 5 – DBU were previously of the view that the proposed rooms within the roof space would not result in excess impacts on surrounding properties, particularly having regard to the rooms being generally contained wholly within the confines of the existing roof space. It is considered appropriate that the proposed balcony be reduced in size so as to reduce privacy concerns for surrounding properties. In this regard, a balcony depth of 1.5 m is considered appropriate.
……….”
On 26 July 1999, contracts for the sale and purchase of Unit 2 were exchanged and a deposit of $82,500.00, being 15% of the agreed purchase price, paid. In the contract, the property was described as “2/6 Silva Street, Tamarama”. In addition to the standard conditions contained in the 1996 edition of the contract for the sale of land, the contract contained the following (inter alia) Additional Conditions (Combined AB 153-154):
“1.1 Definitions
In these Additional Conditions, unless a contrary intention appears:
……….
‘Property’ means the property described in this contract.
‘Strata Plan’ means the strata plan substantially in accordance with the draft strata plan (a copy of which is annexed hereto).
………
2. Registration of Strata Plan
2. Completion of this contract is subject to and conditional on registration by the Registrar General of the Strata Plan.
2.2The vendor must use all reasonable endeavours to procure the registration by the Registrar General of the Strata Plan.
2.3The purchaser acknowledges that:
2.3.1.The Strata Plan is provisional and subject to final approval by the vendor and any Authority;
2.3.2.The vendor reserves the right in its reasonable discretion and without reference to the purchaser to vary or amend the Strata Plan.
2.3.3.The vendor must not make any variations or amendments to the Strata Plan which substantially and detrimentally directly affect the property to an extent which is other than minor unless the variation or amendment is required or made by an Authority or the Registrar General.
2.3.4.If on registration of the Strata Plan there are any variations or amendments which substantially and detrimentally affect the property to an extent is (sic) other than minor, the purchaser may rescind this contract by written notice to the vendor whereupon the provisions of clause 19 shall apply. In this additional condition 2.3.4 a ‘minor’ variation or amendment includes a variation of the area of the properly (sic) or the common property by not more than 10%.
2.3.5.The right of rescission under additional condition 2.3.4 must, to be effective, be exercised by the purchaser within 14 days after the purchaser receives written notice from the vendor that the Strata Plan has been registered.
2.3.6.If the purchaser does not exercise his right of rescission under additional condition 2.3.4 within the time required under additional condition 1.3.5 (sic) the right of rescission conferred on the purchaser under additional condition 2.3.4 shall lapse and this contract shall remain binding in all respects.
2.4If the Strata Plan is not registered within 12 months of the date of making this contract either party may rescind this contract in which event the provisions of Clause 19 shall apply.
………..”
(The draft Strata Plan referred to is to be found at Combined AB 169-170.)
On 27 July 1999 (Combined AB 197), Council resolved to adopt the recommendation of its Development and Building Unit to the extent to which it proposed the variation of Condition 5.
Thereafter, on 9 August 1999, the Council’s Building Services Manager wrote to Pattern a letter which, so far as is relevant, was as follows (Combined AB 243):
“
………
I have to advise you that after considering your submission, Council has resolved as follows:
1.That condition No. 5 of Council’s development consent determined on 8 May 1999, be deleted and the following condition be imposed:
‘To reduce the impact on surrounding properties, the roof balcony depth is to be reduced to a maximum of 1.5 m.’
2.That Condition No. 8 of Council’s Development Consent determined on 8 May 1999 be reaffirmed.”
Mr. Ryan’s report records the following matters which he ascertained upon an inspection of the Council’s records (Combined AB 197):
(a)on 26 September 1999 Council received a letter dated September 24, 1999 from Trevor Howse & Associates Pty. Limited:
(i)advising of its engagement to assess the “Construction Certificate Application” (i.e. notifying of its appointment of “Accredited Certifier” – a status created by legislation to facilitate assessment of such applications by a building expert as an alternative to a Council officer) and
(ii)requesting clarification of Council’s position on Condition of Consent No. 10, about fire safety;
(b)on October 25, 1999, Council wrote to Trevor Howse & Associates Pty. Ltd. clarifying its position on Condition of Consent No. 10, stating that information available on fire safety is acceptable;
(c)on October 26, 1999, payment was made to the Council by Pattern of s94 levy, long service leave levy and damage deposit;
(d)on November 2, 1999, Council received Construction Certificate dated October 29, 1999 issued by Trevor R. Howse & Associates Pty. Ltd. as Accredited Certifier.
Meantime, so it would seem, Council had received from a neighbour a complaint that the roof top balcony was being built contrary to the conditions of consent which complaint appears then to have been referred to Trevor R. Howse & Associates Pty. Ltd (Combined AB 198).
On 17 November 1999, Trevor R. Howse & Associates Pty. Ltd. wrote to Pattern a letter (Combined AB 245) which letter, omitting formal parts, was as follows:
“RE: 6 SILVA STREET, TUMARAMA (SIC)
CONSTRUCTION CERTIFICATE
It has been brought to the attention of this office that the construction works are proceeding not in accordance with the plans approved by Waverley Council’s Development Consent 486/98 determined on 8 May 1999.
The works relate to the balcony of Unit 4, which is larger than that approved by Council. Accordingly, you are requested to construct building works in accordance with the approved plans.
You are advised that failure to comply with Development Consent may result in orders being issued by Council under the provisions of the Environmental Planning and Assessment Act.
Should you wish to discuss any of the above, please do not hesitate to contact the undersigned or the representative of Waverley Council.”
Notwithstanding the terms of that letter, further complaints were received by Council from neighbours concerning unauthorised works. Among those complaints was one dated February 14, 2000, from a Mr. and Mrs. Gasser who appear to have been the complainants living in 45 Fletcher Street referred to in the Development and Building Unit Report of July 1999 to which I have earlier (para. 14 (above)) referred. A note by a council officer appearing on that complaint (Combined AB 246) was in the following terms:
“Spoke to neighbour regarding the alleged work. At present there is no balustrading around the roof deck. Therefore we are unable to determine whether the applicant has carried out unauthorised work contrary to conditions. When a final is given or by insp. we take action.”
These further complaints appear to have been referred to Trevor R. Howse & Associates Pty. Ltd. which, on 18 February 2000, wrote to Pattern a further letter (Combined AB 247) which, omitting formal parts, was as follows:
“RE: 6 SILVA STREET, TUMARAMA (SIC)
NOTICE TO COMPLY WITH DEVELOPMENT CONSENT
Further to our correspondence in November 1999, it has been brought to the attention of this office that the construction works are not proceeding in accordance with the plans approved by Waverley Council’s Development Consent 486/98 determined on 8 May 1999.
The works relate to the balcony of Unit 4, which is larger than that approved by Council.
Take Notice that under Sections 109L and 121H of the Environmental Planning and Assessment Act, that failure to comply with the Development Consent may result in orders being issued by Council.
It is the responsibility of this office to not issue an occupation certificate at completion unless the building work complies with the approval of Council. Should you wish to discuss any aspect of the above, please do not hesitate to contact the undersigned or the representative of Waverley Council.”

Mr. Ryan’s report (Combined AB 198-199) records that, on February 28, 2000, Pattern applied (DA 120 /00) to Council for strata subdivision, at which time the Council’s Statutory Planner discovered that the plans used by Trevor R. Howse & Associates Pty. Ltd. to support its issue of a Construction Certificate on October 29, 1999, were incorrect, in that they showed:
(a)roof top balcony exceeded depth and area permitted by Conditions of Consent dated May 8, 1999;
(b)floor plan area of room in roof top exceeded conditions of consent;
(c)wall shape in roof top was different to (sic) that shown in previously submitted plans; and
(d)roof top void was in the wrong location to (sic) that shown in the previously submitted plans.
Council’s Statutory Planner then apparently made a note:
“Please ensure a condition is placed on any consent (to application for strata subdivision) that requires an Occ. Cert. being issued.”
Mr. Ryan noted in respect of the note by Council’s Statutory Planner:
“This is a reminder of the need to:
1.not issue an unconditional approval to the strata subdivision application, and
2.to make any approval conditional upon prior completion of building works consistent with the Conditions of Development Consent to justify issue of an Occupation Certificate.”
The letter from Trevor R. Howse & Associates Pty. Ltd. of 18 February 2000 (para. 22 (above)) appears to have provoked the letter (Combined AB 248-249) written by Mr. Hughes on behalf of Pattern to the Council dated 8 March 2000, which letter was as follows:
“RE: SECTION 96(1) OBJECTION
6 SILVA STREET, TAMARAMA
LD486/98 MR:BF
CONDITION NO. 5 OF COUNCILS (SIC) CONSENT
I refer to your letter dated 6 August 1999 stating that condition number 5 states ‘To reduce the impact on surrounding properties, the roof balcony depth is to be reduced to a maximum of 1.5 m’.
We wish to object to this condition as we believe that it will not deliver a realistic outcome as a useable balcony and that the condition is related to an objection by only one of many adjoining neighbours.
The condition requires the depth of the balcony be reduced to 1.5 m. This would give a railing height of 1.4m which would not allow an outlook from the bedroom and would create a confined atmosphere to the bedroom.
The objectors D & H Gasser has stated that there (sic) living area will be directly overlooked and that the balcony will create a high level of ambient noise which will both (sic) contribute to a low (sic) of the value of their unit.
Firstly, the living room that they refer to in their letter is really an enclosed balcony which as far as records reveal was never formally approved and seems to be used as an office rather than a living room.
Prior to any redevelopment of No. 6 Silva Street, there were already balconies in the ajoining (sic) building no. 4 Silva Street, that are closer to the objectors and pose more of a concern.
The upper level balcony is completely open which would create less noise transmission than enclosed one (sic) which would create should reverberation through the roof (sic).
The upper level balcony can be seen from the street and for the following reasons is better open ie
(a)Sound building construction for the drainage of the balcony.
(b)The view from the balcony is in the complete opposite direction from the objectors (sic) unit.
(c)The open balcony will enhance the outlook from the upper level towards the south east and away from the objectors.
We therefore ask council to reconsider this condition and for the original design of fully open balcony to be approved.”
The letter from Pattern to the Council was not formalised as an “Application to Modify a Consent” and was not dealt with by the Council as such. However, it would appear that a partly completed Application to Modify a Consent seeking to modify the conditions in respect of the roof top balcony was lodged on 16 March 2000 (Combined AB 199).
A note made by the Council’s Statutory Planner for the purposes of the Council’s file relating to the application for strata subdivision and dated 19 May 2000 is as follows (Combined AB 250):
“Meeting with applicant and architect Glen Gilsenan. Indicated changes required to strata plans, Unit 2 size and balcony reduction. Also indicated that illegal work performed to Unit 4 would require a section 96 modification to be submitted and assessed by Council.”
That conference appears to have provoked the lodging of a formal Application to Modify Consent, which application appears to have been received by Council on 8 June 2000 (Combined AB 251).
In a report by the Council’s Development and Building Unit dated 14 August 2000, the application was described as follows (Combined AB 251):
“The application is for a Section 96 modification requesting Council approval for internal alterations to the approved upper unit area including an increase to the bathroom size, relocation of void area plus modifications to size of balcony area to residential flat building currently undergoing alterations at 6 Silva Street, Tamarama.”
The application was notified to adjoining owners and occupiers, following which objections were received from the Body Corporate for the building known as 4 Silva Street, Tamarama, from one of the occupiers of Unit 4 in that building, from the Body Corporate for the building known as 45 Fletcher Street, Tamarama and from the occupiers of two of the units in that building, those occupiers including Mr. and Mrs. Gasser. In each case, the objection which was received related to the request for modification of Condition 5 in the Development Consent so as to increase the size of the proposed balcony area (Combined AB 255).
However, before the report by the Council’s Development and Building Unit had been prepared, Pattern’s solicitors, on 11 August 2000, wrote to Mr. Mitchell’s solicitors, a letter in the following terms (Combined AB 67-68):
“RE: PATTERN HOLDINGS PTY. LIMITED SALE TO MITCHELL
PPTY: 2/6 SILVA STREET, TAMARAMA
We refer to your letter of 15 June 2000 and advise that this firm has now been instructed to act for Pattern Holdings Pty. Limited in relation to the above matter.
We note that the contract for sale was dated on 26 July 1999 and Clause 2.4 of the contract states;
‘If the strata plan is not registered within 12 months of the date of making this agreement either party may rescind this contract in which event the provisions of Clause 19 shall apply.’
We note that the 12 months expired on 26 July 2000 and the Strata Plan is still not registered.
Contrary to your clients assertions as set out in your correspondence to C.P. Lucas & Co we are instructed that our client has diligently pursued strata approval with Waverley Council but has encountered enormous problems and is now faced with the prospect that the strata plan may not issue.
In this regard our client is now forced to look at alternatives, including company title.
Having regard to the above we are instructed to give a Notice of Termination of the contract dated 26 July 1999.
Our client will authorise the selling agent, Elders Double Bay, to refund the deposit plus all of the accrued interest and our client will refund the $4,000.00 paid by your client to our clients (sic) electrician for special lighting.”
(A formal Notice of Termination (Combined AB 69) was enclosed with that letter.)
The Summary and Recommendation contained in the report of the Council’s Development and Building Unit to which I have earlier referred (para. 28 (above)) were in the following terms (Combined AB 256):
“
SUMMARY
The application has been assessed against the relevant provisions of Sections 79C and 96 of the Environmental Planning & Assessment Act 1979 (as amended); Council Codes and Policies and taken into account the submissions received. It is generally not considered that the proposed internal alterations will create any loss of amenities for adjoining residents. Located within the existing roof area, the proposed modifications are considered ‘hidden’ and generally minor in nature.
The proposed increase in size to the balcony area is not considered acceptable. An increased length is considered will impact (sic) upon residential dwellings primarily to the north east of the site via increased overlooking and noise concerns. The retention of a 1.5m depth for the balcony from the bedroom wall is not considered unacceptable for users noting a 1.2m height allowed to its edge with the roof falling, allowing to view retention, solar access and ventilation.
The proposed modifications are therefore considered acceptable subject to the retention of the existing 1.5m balcony depth.
RECOMMENDATION
That Council as the consent authority grant Development Consent for the proposed modifications under Section 96 of the Environmental Planning and Assessment Act 1979 (as amended) for Development Application at 6 Silva Street, Tamarama subject to the following.
Condition 1 to be amended to read as follows:
1.The proposed development being carried out in accordance with the Development Application approved 8th May, 1999 review of conditions approved 9th August, 1999 and to conform with amended Plan Drawing No. A 01, dated November, 1998, prepared by Glen Gilsenan and Associates, received by Council on 6th June 2000.
That Condition No. 5 of Counsel’s Development Consent (determined following a request for review of conditions, dated 9th August, 1999) be reaffirmed.
All other conditions of Development Consent 486/98 dated 8th May 2000 (sic) and REVIEW dated 9th August, 1999 are reaffirmed.”
On 4 September 2000 Mr. Mitchell’s solicitors forwarded to Pattern’s solicitors by facsimile a letter (Combined AB 70) reading as follows:
“MITHCELL (sic) PURCHASE FROM PATTERN HOLDINGS PTY. LIMITED
PROPERTY: 2/6 SILVA STREET, TAMARAMA NSW.
We refer to your letter 11 August 2000.
We are instructed to advise that our client disputes that your client has diligently pursued approval of the Strata Plan of Sub-division under the Contract and we again confirm our clients (sic) advice and belief that your client has not used all reasonable endeavours to have the draft plan of sub-division under the Contract registered within 12 months of the date of making the Contract.
It is on the above basis that our client disputes the validity of the Notice of Termination dated 11 August 2000.
We put both you and your client on notice that our client intends to pursue its (sic) claim and interest under the Contract and will take all necessary legal action to enforce its (sic) interest under this Contract.”
On the same day, the Council’s Manager Statutory Planning wrote to Pattern a letter (Combined AB 260) which was in the following terms:
“MODIFICATION OF DEVELOPMENT CONSENT LD486/98
6 SILVA STREET, TAMARAMA
I refer to your application to Council for modification of Development Consent (LD 486/98 dated May 8, 1999) granted for the above property.
After considering all relevant issues, your application has been approved, subject to the following:
AMEND CONDITION NO. 1
At the end of this condition add … ‘No approval is expressed or implied to the proposed amendment to the roof balcony in terms of its depth of 2.5m when measured from the outer wall face of the bedroom 1’.
ADVISORY NOTE:
That the unauthorised work to the roof balcony, contrary to Condition C No. 5, resulting from a Review by Council is to be rectified to meet the intent of said condition No. 5 to within twenty-one (21) days from the date of the Notice of Determination.
ALL OTHER CONDITIONS FOR DEVELOPMENT CONSENT LD 486/98, DATED MAY 8, 1999 ARE REAFFIRMED.
Should you have any inquiries please do not hesitate to contact me on telephone 9369 8044.”
A facsimile transmission, apparently sent on 13 September 2000 from Trevor R. Howse & Associates Pty. Ltd. to Mr. Hughes (Combined AB 261) was as follows:
“COMMENTS:
Reference is made to the telephone conversation today with John Hughes.
I have discussed the matter of he reduction of the balcony with Michael Buckley of Waverley Council with particular reference the installation of a planter box and the impacts of such in relation to the release of any strata plan.
Mr. Buckley advised that the proposal for the installation of the planter box to the (sic) considered during his recent discussions with yourselves and was subsequently put to the Councillor’s (sic), however, it was not supported.
It is considered that a reasonable interpretation of the wording of the condition gives scope for the installation of a planter box, as the condition only calls for the reduction of the balcony and does not state the method of achieving such (e.g. the retention of the roof area). Mr. Buckley agrees that the wording of the condition does allow for scope in it’s (sic) interpretation, however, Council is adamant that the roof must be reinstated.
Whilst it may be possible to issue an Occupation Certificate for the building with a ‘planter box’ reduction, Council remains responsible for the issue of the strata plan and accordingly, may refuse to do so. Therefore, the options that remain are for you to continue attempting to convince Council otherwise or comply with their requirements. It is considered that the latter is more likely to result in the expeditious release of the strata plan.”
Subsequent events would indicate that that advice was accepted by Pattern.
On 20 September 2000, Council determined Pattern’s application for strata subdivision. Insofar as is relevant, the Notice of Determination, was as follows (Combined AB 262-263):
“Your Development Application to strata subdivision of residential flat building containing 4 Units currently completed alterations and additions
at 6 Silva Street, Tamarama
has been determined by consent being granted subject to conditions itemised in Attachment 1.
……….
CONDITIONS OF CONSENT
1.Compliance in all respects with Plan Surveyors Reference No. 5288B, Sheets 1 and 2, prepared by Christopher C. Robertson printed 22 February, 2000 and submitted with LD 120/00 received by Council on 13th September 2000.
2.A linen plan and six copies are to be submitted to Council’s Planning and Environmental Services Department.
3.Prior to the registration of the linen plans a Subdivision Certificate must be obtained from Council or an accredited certifier in accordance with Section 109c(d)(sic) of the Environmental Planning and Assessment Act 1979.”
(The plan referred to in condition 1 is to be found at Combined AB 130-131.)
Mr. Ryan’s report records (Combined AB 200):
(a)that on September 26, 2000 Pattern submitted building plans for final inspection and stamping;
(b)that on 26 October 2000 Council issued “linen plans”, which plans were collected by Pattern on October 30, 2000.
Meantime, the proceedings with which Windeyer J was concerned to deal were commenced by a Statement of Claim filed on 11 October 2000 (RAB 1-6).
Since the Council sealed the linen plans and issued them to Pattern, one can but assume that the linen plans were in the form of the plan which had been prepared by Mr. Robertson in February 2000 but amended so as to reduce the depth of the balcony adjoining “bedroom 1” to 1.5m. If this be so, then the differences between the draft strata plan included in the contract and the plan which, so one assumes, has since been registered, are as follows (Combined AB 208);
a.the Level 4 floor plan area is fundamentally different in configuration and plan area and the depth of the roof top balcony has been significantly reduced;
b. the Level 4 “void” is now shown on the opposite side of the structure from its original position in the contract plan;
c.the Level 3 common wall position at the Eastern end is reversed from that shown in the contract plan changing the Level 3 floor plan of both lots 3 and 4 by 10%;
d.the Level 1 store reveals a significantly larger plan area from that in the contract plan.
Of these differences, the only one which related to Lot 2 was that related to the Level 1 store which, together with Garage 2, was part of Lot 2.
The Strata Plan was registered as SP64230 on 6 November 2000 (Combined AB 185-186).
In the course of his cross-examination at trial, Mr. Ryan gave the following evidence (Combined AB 17-19):
“Q. Are you aware whether the plans lodged with the Council in respect of the roof top balcony provided for an area of 15.96 square metres? A. I am not aware of the specific area that was provided in the original plans.
Q. I want you to assume that’s what the building plans originally provided for; alright? A. Yes.
Q. And if you assume that the review by the Council, limiting the depth of the top floor balcony to 1.5 metres resulted in an area of 5.98 square metres? A. Right.
Q. That results in a loss of balcony area of 10 square metres? A. sure.
Q. And that would in your experience as a town planner and no doubt having inspected many properties and indeed you were a valuer at one stage; were you not? A. Yes.
Q. Would result in a substantial change of use in respect of that balcony? A. In planning and valuation parlance, not a substantial change of use, a change of use. It is one part of the whole.
Q. I am directing your mind to this balcony at the moment? A. Right.
Q. You have a balcony which was originally 15.96 square metres and it is now 5.98 square metres. Now, that would result in a substantial change in the use of that balcony; would it not? A. It remains a balcony. I don’t know that, except for a change in the area of the balcony.
………
Q. That balcony of 4 metres in depth you would agree with me would have been a significant selling point in relation to that unit? A. Yes I have.
Q. You could expect, could you not, that if the balcony in respect of that penthouse unit was reduced in size of the kind we have been talking about, would have an adverse impact in the selling price of that unit? A. I would suggest that it would effect (sic) marketability, ease of sale, quickness of sale, more than it would measurable affect the price one could achieve.
Q. Are you suggesting that a balcony on the top floor of this building which is reduced in size from 15.96 square metres to 5.98 metres wouldn’t materially adversely affect the selling price of that unit? A. I didn’t say it wouldn’t materially affect it. I said it would affect marketability rather than being able to measure the exact amount in 10,000 or 5,000 or $50,000 terms.
Q. Leaving aside trying to work out the precise figures, it would have a material adverse effect on the selling price? A. It would have a materially adverse effect, yes.”
In the Statement of Claim which was filed on his behalf, Mr. Mitchell alleged (inter alia):
“4.On 26 July 1999, the defendant and the plaintiff made a contract (‘the Contract’) for the sale by the defendant to the plaintiff of unit number two in the Plan (‘the Unit’), at a price of $550,000.00.
5.The following were terms of the Contract:
………
5.2The defendant must use all reasonable endeavours to procure the registration by the Registrar General of a strata plan substantially in accordance with the Plan (‘Special Condition 2.2’).
5.3If a strata plan substantially in accordance with the Plan was not registered within 12 months of the date of the Contract (that is, 27 July 2000) either party might rescind the Contract in which event the provisions of clause 19 of the printed form contained in the Contract would apply (‘Special Condition 2.4’).
5.4.The vendor could only rescind the Contract pursuant to Special Condition 2.4 if it had complied with its obligations under Special Condition 2.2.
………
7.On or about 11 August 2000 a notice purporting to terminate the Contract pursuant to section 2.4 of the Special Conditions (‘the Notice’) was sent by the defendant’s solicitor to the then solicitor for the plaintiff.
8.As at the date of issue of the Notice, the defendant had not used all reasonable endeavours to procure the registration by the Registrar General of a strata plan substantially in accordance with the Plan.
9.By reason of the defendant’s breach of its obligations under the Contract, the Notice was invalid.
10.Further, at all material times from July 1999 onwards, the defendant led the plaintiff to expect that:
(a)the Unit belonged to him; and
(b)the defendant would not rely upon Special Condition 2.4 to rescind the Contract.
11.In reliance on that expectation, the Plaintiff decorated and arranged for certain improvements to the Unit.
………
12.At all material times the defendant encouraged, or was aware of and did not prevent, the plaintiff from altering, taking delivery of or organising the installation of the decoration and the carrying out of those improvements.
13.By reason of the matters set out in paragraphs 10, 11 and 12 above, the defendant is estopped from treating the Notice as valid and effective to rescind the Contract.
14.Further, the issue by the defendant was the Notice was:
(a)not bona fide;
(b) not in accordance with the terms of the Contract;
(c)not reasonable; and
(d) reckless,
and accordingly the defendant is not entitled to rely upon the Notice.”

Save that in paragraph 2(b) of the Defence which was filed on its behalf, Pattern did not admit sub-paragraph 5.4 of the Statement of Claim, it is not necessary otherwise to record the terms of the Defence. However, the following passage (Combined AB 5) in the course of discussion which took place at the commencement of the hearing before Windeyer J should be noted:
“WHITE: …
In relation to the four points that my friend raised, can I deal with them very quickly in this way? In relation to the implied term, he submitted should be incorporated into this contract. We do not dispute that such an implied term would be so imputed, indeed, the express term in the contract is to that effect.
HIS HONOUR: To make it quite clear, the term claimed in paragraph 5.4 of the statement of claim which was subject to a non-admission in the defence is now admitted; is that correct?
WHITE: Yes.
HIS HONOUR: It can be noted then that paragraph 5.4 of the statement of claim is now admitted.”
Nor is it necessary to refer to the terms of the Cross-Claim which was filed on Pattern’s behalf in January 2001 as, on the hearing before Windeyer J (Combined AB 4), his Honour, on Pattern’s application, ordered that the Cross-Claim be dismissed and that Pattern pay Mr. Mitchell’s costs of the Cross-Claim.
In the course of his Judgment, Windeyer J wrote (RAB 25):
“Issues
21.It is admitted that the vendor could only rescind pursuant to Special Condition 2.4 if it had complied with its obligation under Special Condition 2.2. The principal question is whether it had done so. The second issue was whether or not the defendant should be estopped from relying on Special Condition 2.4 because it had represented to the plaintiff the unit belonged to him and it would not do so and thereby it caused the plaintiff to assume the condition would not be relied upon so that in reliance on this he expended money on the improvements to the unit. The third claim of the plaintiff is that the issue of the Notice was not bone fide nor in accordance with the contract, nor reasonable, and was reckless so as to preclude the defendant from relying upon it.
The evidence
22.No affidavits were read by the defendant but certain documentary evidence was tendered by it. The main evidence of the plaintiff consisted of his affidavit sworn on 10 October 2000 and an expert’s report of Mr. Ryan, a well qualified property consultant, experienced in Local Council planning and previously a valuer. The evidence of the plaintiff was directed toward his conversations with Mr. Adam Hughes and the part he took in planing the upgrading of Unit 2 and the moneys expended by him on the project. The report of Mr. Ryan was directed to the questions of delay in obtaining registration of the strata plan. It may be for this reason that the real defence to the plaintiff’s claim was not apparent at least to me until Mr. Ryan was cross-examined. It then became apparent that the real question to be determined was whether or not the strata plan which was ultimately approved was one ‘substantially in accordance with the draft strata plan’ annexed to the contract. I assume that while has caused me some surprise (sic) it did not surprise counsel for the plaintiff as no opportunity was sought to lead further evidence on this subject.”
Later, under a heading “The Strata Plan” Windeyer J, after referring to the passage in Mr. Ryan’s evidence which I have set out above (para. 41 (above)) wrote (RAB 26-29):
“26.It is clear from the material included in Mr. Ryan’s report that the defendant expended a great deal of time an energy trying to build the large balcony, even to the point of carrying out illegal and unauthorised work. It is clear that, from the defendant’s perspective, there was a substantial difference between the two balconies. This is important because while the Council’s original conditions of consent prohibited any work on the rooftop bedroom and balcony, from the date of the amended consent, 27 July 1999, the smaller balcony was approved. Once Trevor R. Howse & Associates were engaged, the fire safety requirements met and levies paid, the defendant was in a position to finish the development and obtain approval for its strata plan. This all happened by October 1999. I accept it would have been unreasonable delay for the defendant not to have the strata plan registered in time unless it was entitled to pursue the large balcony. It was this pursuit that delayed the registration of the strata plan and took it beyond the contract period. If the defendant was in a position to register a strata plan within that period substantially in accordance with the draft, albeit with the smaller balcony, then it would be unreasonable of it to delay that registration. The question is whether a strata plan with the smaller balcony would be substantially in accordance with the draft strata plan. Mr. Ryan agreed that the defendant could not have convinced Council to consent to the larger balcony – that I think is clear.
27.I have come to the conclusion that the strata plan as approved is not substantially in accordance with that attached to the contract. Unit 4 is the most expensive unit in the development. I consider it reasonably obvious that a further 10 square metres of balcony with ocean views would substantially enhance its value. It was not unreasonable for the vendors (sic) to pursue this. The developer/vendor is entitled to rely on the draft strata plan in each of its sales and if that plan cannot be registered after proper efforts to obtain consent then it is not at fault. I have considered whether the absence of evidence from the defendant should bear on this so that without it I should conclude that there was no substantial difference. The question is one of objective fact: there is no evidence available other than inspection of the plan to show from the plaintiff’s point of view the approved plan was substantially in accordance with the draft. The evidence of Mr. Ryan and that inspection leads me to determine this issue in favour of the defendant.
28.Mr. Ryan highlighted in his report a number of delays in the process of trying to modify the consent of Council. The fact is, however, that the consent was never modified and on the evidence never would be. If the Council’s consent to subdivision on 20 September 2000 was consent to a large balcony and it could be shown that by hurrying its application process the defendant could have got that consent by July – which has not been shown – then the plaintiff would have had a strong case. But the 20 September consent was not to the draft plan annexed to the contract but to a plan that I have decided is not substantially in accordance with that plan. On this main issue the plaintiff fails.
29.This conclusion in some ways seem (sic) hard on the plaintiff, because so far as the unit he was purchasing is concerned, the plan as registered accords with the plan annexed to the contract. As against that, however, it is to be borne in mind that contract provisions are negotiated for the benefit of both vendor and purchaser. The vendor was entitled to look at the development as a whole. The terminating of the contract on its terms, presumably on the expectation of obtaining a higher price from another purchaser which might make up for a lower price than expected on the top unit, should not necessarily be looked upon askance.”
Later, Windeyer J wrote (RAB 30-32):
“Paragraph 14 of the statement of claim
33.This paragraph claims the issue of the termination notice was not bona fide, not in accordance with the contract, not reasonable and reckless. The basis on which it was said not to be bona fide was that an agent has been asked to give an estimate of the value of Unit 2 prior to the date upon which termination was available. The evidence of the agent, which I accept, was that she had been asked to value Units 1 and 4 and while there was shown through Unit 2 and 3 and asked to give an estimate of their value, which she did. She said she had tried to obtain a sole agency agreement for these as a ‘try on’, although she had been told they were not available. The defendant did not take any steps to sell Unit 2 prior to termination. The claim the issue of the notice was not bona fide presumably being for the improper purpose of enabling the defendant to proceed with some negotiations already in train, was not made out.
34.I have already found that the issue of notice was authorised by the contract and nothing further needs to be said on that. No particular argument was put forward on lack of reasonableness. If the plaintiff had an entitlement under the contract to rescind and did so pursuant to that entitlement, no question of reasonableness arises. The fact that so far as Unit 2 is concerned, this may enable the vendor to obtain a higher price does not mean it was not reasonable to issue the notice assuming for the moment that lack of reasonableness could be considered. Finally, recklessness could, as I understand it, go only for some recklessness in a vendor in seeking to include a clause which it knew it could not comply with. The clause in question is not of that sort. Had Council allowed the balcony sought, the time limits could have been complied with. None of these matters raised is established and none prevents the vendor from relying on the notice. In making his submissions on these matters counsel for the plaintiff relied upon the decision of Bryson J in Hawes v. Cuzeno Pty. Ltd. (unreported 14 December 1999). His Honour said:
‘A vendor acting recklessly may lose a right to rescind: Woodcock v. Parlby Investments Pty. Ltd. (1989) NSW Conv R 55-454. In that case there does not seem to have been any contractual provision corresponding with Printed clA6 or any express contractual condition for rescission. At 58,297 Young J noted ‘… there is no promise by the vendor to build a building within a certain time in accordance with the particular standard of construction.’ When dealing with cl8 Young J cited earlier authorities which established, in case where there is no condition like Printed Condition A6, that there are limits on the availability of the right of rescission. The limits appear from passages in Gardiner v. Orchard (1910) 10 CLR 722 there cited and from the judgment of Gibbs J in Pierce Bell Sales Pty. Ltd. v. Frazer & Anor (1974) 130 CLR 575 at 590. Disabling circumstances referred to include the necessity for bona fides, that the cancellation must be reasonable, and that the vendor must not be guilty of recklessness in entering into the contract. The plaintiff’s case does not rest on this principle, but on the terms of their contracts.’
35.The High Court cases referred to dealt with the right to rescind under the contract for sale of land where a vendor unable or unwilling to comply with a requisition on title could give notice to the purchaser accordingly and if the requisition were not waived could rescind. As was pointed out by Young J in Woodcock v. Parlby Investments Pty. Ltd (1989) NSW Conv R. 58,295 at 58,298 those circumstances are quite removed from the situation under consideration here. Finally, Mr. Parker argued that the defendant was in default because it could have tried harder earlier to get what it did not get even if these efforts would have produced no results. I consider the vendor did make reasonable efforts to gain approval for its plan. Those efforts failed so that Condition 2 could not be fulfilled, thereby triggering the right to rescind.”
In the result, therefore, as I have earlier recorded, Windeyer J dismissed the proceedings with costs. In addition, his Honour ordered that Mr. Mitchell withdraw the Caveat which appears to have been lodged on Mr. Mitchell’s behalf.
Although, in the Notice of Appeal (RAB 33-35) which was filed on Mr. Mitchell’s behalf, further grounds of appeal were taken, the only grounds which, on the hearing of the appeal, were relied upon (T.3) were the following:
“2.Further, his Honour ought to have held that the respondent had breached its obligation to use all reasonable endeavours to procure registration of a strata plan, substantially in accordance with the draft plans annexed to the contract and accordingly the respondent was disentitled from relying upon its notice of recision (sic) under the contract.
3,Further, his Honour ought to have held that the issue by the respondent of its notice of recision (sic) was a breach of the respondent’s obligation to act reasonably and accordingly the respondent was disentitled under the contract from relying on the notice of recision (sic).
4.Further, his Honour ought to have held that the respondent had been reckless in entering into the contract and was thereby disentitled from relying on the notice of recision (sic).”
When the appeal was called on for hearing, Mr. T.G.R. Parker appeared for Mr. Mitchell, while Mr. B.A.J. Coles QC appeared with Mr. S.T. White and Ms. N. Obrant for Pattern.
Despite the facts – which were admitted (T.7-8) – that the Statement of Claim did not allege that the Strata Plan which was registered was substantially in accordance with the draft strata plan and that no evidence directed to that question was led on behalf of Mr. Mitchell at trial, Mr. Parker submitted that ground 2 in the Notice of Appeal had two aspects to it they being
(a)that, upon the proper construction of clause 1.1 of the Special Conditions in the contract, the strata plan which was ultimately registered was a strata plan which was substantially in accordance with the draft strata plan annexed to the contract; and
(b)that even if it not be so, the term of the contract which was pleaded in clause 5.4 of the Statement of Claim and which was admitted at trial, was a condition precedent to the exercise by Pattern of the right to rescind and, in the circumstances, as, so it was submitted, Pattern had failed to use all reasonable endeavours to procure the registration of a strata plan substantially in accordance with the draft strata plan annexed to the contract, it was not open to Pattern to exercise the right of rescission otherwise conferred on it by clause 2.4 of the contract.
In developing this ground, Mr. Parker submitted:
(a)that upon its proper construction, clause 1.1 – and, thus, the obligation imposed upon Pattern by clause 2.2 – of the contract was concerned only with “the envelope” of the building, or alternatively, with “the form and function” of the various units within the proposed development. In this respect, so Mr. Parker submitted, “the envelope” of the building remained substantially the same, or, if the “form and function” of the various units in the development was what was required to be considered, Unit 4 remained a unit, the elements of which were to be found on three levels, but on the upper level of which was to be found a bedroom with attached bathroom and a verandah leading off the bedroom;
(b)even if this be not so, it was not open to Pattern, in reliance on the provisions of clause 2.4 of the Special Conditions, to rescind the contract since the effect of the implied term in the contract – which was said to have been admitted – was that, unless – which it was submitted had not occurred – Pattern had used all reasonable endeavours to procure the registration of a strata plan substantially in accordance with the draft strata plan, the condition precedent to the exercise by Pattern of the right of rescission contained in clause 2.4 of the Special Conditions, would not have been fulfilled.
Even if, in the circumstances, the submission be open to him to argue, I am unable to accept Mr. Parker’s submission that the strata plan which was ultimately registered was one substantially in accordance with the draft strata plan. In the first place, a strata plan is not limited to depicting the “envelope” of the building or buildings to which it relates but must depict the lots to be created by the registration of the strata plan, the common property, if any, and the like Strata Titles Act 1973 s5(1) “floor plan”, “location plan”, “lot”, s8, Schedule 1A. Further, except to the extent to which a strata plan depicts lots and common property, a strata plan is not concerned with “form and function”. Although both at trial and on the hearing of the appeal, most attention was directed toward the Council’s rejection of the 4 metre deep balcony leading off the bedroom on the upper level of Lot 4 – reducing it in area by some 62.5% - there were other alterations required by the Council. Thus, the external car space – 13.75m2 in area – which on the draft strata plan was to form part of Lot 4 was rejected, and the second garage in the basement which had been intended to form part of Lot 3 became part of Lot 4. Further, the balconies leading off the living rooms of each of Lots 1-3 and the lower level of Lot 4 at the Eastern end of the building were required to be reduced in depth from 2100mm to 1200mm. In addition, there were the other differences which Mr. Ryan recorded in his report (see para. 38 (above)).
Although apparently accepting that, in the absence of a condition of the contract, the terms pleaded in para.5.4 of the Statement of Claim and admitted by Pattern, it would have been incumbent on Mr. Mitchell to establish, first, that Pattern had failed to use all reasonable endeavours to procure the registration of a strata plan substantially in accordance with the draft strata plan, and, second, that it was Pattern’s failure to use all reasonable endeavours so to do which led to the failure to have such a plan registered within 12 months of the date of the contract, Mr. Parker submitted that, given that the condition pleaded in para. 5.4 of the Statement of Claim was accepted as having been a condition in the contract, it was necessary for Mr. Mitchell to do no more than establish that Pattern had failed to use all reasonable endeavours to secure the registration of such a plan within 12 months from the date of the contract. For this submission, Mr. Parker relied upon the decision of Bryson J in Hawes v. Cuzeno Pty. Limited (1999) 10 BPR 97821.
Hawes v. Cuzeno Pty. Limited supra involved claims for specific performance by purchasers of home units in a development, the purchasers having agreed to buy those units “off the plan” before construction of the building began. So far as is relevant, Bryson J, in the course of his Judgment, said:
“4.The agreement was made conditional on registration of the strata plan by special condition 24 as follows:
’24.This Agreement and completion thereof is subject to and conditional upon the registration by the Registrar General of a Strata Plan pursuant to the Strata Titles Act, as amended, not less than twenty-four (24) months from the date hereof and in the event of such registration not being effected before or on the date than either party hereto shall have that right to rescind this Agreement by notice in writing to the other.’
5.Special condition 25 deals at length with the process of registering the strata plan and problems which may arise out of variations. Its provisions include: ‘The vendor will, as soon as possible, take steps to have the plan registered by the Land Titles Office’.
6.These conditions operated with printed condition A6 which contains cll A6.1 and A6.2:
A6 Unregistered plan
If any of the properties described as a lot in an unregistered plan -
A6.1The vendor must do everything reasonably necessary to have the plan registered within the plan registration time, with or without any minor alteration to the plan or any document to be lodged with the plan validly required or made by a statutory authority or the Registrar General.
A6.2Normally, either party can rescind if the plan is not so registered.
7.The definitions in printed Cl1 include: ‘rescind’ rescind this contract from the beginning.’
8.The particulars on the first printed page say: ‘The plan registration time is 24 months after the date of this contract.’
9.In clA6.2 ‘normally’ refers to what the vendor may do if the vendor complies with A6.1; the normal course is that contractual obligations are complied with. The right to rescind is conferred by printed condition A6. The reference in special condition 24 to ‘that right to rescind’ is a cross reference to the right to rescind in printed condition A6. If the contract meant that that the vendor could commit a breach of cl A6.1 and then rescind there would be an absurdity because there would be no remedy for breach of A6.1. In the plain and ordinary meaning of these provisions, the right to rescind can only be exercised by the vendor in normal circumstances where the vendor has complied with cl A6.1.
10.If this result is not reached by the processes of construction or implication it is reached by the application of a principle of law referred to in Suttor v. Gundowda Pty. Ltd. (1950) 81 CLR 418 at 441; see to Alghussein Establishment v. Eton College [1988] 1 WLR 587.
11.The same result is reached by considering whether the terms of the contract impliedly make compliance by the vendor with printed condition A6.1 a condition of exercise of the right of rescission. If the tests for implication of a term referred to in Codelfa Construction Pty. Ltd. v. State Rail Authority (NSW) (1982) 149 CLR 337 at 351-2, 404; 41 ALR 367 are applied this implication should be made, as the contract would lack business efficacy if the vendor could escape from it by delaying.
12.In my view printed cl A6 has both the character which appears from its express terms of a promise the breach of which would give rise to a liability for damages and also the character of a condition for the exercise of the vendor’s right of rescission; breach of the promise is also failure of the condition in which the vendor can rescind.
13.The plaintiffs’ counsel referred me to observations of McLelland CJ in Eq in Plumor Pty. Ltd. v. Handley (1996) 41 NSWLR 30 at 34C-E; 7 BPR 14 735. The operation of printed cl A6 as a condition made it inapplicable to the present case his Honour’s observations which relate to the need to show a causal relationship. In any event there is in this case a causal relationship.”

I must say that I have difficulty in accepting as correct the approach taken by Bryson J in Hawes v. Cuzeno Pty. Ltd. supra both as to the construction accorded by his Honour to condition A6 and as to the appropriateness of implying into the contract thereunder consideration a term making compliance by the then vendor with condition A6.1, a condition of exercise of the right of rescission. In this regard, it is appropriate to note that both the decision of the High Court in Suttor v. Gundowda Pty. Ltd. supra and the decision of the House of Lords in Alghussein Establishment v. Eton College supra to which his Honour referred in paragraph 10 of his Judgment, involved the application, in each case, to the agreement then under consideration of what has been described as “a rule of construction” based upon a broad proposition that a party is not entitled to take advantage of his own default or wrong. In each of the cases to which his Honour referred reliance was placed upon the decision of the House of Lords in New Zealand Shipping Co. Ltd. v. Société des Ateiliers et Chantiers de France [1919] AC 1. Thus, in the speech of Lord Jauncey of Tullichettle, with whom Lord Bridge of Harwich, Lord Elwyn-Jones, Lord Ackner and Lord Goff of Chieveley agreed, in Alghussein Establishment v. Eton College supra at 592-595 the following passages may be found:
“In the New Zealand Shipping case in the Court of Appeal [1917] 2 KB 717, Viscount Reading CJ said, at pp 723-724:
‘Unless the language of the contract constrains the court to hold otherwise, the law of England never permits a party to take advantage of his own fault or wrong. In Malins v. Freeman (1838) 4 Bing. N.C. 395, 399 Coltman J said: ‘It is so contrary to justice that a party should avoid his own contract by his own wrong, that unless constrained, we should not adopt a construction favourable to such purpose.’ That appears to me to be the true underlying principle of the cases in which the word ‘void’ has been construed as if it mean voidable. Unless there are clear words to the contrary, a clause making a contract void must be read subject to the condition that the party who is seeking to set up the invalidity is not himself in default.’
And Scrutton LJ said, at p 724:
‘… I think that clause 12 and all other clauses are to be read subject to an overriding condition or proviso that the party shall not take advantage of his own wrong and therefore is estopped from alleging invalidity of which his own breach of contract is the cause.
On appeal to this House, Lord Findlay LC said [1919] AC 1, 8:
‘Questions of this sort have often arisen in case of provisions that a lease should be void on non-payment of rent or non performance of covenants by the lessee. It has always been held that the lessee could not take advantage of his own act or default to avoid the lease, and the expression generally employed has been that such proviso makes the lease voidable by the lessor, or void at the option of the lessor. The decisions on the point are uniform, and are really illustrations of the very old principle laid down by Lord Coke (Co. Litt. 206b) that a man shall not be allowed to take advantage of a condition which he himself brought about.’
The speech of Lord Atkinson contained the following passage, at p 9:
‘It is undoubtedly common for the two parties to a contract to stipulate by a clause in it that the contract shall be void upon the happening of an event over which neither of the parties shall have any control, cannot bring about, prevent or retard … But if the stipulation be that the contract shall be void on the happening of an event which one or either of them can by his own act or omission bring about, then the party, who by his own act or omission brings that event about, cannot be permitted either to insist upon the stipulation himself or to compel the other party, who is blameless, to insist upon it, because to permit the blameable party to do either would be to permit him to take advantage of his own wrong, in the one case directly, and in the other case indirectly in a round about way, but in either way putting an end to the contract. …’
………
… Finally in Cheall v. Association of Professional Executive Clerical and Computer Staff [1983] 2 AC 180, Lord Diplock referring to the New Zealand Shipping case said, at pp 188-189:
‘In the course of the speeches, which are not entirely consistent with one another, reference was made by all their Lordships to the well known rule of construction that, except in the unlikely case that the contract contains clear express provisions to the contrary, it is to be presumed that it was not the intention of the parties that either party should be entitled to rely upon his own breaches of his primary obligations as bringing the contract to an end, i.e. as terminating any further primary obligations on his part then remaining unperformed. This rule of construction, which is paralleled by the rule of law that a contracting party cannot rely upon an event brought about by his own breach of contract as having terminated a contract by frustration is often expressed in broad language as ‘A man cannot be permitted to take advantage of his own wrong.’’
………
It only remains to refer to the respondent’s argument that there is an absolute rule of law and morality which prevents a party taking advantage of his own wrong whatever the terms of the contract. My Lords I do not find it necessary to deal with this. For my part I have no doubt that the weight of authority favours the view that in general the principle is embodied in a rule of construction rather than in an absolute rule of law …”
Two things, as it seems to me, flow from the approach reflected in the Judgments to which Bryson J referred, they being:
(a)that, given that approach, there is no need for the implication of a term such as his Honour suggested; and
(b)that, in order that a party be held disentitled to exercise a right of rescission, it must appear that it was his default which brought about, or at least materially contributed to, the occurrence of the relevant event.
Support for the latter of these two propositions may be found in the Judgment of this Court in Nina’s Bar Bistro Pty. Ltd. (formerly Mytcoona Pty. Ltd.) v. MBE Corporation (Sydney) Pty. Ltd. [1984] 3 NSWLR 613 - a case involving a claim by a party, which was held to have failed to comply with a covenant to use its best endeavours to obtain the consent of a lessor to the assignment to it of a lease – in which it was held that, if non-compliance with a contractual obligation is to take away the defaulting party’s right to terminate, there must be a direct causal relationship between the compliance and the failure to complete, the onus of proving which lies on the non-defaulting party, and there must be an absence of repudiation by the defaulting party prior to that time.
However, in the light of the admission by Pattern of the term pleaded in para. 5.4 of the Statement of Claim, it does not appear to be open to me to give effect to the views which I have set out above.
This notwithstanding, it remained incumbent upon Mr. Mitchell to establish that Pattern had in fact failed to comply with the obligation cast on it by additional condition 2.2 of the contract. The question thus is, whether it can properly be said that Pattern had failed to use all reasonable endeavours to procure the registration of a strata plan substantially in accordance with the draft strata plan, a question which is not concluded by the mere fact that no such plan was approved by the Council or registered by the Registrar General.
It is clear that, notwithstanding that, when it gave its original consent to the development application, Council required the deletion of the room in the roof void and the balcony, Pattern moved expeditiously to seek to have condition 5 deleted from that Development Consent. It is equally clear that, as the result of that action, Council, after the contract between Mr. Mitchell and Pattern had been entered into, acceded to modify the original condition 5. It is also clear that, albeit somewhat belatedly, Pattern then sought to have Council modify the substituted condition 5 with a view to increasing the size of the proposed balcony area, that further application not having been dealt with at the time when the Notice of Termination was forwarded to Mr. Mitchell’s solicitors. It is equally clear, as Windeyer J found (para. 28 of his Judgment – see para. 45 (above)) that the consent would never have been further modified even if Pattern had acted more expeditiously with its application. This being so, it seems to me that Windeyer J did not fall into error when he held (para. 35 of his Judgment – see para. 46 (above)) that Pattern did make reasonable efforts to gain approval for its plan.
As Mr. Parker, on the hearing of the appeal, observed (T. 3), grounds of appeal 3 and 4 “really go together”. That that is so is readily demonstrated by a reference to the speech of Viscount Radcliffe, when delivering the advice of the Judicial Committee in Selkirk v. Romar Investments Limited [1963] 1 WLR 1415, 1422-1424 a case which - in common with the decisions of the High Court in Godfrey Constructions Pty. Limited v. Kanangra Park Pty. Limited (1972) 128 CLR 529 and Pierce Bell Sales Pty. Limited v. Fraser (1972-1973) 130 CLR 575 to which Mr. Parker also made reference in the course of his submissions – involved a purported rescission by a vendor of land in reliance upon a condition in the contract allowing the vendor to give notice of intention to rescind if “unable or unwilling to satisfy or comply with” a requisition. In the passage to which I have referred, his Lordship said:
“Now, on what can the appellant rest his claim to set aside the respondent’s notice of rescission? It is plain enough that, so far as the terms of the contract go, the respondent is within its rights. Clause 3(3) is as much part of the various undertakings and stipulations that make up the total nexus of the parties’ agreement as any other of its clauses, and it is in fact a stipulation that was included in the draft put forward by a purchaser. If a vendor, having stipulated for or been conceded such a right, is to be precluded from asserting it in any particular context, it must be by virtue of some equitable principle which enures for the protection of the purchaser; and it is not in dispute that courts of equity have on numerous occasions intervened to restrain or control the exercise of such a right of rescission in contracts for the sale of land, despite what, on the face of the contract, its terms seem to secure for the vendor.
It does not appear to their Lordships, any more than it did to the judge who tried the action, that there is any room for uncertainty as to the nature of the equitable principle that is invoked in these cases. It has frequently been analysed, and frequently applied, by Chancery judges and, although the epithets that describe the vendor’s offending action have shown some variety of expression, they are all related to the same underlying idea, and their variety is only due to the fact that, as each case is decided according to the whole context of its circumstances and the course of conduct of the vendor, one may illustrate more vividly than another some particular aspect of that idea. Thus, it has been said that a vendor, in seeking to rescind, must not act arbitrarily, or capriciously, or unreasonably. Much less can he act in bad faith. He may not use the power of rescission to get out of a sale ‘brevi manu’ since by doing so he makes a nullity of the whole elaborate and protracted transaction. Above all, perhaps, he must not be guilty of ‘recklessness’ in entering into his contract, a term frequently resorted to in discussions of the legal principle and which their Lordships understand connote an unacceptable indifference to the situation of a purchaser who is allowed to enter into a contract with the expectation of obtaining a title which the vendor has no reasonable anticipation of being able to deliver. A vendor who has so acted is not allowed to call off the whole transaction by resorting to the contractual right of rescission: see In re Jackson and Haden’s Contracts ([1906] 1 Ch 412) Baines v. Tweddle ([1959] Ch 679).
………
Authorities or propositions of law which bear upon such situations have therefore no immediate relevance to what is now an issue, which is simply the question whether the respondent is to be held guilty of ‘recklessness’, in the legal sense, in not warning the appellant before the contract was signed that there were certain evidential gaps in the proof of its title that it was unlikely to be able to fill up.
Their Lordships are satisfied that recklessness is not to be attributed to the respondent for this omission. While there have indeed been instances in which a vendor has been deprived of the right of rescission for entering into his contract in circumstances in which he had no reasonable assurance that he could convey the whole title for which he was contracting, his disqualification arises out of his carelessness or lack of prudence in the particular circumstances and not out of a mere failure to disclose the defect in title, much less the defect in the evidence of title, which rendered the title that he had to offer less than complete. Had the law been otherwise, the decision in Duddell v. Simpson (1886) 2 Ch App 102) and In re Deighton and Harris’ Contract ([1898] 1 Ch 458) could never have gone as they did, in favour of the vendor.”
Even if - which, in the circumstances, I am prepared to do – one accepts that the principle described by Viscount Radcliffe is applicable to a case such as this, I am unable to accept Mr. Parker’s submissions that, in entering into the contract with Mr. Mitchell, Pattern was guilty of “recklessness” and that, by reason of that fact, it was not entitled to rely upon the provisions contained in Additional Condition 2.4 of the contract. Although, at the time when the contract between Mr. Mitchell and Pattern was entered into, the Council, when granting consent to Pattern’s Development Application, had imposed the original condition 5, the letter of 11 June 1999 requesting a review of (inter alia) that condition (see para. 12 (above)) would indicate that Council officers, when considering the merits of the original Development Application, had expressed a favourable view of it. Further, the application for review had by the time the contract was entered into been made and remained unresolved. Further still, as appears from what I have earlier recorded (paras. 16-17 (above)), the application for review did lead to a variation to condition 5.
In seeking to support the submission that, in giving the Notice of Termination, Pattern had acted unreasonably and in bad faith, Mr. Parker sought to rely upon the Judgment of Gibbs J (as he then was) in Pierce Bell Sales Pty. Limited v. Fraser supra at 590 in which his Honour had prayed in aid the speech of Viscount Radcliffe in Selkirk v. Romar Investments Ltd. supra and also upon the Judgment of this Court in Alcatel Australia Ltd. v. Scarcella (1998) 44 NSWLR 349 and, in particular, on the Judgment of Sheller JA in the latter case where his Honour said supra at 368:
”If a contract confers power on a contracting party in terms wider than necessary for the protection of the legitimate interests of that party, the courts may interpret the power as not extending to the action proposed by the party in whom the power is vested or, alternatively, that the powers are being exercised in a capricious or arbitrary manner or for an extraneous purpose, which is another was (sic) of saying the same thing. Thus a vendor may not be allowed to exercise a contractual power where it would be unconscionable in the circumstances to do so: Pierce Bell Sales Pty. Limited v. Fraser (1973) 130 CLR 575 at 587.”
and later supra at 369:
“The decisions in Renard Constructions and Hughes Brothers mean that in New South Wales a duty of good faith, both in performing obligations and exercising rights, may by implication be imposed upon parties as part of a contract. There is no reason why such a duty should not be implied as part of this lease. But it remains to decide whether the implication of that duty has any consequence in the resolution of the dispute the subject of this appeal.”
Even assuming – as, in the circumstances, I am prepared to do – that there was to be implied in the contract a term to the effect of that suggested by Sheller JA, it seems to me that the implication of such a duty had no consequence in the present case. I say this since, as Windeyer J recorded in para. 33 of his Judgment (see para. 46 (above)), the basis upon which, at trial, it was sought to demonstrate that the giving of the Notice of Termination was not bona fide was that an agent had been asked to give an estimate of the value of Unit 2 prior to the date upon which termination was available, an assertion which his Honour did not accept.
It follows, in my view, for the reasons which I have set out above, that the grounds of appeal sought to be advanced by Mr. Mitchell have not been made out.
This being so, I propose that the appeal should be dismissed with costs.
STEIN JA: I agree with Powell JA.
ROLFE AJA: I agree with Powell JA.

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LAST UPDATED: 31/07/2002