Munro v Bodrex Pty Ltd

[2002] NSWSC 122

CITATION:	MUNRO & ANOR v. BODREX P/L [2002] NSWSC 122
CURRENT JURISDICTION:	EQUITY
FILE NUMBER(S):	SC 5212/01
HEARING DATE(S):	07/02/2002
JUDGMENT DATE:	6 March 2002
PARTIES :	Catherine Isobel Munro and Neil Alexander Munro - Plaintiffs Bodrex Pty Ltd ACN 087 483 074 - Defendant
JUDGMENT OF:	Bryson J at 1

COUNSEL :	R.J. Powell - Plaintiffs T. Lynch - Defendant
SOLICITORS:	Loder & Loder - Plaintiffs Sachs Gerace Lawyers - Defendant
CATCHWORDS:	VENDOR and PURCHASER - matters arising between contract and completion - rescission - sale off-the-plan of home unit in proposed Strata Plan of building not yet built - Special Condition gave vendor right of rescission if Strata Plan not registered by 8 October - plan registered on 5 November - consideration of facts relating to causes of delay and grounds given by Council officers for not granting consent to Strata Plan - found that non-registration was caused by breaches of contract by vendor and purported rescission was not effective.
LEGISLATION CITED:	Environmental Planning and Assessment Act 1979 subs.79C(4)
CASES CITED:	Peters (WA) Ltd v. Petersville Ltd (2001) 75 ALJR 1385 Plumor Pty Ltd v. Handley (1996 ) 41 NSWLR 30 Hunyor & Anor v. Tilelli (1997) 8BPR [97667] 15,629 Woodcock v. Parlby Investments Pty Ltd (1988) 4 BPR 97301 Pierce Bell Sales Pty Ltd v. Frazer (1973) 130 CLR 575 at 590
DECISION:	Order for specific performance and other relief: see [72]

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON J

WEDNESDAY 6 MARCH 2002

5212/01 CATHERINE ISOBEL MUNRO & ANOR v. BODREX PTY LTD

JUDGMENT

1 HIS HONOUR: The purchasers (the plaintiffs) challenge an exercise by the vendor (the defendant) of a right of rescission of a contract for the sale “Off-the-Plan” of a home unit where the Strata Plan was not registered within the period for which the contract provided.

2 By Contract dated 8 October 1999 the vendor agreed to sell and the purchasers agreed to buy home unit 3 at 2 Myola Street, Newport, for $720,000; and the purchasers then paid the agreed deposit of $36,000. The home unit was described as Lot 3 in an unregistered plan, and incorporated a garage. A building containing 5 units was to be built on part of Lot 24 Deposited Plan 7424, an irregularly shaped parcel at the northern intersection of Ross Street and Myola Street where there had formerly been a dwelling which was to be wholly redeveloped. The contract was on the 1996 edition contract form but Printed cl.28 was deleted. Building plans were annexed.

3 Special Condition 40.1 provided:

40. CONSTRUCTION OF BUILDING AND DEFECTS LIABILITY

40.1 The vendor will cause the Building to be constructed in accordance with the Building Plans and in a good and workmanlike manner and in accordance with all approvals, consents and requirements of all relevant Authorities.

4 Special Condition 37 provided, among other things:

37. REGISTRATION OF THE STRATA PLAN

37.1 Completion of this contract is conditional on and subject to registration of the Strata Plan with the Land Titles Office.
37.2 The vendor undertakes to use its reasonable endeavours to have the Strata Plan, registered. However, in the event that the Strata Plan is not registered by the expiration of the period specified in Schedule 1, then either party may, by notice in writing to the other, rescind this contract and the provisions of clause 19 will apply.

5 The period specified in Schedule 1 and referred to in cl.37.2 is “Date: 24 months from the date of this contract”. Clause 37.3 contained the following subcl.(a):

(a) The vendor reserves to itself the right to alter the dimensions, the position of the property, the unit entitlement of any lot or lots or the lot number of any lot or lots set out in the Building Plans, as is considered desirable by the vendor or as is required by any Authority.

Subclauses (b), (c) and (d) went on to limit the purchasers’ remedies if there were alterations and to give the purchasers a qualified right of rescission (and there has been no attempt by the purchasers to rescind).

6 Clause 38 provided:

38. COMPLETION DATE

Completion of this contract will take place on the later to occur of:

(a) 42 days from the date of this contract; or

(b) 14 days after the purchaser is notified in writing by the vendor that the Strata Plan has been registered with the Land Title Office.

7 Printed cl.21 relates to time limits in the provisions of the contract and includes the following:

21.1 If the time for something to be done or to happen is not stated in these provisions, it is a reasonable time

…

21.6 Normally, the time by which something must be done is fixed but not essential.

8 The requirement relating to a reasonable time in cl.21.1 applies to the vendor’s obligations to cause the building to be constructed (cl.40.1) and to use reasonable endeavours to have the Strata Plan registered (cl.37.2).

9 The Strata Plan was not registered on or before 8 October 2001, and on 17 October 2001 Mr Luke McKenzie, the principal and the only director of the defendant, delivered a written notice of rescission to the purchasers. According to the terms of the notice, the deposit and all moneys paid to the vendor on account of variations made to the property at the purchasers’ request were to be repaid to the purchasers. It was an agreed fact that the Strata Plan was registered on 5 November 2001.

10 In the Summons issued on 25 October 2001 the purchasers claim a declaration that they were entitled to have the agreement for sale of land specifically performed and an order for specific performance, and declarations establishing that the defendant failed to use reasonable endeavours to have the Strata Plan registered, that the defendant was not entitled to rescind the contract and that the notice of rescission is of no effect. The purchasers claimed other relief: relief against forfeiture of their interest in the land and an injunction restraining interference with their actual possession of the home unit and ancillary orders. There were no pleadings and the issues appear from the parties’ affidavits and from submissions at the hearing.

11 The vendor applied to Pittwater Council for approval of its Development Application late in 2000 and appealed to the Land and Environment Court when Pittwater Council had not determined the application. The Court approved the Development Application subject to conditions by its order of 22 February 2000. The conditions included the following:

A(i) This consent is not an approval to commence building work and these works can only commence following the issue of a Construction Certificate.

(ii) The use or occupation of this building shall not commence until an Occupation Certificate has been issued.

12 General Condition B was as follows:

The development shall be carried out generally in accordance with plans numbered 99016, dated July 99, prepared by Marchese & Partners Architects Pty Ltd as amended in red in Court or as modified by any condition of this consent, the landscape plans prepared by N. Sonter and an amendment as contained in Exhibit S.

13 The plan referred to in General Condition B is the same plan as the building plan annexed to the Agreement for Sale of Land, although it had been amended in the course of the Court proceedings.

14 Condition C included the following:

C6 A 1.2 m wide footpath is to be provided from the site along Ross Street to Bramley Avenue, giving access to shops and services and installed at the expense of the applicant.
C7. A covenant is to be placed on the title of the property restricting occupation to persons who are over 55 years or disabled.

15 Condition F entitled “Compliance Certificate” set out a number of conditions which must be complied with by the time of issue of the Compliance Certificate and one of which was:

(8) A Survey Certificate prepared by a Registered Surveyor is to be submitted, confirming that the roof ridge complies with the levels shown on the approved plans. A copy of this Certificate is to be forwarded to the accredited certifier or Council, prior to installation of the roofing material (see copy of form available from Council).

16 Condition G entitled “Issue of Certificate of Occupation” stated many conditions which must be complied with by the issue of the Occupation Certificate including:

G13 A restriction on use of the land is to be created on the title of any new lots, the terms of which burden the said lots, benefit Council and restrict the occupancy of the lot to persons defined in State Environment Planning Policy No. 5 as “older people” or “people with a disability”. All matters relating to this restriction on use of the land are to be finalised prior to release of the Occupation Certificate.
G15 The building is not to be occupied or used until an Occupation Certificate has been issued, confirming that the project complies with the relevant standards and the conditions of development consent. The request for an Occupation Certificate is to be accompanied by a copy of all of the Compliance Certificates required by the conditions of development consent (see copy of form available from Council).

17 Condition D6 required submission of a detailed landscape plan before release of the Construction Certificate showing compliance with Council landscape policy, and Condition G8 required, as a condition for the issue of the Occupation Certificate, certification that site landscaping had been completed in accordance with the details shown in the approved landscape plan.

18 Condition J stated a number of supplementary conditions one of which was:

J1 A footpath shall be constructed along the northern side of Ross Street from a point directly opposite the Ross Street driveway to the intersection of Ross Street and Bramley Lane. A kerb ramp is to be provided on Ross Street directly opposite the Ross Street driveway. These works are to be completed to Council’s normal footpath and ramp specification prior to the issuance of a Certificate of Completion.

19 On 24 July 2000 BCA Logic Pty Ltd, Building Regulation and Fire Safety Engineers, by letter informed Pittwater Council that Stuart Boyce of that company had been engaged by Mr Luke McKenzie of the vendor to act as Accredited Certifying Authority to issue the Construction Certificate for the development and to act in the role of Principal Certifying Authority. The letter stated that all conditions of the Court Order that needed to be satisfied prior to the issue of the Construction Certificate had then been met, and enclosed Construction Certificate.

20 Construction then proceeded, but there is little evidence establishing the rate of progress or the dates of particular events until what can be understood from a fax message dated 23 April 2001 from PhD Building Services, the vendor’s builder, to BCA Logic, asking for review of a proposed location of the Ross Street footpath referred to in Condition J1. PhD Building Services set out some details of the proposed construction of footpath and said “Time is running out and I need to build it. Please investigate and confirm ASAP.”

21 The footpath so required by Condition J1 was not on the development site but was on land dedicated as a road and owned by Pittwater Council, on the opposite side of Ross Street. This raised some question about the authority of the Private Certifier to deal with that part of the works. Whatever difficulties existed, they were overcome and the construction of the footpath proceeded.

22 The concerns raised on 24 April 2001 seem to show that the progress of work on the development was well advanced. The evidence of Mr Luke McKenzie is that at April 2001 the works had not reached practical completion and several major items of work and numerous other miscellaneous items had not been completed.

23 Work was sufficiently advanced by 14 June 2001 for Mr Surveyor Paul Keen to then complete and certify a Strata Plan, and on 3 July 2001 the vendor applied to Pittwater Council for development consent for development consisting of subdivision of the building into strata units in accordance with the plan. There were two applications, or so the application was treated: for approval of the Strata Plan and for subdivision. These events show that very little building work can have remained to be performed as of 3 July 2001. However an Occupation Certificate had not been issued, and Mr McKenzie knew that Council would require an Occupation Certificate before it could give development consent relating to the Strata Plan. Early in July 2001 Mr McKenzie told Mr Munro, the second plaintiff, “The building is ready to occupy. It may take a few weeks to get the Strata Plan registered. You can move in under licence and pay $200 a week rent until completion.” Mr Munro replied “We will agree to that”. On 16 July the vendor’s solicitor told the purchaser’s solicitor in answer to enquiry that the Strata Plan would be registered perhaps late in August.

24 The purchasers previously lived in a home unit in Narrabeen; they entered into an agreement to sell that home unit on 24 May 2001 and came under an obligation to settle that sale on 23 July 2001; they in fact completed the sale on that day. With the permission of the vendor they moved belongings to Unit 3 on 19 July 2001, and they took up occupation of Unit 3 on 25 July 2001. The vendor and the purchasers made an agreement in writing on 25 July 2001 under which the vendor agreed to allow the purchasers to have possession before completion for residential purposes for the weekly licence fee of $1000, but the licensor to accept $200 per week if completion took place on or before the completion date set out in the contract. It is doubtful whether the licence agreement had any legal effect as there was no Occupation Certificate and occupation was a breach of Condition G15 of development consent; however no question of illegality was in issue before me and the vendor terminated the licence on 17 October 2001. There can have been very little work remaining to be done, if there was any, when the vendor was prepared to license the purchasers to go into possession.

25 During July Mr McKenzie made many attempts to speak by telephone to Mr Trevor Dunbar, an officer of Pittwater Council, about the application. On 1 August 2001 Mr Dunbar telephoned him and said to the effect that Mr Dunbar required the final Occupation Certificate to be submitted for consideration, and required the restriction on occupation to persons over 55 years and disabled persons to go on the title. Mr McKenzie said to the effect that he expected the Occupation Certificate to be completed soon and “I will send it to you today or tomorrow.” He also said that he would get the s.88B instrument to Mr Dunbar straight away. (The s.88B instrument would when registered create the restrictive covenant required by Conditions C7 and G13). In fact the Occupation Certificate was sent to the Council by BCA Logic on 13 August 2001, by which time it appears that the restriction under s.88B had been created.

26 The vendor sent a message to Council on 3 August 2001 setting out the proposed restrictive covenant. Mr Ross Payne, a Council officer made a note on this message on 3 August saying “Covenant needs to be approved by Council and incorporated into the Strata Plan prior to its submission to Registrar General, Land Titles for registration, all of which will only take place once occupation has been issued. The above addresses Condition C7 of the original Land and Environment Court Order No. 10743 of 1999.”

27 No evidence deals in detail with events in bringing the s.88B instrument into existence and registering it but insofar as the vendor’s evidence can be understood, these events happened between 1 and 13 August 2001. No evidence suggested there was ever any difficulty in creating the restriction, or explains why its creation was not attended to until prompted by Mr Dunbar although it was a necessary condition for issue of the Occupation Certificate which in turn was a necessary condition for development consent for the Strata Plan. In my finding the preparation of the s.88B instrument and its registration could have been attended to before 3 July when the application for development consent was lodged, just as the Strata Plan was prepared before then, or could have been attended to at about that time when the need presented itself to obtain an Occupation Certificate to support the application for development consent.

28 The Newport Progress Association wrote to Council on 17 August seeking information about the Development. However the next event in Council’s consideration of which evidence speaks is a conversation between Mr Dunbar and Mr McKenzie about 29 August 2001. Mr Dunbar said to Mr McKenzie, among other things, to the following effect: “Council has difficulties with the applications. The roof over townhouse No. 1 is 220mm higher than provided for on the plan. This is identified in the material supplied with the Occupation Certificate by BCA Logic to Council. Also the air-conditioning units placed in the gardens of some of the townhouses reduce the area of landscaping described in the approved plans.” Mr McKenzie said to the effect that Council could presume that development had been constructed in accordance with the plans when an Occupation Certificate had been issued and Mr Dunbar said to the effect that Council was thinking of getting legal advice relating to the effect of an Occupation Certificate.

29 The problem relating to the height of the roof became known to the vendor about March 2001 as a result of a survey of the partly built building as required by Condition F8; this was pointed out to BCA Logic, apparently by the builder, and BCA Logic said that it should be indicated within one or two weeks that it would not prevent a Certificate of Occupation. BCA Logic specifically addressed the non-compliance in the height of the roof, referred to it in an attachment to the Occupation Certificate and must be taken to have decided that the non-compliance was not significant. (This is the position that Council officers eventually reached, and it appears to be a reasonable position). The problem was not inherently important, but it was a cause of delay, and if the building had been constructed in accordance with the plan there would not have been any such problem.

30 After 29 August Mr McKenzie endeavoured to further Council’s obtaining legal advice about the effect of the Occupation Certificate, and over some days he had conversations with Council officers and the Council’s solicitor. In one of these conversations, on 4 September 2001, Mr Dunbar said to Mr McKenzie to this effect “The Council is considering refusing the application because of the roof issue and the landscaping issue. The Council officers feel the matter should go back to the Land and Environment Court for resolution because the plans were approved by the Court and in the circumstances where there is a departure from those plans that should be dealt with by the Court.” Mr McKenzie again put his view that in the face of an Occupation Certificate Council should approve the application.

31 Mr McKenzie also retained Mr David Tow, a Consultant Town Planner to represent the vendor in negotiations with Pittwater Council to get the applications approved. Mr Tow gave some attention to those negotiations on and after 4 September, speaking to Council officers and also to solicitors who had earlier acted for the vendor in the Land and Environment Court proceedings; Mr McKenzie did not favour proceedings in the Land and Environment Court which would involve some months’ delay and also significant expense. Mr Tow spoke to Mr Lindsay Dyce who was Pittwater Council’s Manager, Planning and Assessment.

32 On 10 September a meeting with Mr McKenzie took place, which was attended by the purchasers Mr and Mrs Munro, by Mr and Mrs Williams who were the purchasers of Unit 2, and by Mr and Mrs Morgan, who were the purchasers of Unit 4. Mr McKenzie told them to the effect that he called the meeting to tell them that the Council would not approve the Strata Plan; he referred to Council’s relying on the roof of Unit 1 being 220mm above the plan height and on the air-conditioning units taking up landscape space; he reviewed the difficulties of going back to the Land and Environment Court and the time and expense that that would involve and asked the purchasers to settle without strata title. He said “I remind you all that under cl.37 of the Contract I can rescind if the Strata Plan isn’t registered within two years. However I will give this right up if there is an immediate settlement if you agree to settle now and make the cheques payable to National Australia Bank. I am not saying this as a threat but I will use this clause if necessary either to complete settlement or cancel the contracts.” The Munros did not agree.

33 The vendor circulated to the various purchasers including the Munros an Information Memorandum dated 11 September 2001 reviewing the difficulties which Mr McKenzie then saw, stating that he would apply to the Land and Environment Court that week, referring to cl.37 which he called “a Sunset Clause” and saying “I will agree to the removal of the ‘Sunset Clause’ from the contracts if you agree to settle now.” He went on to say that he would create a company title structure and he would continue action to register the Strata Plan after which each townhouse would be converted from company title to strata title. He went on to discuss the stamp duty which this would incur and attendant difficulties. The purchasers’ solicitors on 12 September 2001 declined his proposal and said among other things “Any attempt by your client to rescind the contract would be resisted” and “Our clients expect the vendor to fulfil its obligations under the contract by taking all legal steps necessary to have the plan registered.”

34 In a conversation with Mr Dyce on 14 September 2001 Mr Dyce told Mr Tow to this effect: “Council is no longer concerned about the height issue and accepts that it was a minor variation of little consequence. However, a new issue has come to light. This is the non construction of the planter box.” Mr Dyce also said “If Bodrex lodges a bond to cover the construction of the planter box and additional planting around the aircon units, I may be able to expedite the approval of the Strata Plan. You should speak to Trevor Dunbar, sort out the details of the bond and its payment.”

35 Mr Tow reported this conversation to Mr McKenzie who then, also on 14 September, telephoned Mr Dunbar and discussed the amount of the bond and means of payment. He said to the effect that it would cost $2,500 to build the planter box and that Bodrex would pay a bond of $3000 which Mr Dunbar said would be sufficient. Mr McKenzie reported this arrangement to Mr Munro, also on 14 September. Mr McKenzie’s account of this conversation is that he said to this effect: “Agreement has been reached with the Council to pay a bond for the construction of the planter box between townhouses 4 and 5. The Council said they would approve the Strata Plan if the bond is paid on Monday.” Mr Munro’s affidavit gives a different account, that Mr McKenzie said to the following effect: “Council would issue the Strata Plan if we build a planter box between units 4 and 5. They offered me a bond but wanted all sorts of money which I was not prepared to pay. I said ‘I’ll build it myself’ and they said ‘If it were built we’d issue the plan on Monday’.” Mr McKenzie’s evidence is that it was not until about 27 or 28 September that he reported to Mr Munro to the effect that Council had agreed to approve the Strata Plan if Bodrex built the planter box between townhouses 4 and 5. The most significant point of difference in these two accounts is that, according to Mr Munro, Mr McKenzie was already speaking of a proposal actually to build the planter box on 14 September. Mr Munro’s account is substantially supported by his contemporaneous diary note.

36 The omission of the planter box is explained in evidence only by a letter from PhD Building Services to BCA Logic dated 3 August 2001 in relation to the Occupation Certificate. The letter said “With reference to planter box detail Unit 5 1st floor balcony above garage. Due to perceived structural and waterproofing problems in the long term with placing this particular planter box in the location indicated, it was decided that it would be more prudent to delete this item and replace it with planter boxes/pot plant in lieu of, to be supplied by purchasers at a later date.”

37 Mr McKenzie first became aware that PhD Building Services had decided not to construct the planter box at the end of July 2001. It was Mr McKenzie’s evidence that the absence of the planter box was drawn to Council’s attention in documentation which accompanied the Occupation Certificate (t.11). Mr Dunbar told Mr McKenzie, at some time after 15 August, to the effect that Mr Dunbar and a Council officer concerned with landscaping had inspected the site and observed that the landscaping plan had not been adhered to. Although the attachments to the Occupation Certificate are not all in evidence, it was Mr McKenzie’s belief that the Occupation Certificate did not point out this non-compliance.

38 By a letter dated 14 September 2000 Mr McKenzie writing for Bodrex Pty Ltd said to Mr Dyce “… I am able to provide the following undertakings:

(a) A planter box would be constructed on the decking above the garage of Unit 5, in accordance with plans approved by the Land and Environment Court;
(b) Additional screen planting will be provided around air-conditioning units that have been placed in garden beds.
These works will be completed within 1 week of this letter.”

He went on to refer to the provision by the builder of $3000 to be held until the works outlined were complete and asked that Council issue a strata plan. Pittwater Council did not make a written response, and Mr McKenzie’s evidence seems to show that he regarded himself as having an arrangement for Council to accept a deposit of $3000, and for Council then to issue the strata plan. The terms of the letter of 14 September assist acceptance of Mr Munro’s account of what he says Mr McKenzie told him on 14 September.

39 As the undertaking which it was said in the letter of 14 September the vendor was in a position to give was not accepted, it did not have any standing as an undertaking, but the offer of an undertaking does admit and demonstrate that it was then possible to complete the work within a week. If it was possible to complete the work in a week then, it had been possible to complete the work within a week at earlier times.

40 I accept that Mr McKenzie was already considering and speaking to Mr Munro of a proposal actually to construct the planter box between units 4 and 5 as early as 14 September; he may well also have been speaking to a similar effect on 27 or 28 September. Although this difference in the evidence of the protagonists was treated at the hearing as if it was of considerable importance, I do not see it as important.

41 Mr McKenzie gave an explanation in oral evidence of his not having proceeded to carry out the works within one week of the letter of 14 September to the effect that Mr Tow and Mr McKenzie formed the view that having paid the bond was as good as having built the works and the application should go to Council on 8 October in that state. In my finding this is not a reasonable explanation for not proceeding to construct the planter box and provide the additional screen planting soon after 14 September; and indeed there has been no reasonable explanation for their not having been constructed long before that date as an ordinary part of the building process.

42 The builder PhD Building Services paid the Council $3000 by bank cheque accompanied by a letter of 18 September 2001 saying that that amount represented “Bonds for additional landscaping required at the townhouse complex at the above address. We understand that the bond will be released once the additional planter box is in place. I trust that this will facilitate the early release of the strata title plan.”

43 Mr Tow continued to seek to facilitate matters by communicating with Council officers. Mr McKenzie urged the purchasers including Mr and Mrs Munro to make representations for the Council in favour of approving the application. On 26 September Mr Dunbar made an internal report to Mr Lindsay Dyce; he said to the effect that there were two main areas of variation/departure from the court approved plan and development consent being the increase in the roof height and “2. deficiencies in level of planting of approved landscape plan and omission of terrace planter box from Unit 5 (unit fronting Ross Street)”. He reported that the increase in the overall roof height was considered acceptable and that it would be difficult to discern any appreciable impact of the increase in roof height. He also reported “Item 2 is acceptable in terms of the number of plants provided being adequate and the prescribed/detailed number of plantings on the approved landscape plan being unachievable for the areas available. The omission of the planter to the 1st floor terrace of Unit 5 is not considered to be acceptable. The reasons provided for the omission of the planter are not considered justification for the omission. The provision of smaller planters in similar locations (decks over garages) has been undertaken for Units 2 & 3. It is considered appropriate that the planter detail upon the Court approved plans for the roof terrace of Unit 5 be provided.” Mr Dunbar went on to report on the payment of the $3000 bond as an undertaking for the works to be completed.

44 Mr McKenzie had a conversation with Mr Dyce on 27 September. Mr Dyce was then unreceptive to arrangements involving a bond and said “If the planter box is completed prior to 8 October 2001 the applications can proceed to the meeting of the Councillors on that day.” On the following day 28 September Mr Tow spoke to Mr Dyce who said to the effect “I am prepared to approve the application by way of delegation if the planter box is constructed and the additional planting around the air-condition units is done. The matter no longer needs to go before a Council meeting. Trevor Dunbar will not be able to approve the planter box and Bodrex’s private certifier should do this.”

45 Mr McKenzie then arranged for construction of the planter box to be completed by PhD Building Services. In Mr McKenzie’s evidence, his decision to move towards actually constructing the planter box was a response to a suggestion made by Mr Dyce on 27 September 2001 that an appropriate amount for a bond was $15,000 to $20,000. Construction of the planter box commenced on 3 October 2001, and although there is a conflict of evidence my finding is that it was completed on the morning of 5 October 2001. Mr McKenzie also made arrangements for Mr Payne of BCA Logic to inspect the planter box which it seems he did on the afternoon of 8 October 2001; then on 9 October 2001 he completed a certificate showing approval.

46 BCA Logic’s letter of 9 October certified that the planter box originally proposed for the upper terrace to Unit 5, omitted from the original construction, together with the provision of screen planting adjacent to a number of pad-mounted air-conditioning units, installed late in the original construction program and located in the garden edge adjacent to each unit, had been inspected; the planter box was considered to have been constructed in accordance with the original proposal and to be structurally adequate and the planting when fully developed should provide an adequate screen to the units.

47 Mr McKenzie collected the certificate on 10 October and arranged for a further enquiry by Mr Dunbar relating to waterproofing the planter box to be answered by the builder. There were further communications. Council’s Development Consent for Development Application for Strata Plan subdivisions was dated 16 October 2001. The approval of the Strata Plan was collected on 17 October 2001. Thereafter Mr McKenzie arranged for its registration which (as earlier stated) took place on 5 November 2001.

48 On 17 October 2001 Mr McKenzie served on Mr and Mrs Munro two documents; a notice of rescission of the agreement for sale and a notice of rescission of the licence agreement. The claim to rescind the agreement for sale led to the issue of the summons on 25 October.

49 Restrictions on exercise of rights of rescission recurringly come under consideration in contracts for the sale “Off-the-Plan” of dwellings in proposed strata developments. The contractual terms are the primary source of any supposed restriction, and an apparent right of rescission may be restricted by implied terms to be discerned on the whole view of the parties’ contract, or by the application to them of implications arising under general contract law of kinds illustrated by the following passage in Peters (WA) Ltd v. Petersville Ltd (2001) 75 ALJR 1385 at 1393 [36] “The law already implies an obligation by the respondents to do all such things as are necessary on their part to enable Peters WA to have the benefit of those licence arrangements Butt v. McDonald (1896) 7 QLJ 68 at 70-71; Secured Income Real Estate (Australia) Ltd v. St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607-608. It is not now necessary to consider the basis of the implication. The law also implies a negative covenant not to hinder or prevent the fulfilment of the purpose of the express promises made in Art.5 Shepherd v. Felt & Textile of Australia Ltd (1931) 45 CLR 359 at 378.”

50 Important statements about the principles involved were made in Plumor Pty Ltd v. Handley (1996 ) 41 NSWLR 30 (McLelland CJ in Eq). At 34C-E his Honour made observations showing the need for a sufficient causal relation between a breach by the party rescinding of a contractual obligation on that party and the happening of the event giving rise to a right of rescission, unless the parties’ contract made performance of the obligation a condition of the exercise of the right of rescission. At 34E-G McLelland CJ in Eq said:

The plaintiff’s third submission is based on the proposition that in addition to the express obligation to apply for the requisite ‘consent’ within twenty-four hours of the date of the contract, special condition 28 imposed on the defendant an implied obligation to take all reasonable steps available to him to obtain that ‘consent’ within the stipulated fourteen day period. That proposition is undoubtedly correct: see, eg, Butts v O’Dwyer (1952) 87 CLR 267 at 279-280. If the failure by the defendant to obtain ‘consent’ within the fourteen day period resulted from any default by him in the performance of either his express or implied obligations, then the defendant was not entitled to exercise the right of rescission of the contract otherwise available to him under special condition 28: see Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 440-443 applying New Zealand Shipping Co Ltd v Societe des Ateliers et Chantiers de France [1919] AC 1. This is an application of the principle 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. The history of that principle was, in New Zealand Shipping Co (at 7-8 and 12), traced back to a passage in Coke Upon Littleton (at par 206b): see also Alghussein Establishment v Eton College [ 1988] 1 WLR 587 at 591-594.

51 In my opinion this statement of the law is applicable to the rights of the vendor to rescind under Special Condition 37.2. The principle referred to in the passage cited prevents the vendor from exercising the right of rescission if breach of the undertaking to use reasonable endeavours to have the strata plan registered caused the strata plan not to be registered within the specified time. So too, if breach of the vendor’s obligation in cl.40.1 to cause the building to be constructed and to do so in a reasonable time caused the strata plan not to be registered within the specified time. So too would any other breach of the vendor’s contractual obligations which caused that result.

52 Another important subject dealt with in the same judgment is the onus of proof; see in Plumor v. Handley p.35A to 36B, particularly the concluding observation at 36 “… the onus of proof on the issue of whether the non-obtaining of the requisite consent or advice within the period stipulated in special condition 28 resulted from a breach by the defendant of his contractual obligations, rests on the plaintiff. In other words, the relevant principle can be briefly formulated as: “Non-fulfilment of a condition will justify rescission unless it is proved to be self-induced’, rather than as: ‘Non-fulfilment of the condition will not justify a rescission unless it is proved not to be self-induced’”.

53 In Hunyor & Anor v. Tilelli (1997) 8BPR [97667] 15,629 at 15,631 McLelland in Eq referred to this passage and also said “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, see eg: Apollo Shower Screens Pty Ltd v. Building and Construction Industry Longer Service Payments Corporation (1985) 1 NSWLR 561 at 565-6”.

54 McLelland CJ in Eq on p15,631 stated a further important matter frequently calling for consideration as follows: “For the purpose of considering the question of the defendant’s default, the knowledge, acts and omissions of the defendant’s solicitors or other agents, in that capacity, are to be attributed to the defendant (see CSS Investments Pty Ltd v. Lopiron Pty Ltd [1987] 76 ALR 463 at 474-5), although the knowledge, acts and omissions of independent contractors otherwise than in the capacity of agents for the defendant are not to be so attributed: see Woodcock v. Parlby Investments Pty Ltd (1988) 4 BPR 97301”. In my opinion the vendor is not responsible for failures of the builder within the scope of his independence as a contractor but is responsible for the fulfilment of the vendor’s own contractual duties in cl.40.1 and cl.37.2: these require the vendor to obtain performance by the builder of the work the builder has contracted to do.

55 In the present case then I am of the view that the plaintiffs are entitled to succeed if they discharge the onus of showing that the defendant was in breach of a contractual obligation, and that the breach caused the strata plan not to be registered within the contractual time.

56 The exercise of a right of rescission, even if authorised by the terms of the parties’ contract, may be deprived of effect by equitable remedies referred to by Viscount Radcliffe speaking for the Judicial Committee in Selkirk v. Romar Investments Ltd [1963] 1 WLR 1415 at 1422-3 in these terms:

It does not appear to their Lordships, any more than it did to the judge who tried the action, that there is nay 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 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 to 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 Contract [1906] 1 Ch. 412, C.A.; Baines v. Tweddle [1959] Ch. 679.”

57 Part of the passage cited was referred to, evidently with approval, by Gibbs J in Pierce Bell Sales Pty Ltd v. Frazer (1973) 130 CLR 575 at 590. See too Woodcock v. Parlby Investments Pty Ltd (1988) 4 BPR [97301] 9568 (Young J).

58 The vendor’s counsel contended that there was no breach of the vendor’s obligation in Special Condition 37.2, or of any other obligations in this respect because General Condition B of the Conditions of the Court’s Development consent required that development to be carried out generally in accordance with the plan, that this was complied with and that the issue of the Occupation Certificate shows this. Submissions by counsel for the vendor on the subject of reasonable endeavours addressed the subject as if what was under consideration was limited to responses to difficulties raised by Pittwater Council. This limited the subject in quite a wrong way; the ambit of reasonable endeavours included compliance with conditions of the earlier development consent in the course of construction, and compliance with the obligations of Special Condition 40.1; and if there had been such compliance, there would not have been any matters for Pittwater Council to raise.

59 In my view the vendor’s obligations are not limited to complying with the development consent and negotiating a way through the approval process for any matter of detail of the construction of the building. The vendor also had a contractual obligation to the purchasers in Special Condition 40.1, to cause the building to be constructed in accordance with the building plan and in a good and workmanlike manner. There was not a compliance with Special Condition 41 in the respect that the roof was built too high. The non-compliance was not of any real significance and it seems surprising that Pittwater Council gave attention to it, but if the vendor had complied with Special Condition 40.1 and caused the building to be constructed in accordance with the approved plans this difficulty would not have arisen. Delay caused or contributed to by the roof height was caused by breach by the vendor of Special Condition 40.1. If the vendor had complied with that Special Condition, the building would have been completed to the correct height as an ordinary part of the building process, before the application for development consent was made on 3 July 2001. This cause of delay continued until 14 September.

60 Not building the planter box between Unit 5 and Unit 4 was a failure to comply with the building plans, and a failure to comply with the contractual obligation to the purchasers to construct the building in accordance with the building plans. There was no less a breach by the vendor of its obligation in this respect because the builder wholly omitted to build the planter box, or because the builder offered the reason given in the builder’s letter of 3 August 2001; the reasons offered by the builder were no reasons at all and could not be regarded by anyone responsible for certifying completion, or by the vendor, as excusing the entire omission of the planter box for which the building plans provided. (An incidental and unexplained mystery is that the Strata Plan certified by the surveyor on 14 June 2001 shows the planter box, although without any detail). If there were any sufficient reason for the planter box’s not having been erected earlier, the need to erect it became plain during the process of obtaining the Occupation Certificate early in August, when the builder’s reasons were given in writing and their inadequacy was available to be clearly discerned.

61 The vendor’s counsel contended that Pittwater Council was not entitled to go behind the Occupation Certificate in respect of the height of the building and (as I understood his position) in respect of the absence of the planter boxes or other matters because of the provisions of subs.79C(4) of the Environmental Planning and Assessment Act 1979, which relates to Evaluation in relation to Development Assessment and to Procedures for Development that Needs Consent and provides:

(4) Consent where an accreditation is in force.
A consent authority must not refuse to grant consent to development on the ground that any component, process or design relating to the development is unsatisfactory if the component, process or design is accredited in accordance with the regulations.

62 In my view it is far from clear that Council was precluded by subs.(4) from refusing to grant consent to development consisting of the strata plan and strata subdivision by the existence of the Occupation Certificate from addressing and (it may be) refusing to grant consent on the ground that the planter boxes were simply not built at all, so that the conditions of the previous development and consent had not been complied with, or on the ground that the landscaping was not satisfactory, (a subject with which, so far as appears, the Occupation Certificate did not deal). The proposition is certainly not so clear that it was reasonable to proceed without attending to those matters on the basis that Council was precluded from having regard to them. In its dealings with Pittwater Council the vendor did not adhere to the position that attention by Council to these matters was precluded by the Occupation Certificate, and did not simply refuse to attend to the matters of the planter box and the landscaping. It would not have been the use of reasonable endeavours to take that line, and attending to the problems by doing the works, as was obviously required in the use of reasonable endeavours, was a measure which should reasonably have been taken long before it was taken.

63 Pittwater Council did not adopt the view that Council’s inquiry or concern was precluded by the issue of the Occupation Certificate. It does not seem to me that inquiry or concern were so precluded. Even if inquiry and concern were so precluded, it was hardly to be expected that when Council came to consider a Development Application relating to the Strata Plan Council would not concern itself with whether the building had been finished or with the state of compliance with the conditions of development consent. When on 14 September it became clear that the absence of the planter box was regarded by Council as significant the vendor did not arrange to have the planter box erected. This was a simple enough task when it was finally addressed, and took only two or three days’ work; no reasonable ground has been shown for not having done it in the course of earlier building work, and again no reasonable ground has been shown for not having done it shortly after Council’s attitude that it was important was expressed on 14 September. More than two weeks passed before Mr McKenzie addressed actually having the work carried out, rather than pursuing the prospects of making some arrangement to lodge money as a bond to secure that it would be carried out at some future time.

64 No substantial reason had been shown either for not providing screening vegetation either before embarking on the application for consent to the Strata Plan or as soon as it appeared that Council officers regarded it as significant.

65 My conclusion on Mr McKenzie’s evidence particularly the passage at t.11, l.41-43 is that Mr McKenzie made it his objective to achieve certification of the building work and did not give his attention to whether the building work required by the terms of the vendor’s contract with the purchasers had all been carried out and the obligation in Special Condition 40.1 had been complied with. He did not know on 3 July that the planter boxes had not been constructed, and this came to his knowledge late in July. It should have been obvious that the builder could not dispense with some part of the building work indicated on the building plans, and that the omission was bound to lead to inquiry and could lead to delay. Learning of the omission did not prompt Mr McKenzie to take any action to have them constructed; his attention was directed to getting the Occupation Certificate and getting approvals from Council. It was not a large or difficult project actually to have the planter boxes constructed, either in the course of building work generally when other planter boxes were constructed, or soon after learning of their not having been constructed late in July, or soon after learning in mid-August that Council officers regarded their not having been constructed as a problem.

66 When he did encounter difficulties with Council officers Mr McKenzie’s efforts were not well directed; he gave attention and energy to projects of getting Council to accept a bond or a deposit of money instead of constructing the planter boxes, and pursued a project of persuading these purchasers and the purchasers of other units to agree to accept company title, a very unattractive project involving considerable attention and expense, for stamp duty and otherwise, altogether out of scale with any difficulty of attending to the planter boxes and the landscaping.

67 In my finding the delays which led to the vendor having or appearing to have a right of rescission arose out of the vendor’s own failures to comply with its contractual obligations to the purchasers. The matters which in fact were referred to by Council officers while they had the application under consideration were all matters which, in any reasonable course, should have been attended to while the building was being constructed and before the Development Application was lodged on 3 July. If they had been attended to then it is improbable that there would have been any great delay in Council’s officers giving consent under delegated authority after the Occupation Certificate was available; this is improbable because the reasons for delay which they gave would not have existed. The time taken between lodging the application for Development Consent on 3 July and obtaining the Occupation Certificate and submitting it on 13 August is not really explained, bearing in mind that it was and must have been clearly seen that the Occupation Certificate was necessary for the approval. However that may be, the Occupation Certificate was available on 13 August, and if there had not been matters for Council officers to consider relating to the building work not being completed it is probable that Pittwater Council’s consent would have been given under delegated authority within several weeks after 13 August and with ample time for the plan to be registered before 8 October. When the plan did become available on 17 October it was registered on 5 November, 19 days later.

68 It was Mr McKenzie’s evidence (t.12) that on a few occasions throughout construction he was told by Council that if the vendor were to depart in any way from the plans it would need to go back to Court, as the Council’s view was that Council took no part in further changes to the plans which the Court had referred to in its order. This was a strong indication to Mr McKenzie that he and the vendor should be very attentive to detail and not leave openings for contentions about departures from the plans. Mr McKenzie did not turn to actually building the planter boxes until the end of September, and he but used significant time pursuing Council approval on the basis of depositing money referred to as a bond to secure that the work would be done later. He gave no real explanation for failing to comply with the building plans and building a planter box either in the general course of construction, or as soon as their absence was drawn to his notice.

69 Mr McKenzie’s evidence in cross-examination at t.18 and 19 shows that at the time the decision to rescind the contract was taken he, and the persons who controlled Bodrex, were aware that the value of Unit 3 was several hundred thousand dollars higher than the contract price of $720,000; counsel’s advice was taken as to their rights, and as a result of the advice notice of rescission was given. I find that pursuit of the advantage of the increase in value was a dominating factor in the decision to rescind, as the decision was taken just at the time when the difficulties in the path of registering the strata plan had ended. The purchasers were already in occupation and had moved their goods into the unit, and they were unlikely to make delays about settlement. In the context of delay caused by failures of the vendor, this use of the right of rescission was unreasonable. It was unreasonable to make a precipitate rescission immediately after overcoming all substantial difficulties in the way of registration of the Strata Plan. However the rescission lacked effect for other reasons than those referred to in the passage cited from Selkirk v. Romar Investments.

70 I conclude that the Strata Plan’s not being registered within the time referred to in Special Condition 37.1 was caused by breaches by the vendor of contractual obligations. I also conclude that it was unreasonable of the vendor to exercise the purported right of rescission, and reliance on that right of rescission should be prevented by granting to the purchasers equitable remedies in enforcement of their rights as purchasers.

71 The plaintiff’s counsel put forward as further grounds for relief a claim that rescission had brought about a forfeiture of the plaintiffs’ equitable interest in the home-unit and that there are equitable grounds on which the plaintiffs should be relieved against that forfeiture. That case requires consideration only if the plaintiffs are not entitled to succeed having regard to the contractual relationship between the parties, and I will not address the equitable claim.

72

ORDERS:

(1) Declaration in terms of Claim 2 in the Summons dated 25 October 2001.

(2) Injunction in terms of Claim 1.

(3) Order for specific performance of the Contract referred to in Declaration 1.

(4) Reserve further consideration of time, manner and conditions of specific performance, and of the claim for damages.

(5) Order that the defendant pay the plaintiffs’ costs of the proceedings.

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Last Modified: 03/27/2002