Odgers v Bacich Investments Pty Ltd - [2007] WASC 269

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: ODGERS -v- BACICH INVESTMENTS PTY LTD [2007] WASC 269

CORAM: EM HEENAN J

HEARD: 29, 30 OCTOBER & 2 NOVEMBER 2007

DELIVERED : 16 NOVEMBER 2007

FILE NO/S: CIV 1895 of 2007

BETWEEN: DAVID MATTHEW GLENN ODGERS
LINDA MAE WONG
Plaintiffs
AND
BACICH INVESTMENTS PTY LTD
First Defendant
REGISTRAR OF TITLES
Second Defendant

Catchwords:

Sale of land - Conditional upon subdivisional approval - Subdivisional approval requiring minor reduction in area of land to be sold - Purchasers seeking specific performance with abatement of purchase price - Vendor giving notice of termination pursuant to contractual term allowing termination if dissatisfied with condition imposed on subdivision when acting reasonably - Criteria for specific performance with abatement

Legislation:

Conveyancing Act 1919 (NSW)
Planning and Development Act 2005 (WA)
Transfer of Land Act 1893 (WA)

Result:

Judgment for plaintiffs

Declare plaintiffs are entitled to specific performance with abatement in purchase price, if any, calculated in accordance with standard condition 11, and subject to final subdivisional approval

Declare that purported notice of termination of the contract of sale is ineffective
Counterclaim dismissed

Category: A

Representation:

Counsel:

Plaintiffs:     Mr R J L McCormack
First Defendant              :     Mr M G Pendlebury
Second Defendant         :     No appearance

Solicitors:

Plaintiffs:     Corser & Corser
First Defendant              :     Q Legal
Second Defendant         :     No appearance

Case(s) referred to in judgment(s):

Barker v Cox (1876) 4 Ch D 464
Barnes v Wood (1869) LR 8 Eq 424
Burrow v Scammell (1881) 19 Ch D 175
Drummoyne Municipal Council v Beard [1970] 1 NSWR 432
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Flight v Booth (1834) 1 Bing NC 370; (1834) 131 ER 1160
Gall v Mitchell (1924) 35 CLR 222
Goldsmith v Smith (1951) 52 SR (NSW) 172
Hawes v Cuzeno Pty Ltd [1999] NSWSC 1167; (1999) 10 BPR 18,011
King v Poggioli (1923) 32 CLR 222
McGavin v Gerraty (1911) 17 ALR 85
Mortlock v Buller (1804) 10 Ves 292; (1804) 32 ER 857
Nelson v Bridges (1839) 2 Beav 239; (1839) 48 ER 1172
Niesmann v Collingridge (1921) 29 CLR 177
Paltara Pty Ltd v Dempster (1991) 6 WAR 85
Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537
Rudd v Lascelles [1900] 1 Ch 815
Rutherford v Acton‑Adams [1915] AC 866
Shadlow v Skiadopoulos (1987) 4 BPR 9259
Thomas v Dering (1837) 1 Keen 729; (1837) 48 ER 488
Topfell Ltd v Galley Properties Ltd [1979] 2 All ER 388
Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1
Trust Company Ltd v Chief Commissioner of State Revenue [2007] NSWCA 255

EM HEENAN J: Two principal issues arise in this litigation concerning a contract for the sale of land which is premium riverfront property in Victoria Avenue, Claremont. The first is: should the contract be specifically enforced at the suit of the purchasers but with a possible abatement in the agreed purchase price. The second is: has the contract been terminated by notice to that effect given by the vendor.
Under a contract of sale made in November 2006, the first defendant, Bacich Investments Pty Ltd, agreed to sell two unsubdivided lots in the Victoria Avenue property to the plaintiffs, Dr Odgers and Dr Wong, subject to subdivisional approval being granted by the Western Australian Planning Commission (WAPC) to the then proposed subdivision of the vendor's land.
At the time of the contract the vendor was the proprietor of an estate in fee simple in a riverside block, upon which is located a heritage home. The block had extensive frontage to the river and, because of its size, was believed to be suitable for a battleaxe subdivision. The proposed subdivision contemplated two subdivided lots on the river side of the old home, at a lower level, accessible by a driveway, or driveways, running from Victoria Avenue along the eastern boundary of the block. The proposed subdivision also contemplated that an area of the block, along the river foreshore, would be ceded to the State for eventual inclusion within a reserve. Accordingly, a plan of this proposed subdivision, if approved, would have resulted in the original home being retained on land being designated Lot 1, two new lots, Lots 2 and 3, being available for residential development on the river side and accessible by the battleaxe driveway (or driveways), and Lot 4, being the public reserve to be ceded to the State. Nothing turns on the creation of the riverside reserve and it need not be mentioned further. The proposed subdivision, because it entailed two new riverside lots which might be owned separately, provided for and contemplated the battleaxe laneway being of a width of 6 m.
Shortly afterwards, however, the purchasers decided that they wished to combine the two proposed riverside lots, Lots 2 and 3, into a single lot. They otherwise sought to confirm the purchase on the same terms and conditions. To this end, they requested the vendor to lodge an application for subdivisional approval which would provide for one single larger riverside lot, but still as part of a battleaxe subdivision. The vendor agreed to this without any other variation in the terms of the contract of sale and submitted a plan of subdivision. The submitted plan, however, provided for the width of the battleaxe laneway to be reduced from 6 m to 4 m.
On learning this, the purchasers protested and demanded that the revised application for subdivisional approval preserve the original width of the access laneway at 6 m. The vendor agreed to this and submitted a second plan of subdivision for approval, with the proposed laneway having a width of 6 m, as originally submitted. In due course, the WAPC gave conditional approval to this subdivisional proposal, but instead prescribed (by condition 6) that 'the battleaxe access leg [be] reduced to a minimum width of 4 metres'.
This condition, providing for a 'minimum width of 4 metres', is, clearly enough, uncertain in some respects because it contemplates that the laneway may be wider than 4 m. However, in respect of subdivisional approval, the vendor is contractually required to make application to the WAPC in relation to the working out or implementation of any of its imposed conditions. It is to be expected that by such application the precise requirements of the WAPC can be ascertained such that that the boundary and width of the proposed laneway will eventually be specified and will meet the approval of the WAPC. In the present circumstances, the obligation of the vendor, in my view, is to use its best endeavours to secure a grant of approval for a driveway of 6 m, if that is acceptable to the WAPC. Failing that, it is obliged to secure a grant of approval for a laneway as close as possible to a width of 6 m as will be acceptable to the WAPC.
The actual requirements of the WAPC in this regard have not been finally specified, but the evidence suggests that there is a prospect that a laneway of 4.8 m in width would be acceptable to the WAPC. This is because such a proposal has already been endorsed by a senior planning officer of the Town of Claremont, which is the municipality responsible for the area and which makes recommendations upon such proposals to the WAPC (discussed later in these reasons). In any event, what does seem clear is that although approval of a laneway for the original proposed width of 6 m will not be forthcoming, approval will be given for a slightly narrower laneway.
One of the consequences of this will be that the area of land available for transfer to the purchasers will be slightly less than that delineated in the plan defining the subject matter of the executory contract of sale. The precise reduction in area will only be determinable by the eventual dimensions of the laneway which, as I have said, are yet to be precisely defined. Nevertheless, the purchasers wish to proceed with the sale and are willing, ready and able to accept a lot with this slightly reduced area.
Consequently, the controversy has become whether or not this reduction affects the price payable under the contract of sale and, if so, whether or not the vendor is entitled to terminate the contract of sale because of a reasonable dissatisfaction with the conditions of subdivision imposed by the WAPC in this respect.

Material provisions of contract of sale

The contract of sale contains a number of special, and standard, conditions and also incorporates, to the extent not otherwise inconsistent with the express terms of the contract, the Law Society and Real Estate Institute of Western Australia Joint Form of General Conditions for Sale of Land, 2002 revision (general conditions).
The contract of sale between the parties (Exhibit 4) comprises a contract for sale of land or strata title by offer and acceptance, initially dated 7 November 2006, and several annexures. The land is described as situate at and known as 50 Victoria Avenue, Claremont, part of former Lots 1 and 2 on Diagram 504 and being part of the land in Certificate of Title Volume 2114, Folio 371. It is described as vacant land. The purchase price is $7,250,000, payable by a deposit of $300,000 within seven working days of acceptance and the balance on settlement.
Annexure 'A', expressly made part of the contract, relevantly provides:
7.The property sold, is all of the land proposed to be sub‑divided and created into two lots as per Annexure 'D' and shall be sold free of all encumbrances, work orders or Resumption orders.
8.A copy of the title of the un‑subdivided land being Portion of Swan Location P253 and being Lots 1 and 2 on Diagram 504 Volume 2114 Folio 371 is annexed herewith as Annexure 'D' and forms part of this Contract.
...
11.A copy of the proposed sub‑divisional plan for Lots 2 and 3 are attached as Annexure 'D' and form part of this Contract.
12.The access way being 'the Driveway' to be made good by the vendor = to be cleared and access available to vehicles of buyer as seen on Annexure 'D'. If retaining walls are required, they are to be constructed by the Vendor at the Vendor's cost.
A further annexure (Annexure 'A'(1)) specifies additional 'Standard Conditions'. Among those are conditions which introduce new general terms and exclude certain provisions of the general conditions. Standard condition 7, which replaces general condition 13, provides:
Clause 13 of the 2002 General Conditions does not apply to this Contract and in its place the following is substituted:
13.1This Contract is subject to the approval of the Western Australian Planning Commission ('the WAPC'), approving the proposed sub‑division as per attached plan of sub‑division. Annexure 'D'
13.2This Contract is subject to and conditional upon the following:
(a)The Seller, if it has not done so before the Contract Date, within three (3) months after the Contract Date making an application for the approval of the WAPC for the subdivision of the land known as 50 Victoria Avenue, Claremont of which the Property forms part;
(b)The WAPC giving its approval to the application outlined in clause 13.2(a) within a period of twelve (12) months; and
(c)The deposited plan being endorsed in order for dealing by the Department of Land Information ('the DLI') within eighteen (18) months after the date WAPC gives its approval as outlined in clause 13.2(b).
(d)That settlement should take place within fourteen (14) days of issue of a duplicate certificate of title.
13.3The Seller must use its best endeavours to have DLI endorse the deposited plan in order for dealing and to obtain a separate certificate of title for the Property.
13.4If there is any delay in obtaining a separate certificate of title for the Property, the Seller is not responsible to compensate the Buyer for any additional costs or expenses of any kind, including but not limited to cost increases pursuant to any building contract entered into by the Buyer.
13.5If the WAPC, the DLI or any other authority seek to impose a condition on any of the approvals required pursuant to this clause 13 which the Seller, acting reasonably, is unwilling to comply with, the Seller may give a notice to the Buyer that a condition of subdivision is unacceptable. This Contract is deemed to be at an end on the date that said notice is given.
13.6If any condition in this clause is not satisfied or this Contract is terminated pursuant to clause 13.4:
(a)The Seller must repay the Deposit to the Buyer without deduction; and
(b)This Contract shall come to an end immediately and neither party shall have any further obligations or claims in relation to the other.
Standard condition 10, is as follows:
Clause 15 of the 2002 General Conditions does not apply to this Contract and in its place the following is substituted:
15.No error, omission or misdescription of the Property will annul the sale or entitle the Buyer to any compensation or abatement of the Purchase Price subject to clause 11 of annexure A(1) of this Contract.
Standard condition 11 provides:
The Buyer acknowledges that it has not relied on any plan, brochure, document, letter, material or publication made by the Seller or the Seller Agent in relation to the dimensions, area, boundaries, finished levels or description of the Property other than the Plan. In the event that the area of the Property upon issue of a certificate of title is different from the area of the Property indicated on the Plan the Buyer acknowledges and agrees to the following:
(a)The Buyer shall not object or make any claim for compensation in respect of any difference in the dimensions, area, boundaries or description of the Property where the difference in the area of the Property is not more or less than five percent (5%) of the area outlined on the Plan.
(b)If the difference outlined in clause 11(a) is greater than five percent (5%), at settlement the Purchase Price shall either be increased or decreased (as necessary) on a pro rata basis calculated at a rate of $7,300 per square metre. This increase or decrease will be in full and final settlement and satisfaction of any and all claims that the Buyer has or would have but for this clause in respect of any differences in dimensions, area, boundaries, finished levels or description of the Property.
Annexure 'D' is the plan of the proposed subdivision which, at that date, proposed two riverfront lots (Lots 2 and 3), each accessible by a lane or driveway, the dimensions of which are not expressly stated but are to scale. It is agreed that the width of this dual laneway was to be 6 m throughout its length.
The original offer submitted by the plaintiffs for the purchase of the land was at a price of $7 million. This was not accepted by the vendor who counter‑offered to sell at $7.25 million. That counter‑offer for a sale at $7.25 million was accepted by the plaintiffs on 20 November 2006. It was immediately following this that the request was made by the plaintiffs to combine the two river‑front lots (Lots 2 and 3) into a single lot (Lot 2). However, it was also confirmed that the external boundaries of the portion of the land being purchased were not to be changed, only that the internal boundaries dividing the proposed Lots 2 and 3 would be deleted.

Obligation to use best endeavours

This contract of sale is expressly conditional upon subdivisional approval being granted within the time specified. Further, general condition 13.3 (in both its original and amended form) requires the vendor to take steps to secure the requisite subdivisional plan for dealing. Hence, there is an obligation, both express and implied, for the vendor to use its best endeavours to secure fulfilment of those conditions and to see to their implementation: Hawes v Cuzeno Pty Ltd [1999] NSWSC 1167; (1999) 10 BPR 18,011; Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; Paltara Pty Ltd v Dempster (1991) 6 WAR 85; Niesmann v Collingridge (1921) 29 CLR 177.

Abatement clause

Standard condition 10 is a typical compensation clause providing that errors and misdescriptions in relation to the title or subject matter sold will not annul the sale or give rise to any claims of compensation on either side. This condition, however, is subject to standard condition 11 which provides that for any variation in area greater than 5% of the area agreed to be sold, an adjustment to the purchase price, either by way of increase or reduction, shall be made by a pro rata application of the change in area to the specified price per unit of area.
The plaintiffs, as purchasers, contend that reduction of the width of the laneway from 6 m to 4 m will trigger the application of standard condition 11 and that this will result in a reduction in the purchase price payable by them of $584,000, in view of the specified formula.
The first defendant submits that the formula for reducing the purchase price contained in standard condition 11 only applies to cases of error or misdescription covered by standard condition 10. The first defendant further submits that standard condition 11, applying as it does to errors and misdescriptions in relation to the subject matter of the sale, does not apply in the present circumstances because the diminution in the area which the vendor will be able to convey does not stem from any misdescription, error or defect in the title or nature of the subject matter agreed to be sold which existed at the date of the contract. Indeed, the parties are agreed that, apart from this controversy about the width of the laneway for the proposed subdivision, the vendor has a good title and that the land complies, in all other respects, with the description given at the time of sale. Rather, what has happened is that the conditions imposed by the WAPC mean that the vendor will be unable to convey the full extent of the property which was agreed to be conveyed. This being so, the plaintiffs, as purchasers, contend that they have a contractual right to a reduction in the purchase price due to the reduction in the area of the subject land.
I accept that the problem with the reduction in the area is due to the condition imposed by the WAPC, rather than to any error or misdescription at the date of sale.

Notice of termination

The immediate reaction of the vendor to this assertion by the purchasers was to deliver a notice purporting to terminate the contract under the amended general condition 13.5 (standard condition 7), which confers an opportunity for the vendor to terminate the contract upon reasonable dissatisfaction with a condition imposed on the grant of subdivision.
The notice of termination given by the vendor is dated 5 June 2007. After reciting the agreement for sale, relevant conditions and the grant of approval for subdivision by the WAPC on 21 May 2007 on certain conditions, one of which required that the battleaxe access leg be reduced from a width of 6 m as specified in Annexure 'D' of the contract to a minimum width of 4 m, the notice provided:
The seller hereby gives notice that:
E.The conditions imposed (in particular the condition on the reduction of the access leg referred to in paragraph D above) are unacceptable to the Seller;
F.In accordance with clause 13.5 of the General Conditions 2002 (as amended by Annexure 'A'(1) of the Contract) the Seller hereby notifies the Buyer that the Contract is deemed to be at an end as at the date of this notice.
We will instruct our agent at Acton Dalkeith to release your client's deposit as soon as possible.
A second notice of termination of the contract was given by the vendor dated 19 October 2007. The reason for the second notice was that the plaintiffs originally contended that the first notice had not been served at the proper address specified by the contract. Once that allegation had been made the vendor then prepared, and served, the second notice at the contract address. However, the plaintiffs now accept, in my view correctly, that the service of the first notice upon their solicitors was effective service. That being the case, it is unnecessary to address that issue further or to consider any potential significance of the second notice. This does not ignore the possibility that if, in other respects, the first notice was defective, the second notice could have overcome those defects. However, no such allegation is made in this case. Nor is any additional cause alleged for the termination relied upon by the second notice. It is therefore unnecessary to examine this point further.

On receiving the notice of termination of 5 June 2007 the purchasers applied for an injunction to restrain the first defendant from reselling the land. On 4 September 2007 I granted an interlocutory injunction and gave leave to the purchasers to lodge a caveat. Thereupon, I ordered an early trial, together with pleadings, as it was apparent that this dispute was one of urgency and importance and should be capable of being resolved quickly in view of the narrow issues dividing the parties which, by then, were clearly ascertainable.

Application for subdivisional approval

The steps taken to secure WAPC subdivisional approval are described in the evidence of Ms Marta Osipowicz, a senior planning officer at the Town of Claremont. The WAPC contacted the Town of Claremont by letter of 28 December 2006, advising of its receipt of an application for approval to subdivide 50 Victoria Avenue and seeking information, comment and recommended conditions relating to the application.
The application for subdivisional approval was accompanied by a letter from the vendor's town planning consultant, Greg Rowe & Associates, and a copy of the proposed plan of subdivision. The accompanying plan of subdivision provided for one riverside lot (Lot 2) of 884 m² in area including a laneway, or 'access leg', with a width of 4 m and an area of 164 m². This plan appears to have been prepared on 15 December 2006 and lodged with the Department of Planning and Infrastructure on 19 December 2006. However, the first defendant's agent, Greg Rowe & Associates, wrote again to the WAPC on 15 January 2007 with an amended subdivisional plan. That second letter and the amended plan were forwarded to the Town of Claremont. The only material variation in the second plan of proposed subdivision is that the laneway or access leg had been widened from 4 m to 6 m and now comprised an area of 244 m², so that the total area of Lot 2 with the included access leg became 964 m².
The proposed subdivisional approval was then circulated for comment from other sections of the municipality. The Town of Claremont's heritage officer was consulted because of the heritage status of the existing dwelling. The comment received was that the wider 6 m access leg 'requires the demolition of the original stables and wash house of the heritage property which is not a desirable outcome'. The heritage officer further commented that 'access, if allowed, should be narrower and set along the boundary to give the maximum curtilage possible to the historic house'.
The proposal then went to a council meeting of the Town of Claremont which resolved, in effect, to advise the WAPC that it did not support the subdivision, but that if approval were to be granted certain conditions should be imposed. One of these was that the width of the battleaxe laneway should be reduced from 6 m to 4 m in order to protect the curtilage to the existing heritage‑listed dwelling on Lot 1. The Town of Claremont then wrote to the WAPC advising it of the resolution.
On 28 May 2007 the WAPC notified the Town of Claremont that the subdivision of 50 Victoria Avenue had been approved, subject to conditions, including condition 6, namely:
The battleaxe access leg be reduced to a minimum width of 4 metres.
Ms Osipowicz then proceeds to explain that a development application for approval to commence development of alterations and conservation works to the heritage house was lodged in October 2006 and replaced by a revised development application in March 2007. The plans accompanying the revised development application showed a proposed driveway with a width of 6.294 m. This was not acceptable to the Town of Claremont which resolved to that effect on 1 May 2007 and then notified the WAPC at a time when the subdivision approval application was still pending.
The first defendant sought a review by the State Administrative Tribunal (SAT) of a number of conditions imposed by the WAPC on the development approval. That led to a mediation process and further amended plans being submitted showing a driveway of 4 m in width. Those amended plans were approved by the Town of Claremont at a council meeting on 18 September 2007 and the municipality then advised the WAPC of this. Ms Osipowicz was then informed that the amended development plans had been approved by consent of the vendor and the WAPC and that orders of the SAT issued in that regard.
A further development was that the Town of Claremont received an application for a building licence for the construction of a retaining wall and driveway at 50 Victoria Avenue on 11 September 2007. The accompanying plans indicate that the proposed width of the driveway was 5 m. A building licence was then granted on 20 September 2007.
The next step in this somewhat complicated process was that a firm of consulting engineers and surveyors submitted a plan to the Town of Claremont, seeking endorsement of the plan and confirmation that the conditions imposed by the WAPC relating to the subdivision had been satisfied. That plan showed the battleaxe access leg to have a width of 4.8 m.
The explanation for these departures from the dimension specified in condition 6 by the WAPC to the grant of subdivisional approval, appears from the following passage (at [5.3]) in the evidence of Ms Osipowicz:
Although the WAPC is the authority responsible for granting approval of subdivision applications, and for subsequently approving any Deposited Plan lodged pursuant to a subdivision approval, it is the practice of the WAPC to rely upon advice from various statutory authorities concerning whether conditions imposed by the WAPC on the subdivision approval being [sic] fulfilled. This process is commonly known as 'clearing' the conditions, and is explained in the WAPC approval letter ... in the following terms:
'The agency/authority for local government noted in brackets at the end of the condition(s) identify the body responsible for providing written advice confirming that the WAPC requirement(s) outlined in the condition(s) have been fulfilled. The written advice of the agency/authority or local government is to be obtained by the Applicant/Owner. When the written advice of each identified agency/authority or local government has been obtained, it should be submitted to the WAPC with a form 1C and appropriate fees and a copy of the Deposited Plan.'
Ms Osipowicz points out that the advice provided by the 'clearing authority' is not a statutory requirement and does not have the status of a formal decision recognised by the Planning and Development Act 2005 (WA) because, under s 145 of that Act, it is the WAPC who determines whether the plan of subdivision should be approved. She points out, nevertheless, that although the WAPC is not required to follow the 'advice' received from the clearing authority, that is usually what happens in her experience. She then proceeds to explain how there appears to be an element of discretion or latitude about the dimension of 4 m as the width of the driveway and how she would expect, but cannot ensure, that the recommendation of the Town of Claremont about compliance with this dimension would be accepted.
The evidence then is that, in September 2007, the Town of Claremont received further advice from the vendor's town planning consultants who reported engineering difficulties in designing a battleaxe leg access to this lot of 4 m in width because of the steep topography of the site. The engineers advised that an access leg of 4.5 m in width would be required. The agents then requested the support of the Town of Claremont to this variation in the proposed dimension. On behalf of the Town of Claremont, Ms Osipowicz advised the vendor's agent on 9 October 2007 that:
In principle a driveway of 4.5 metres is considered acceptable. I have noted that the building licence has approved an overall width of 5.0 metres (inclusive of 0.25 metre retaining walls). I would suggest that landscaping needs to be taken into consideration but otherwise I have no major issue with the proposal.
Ms Osipowicz then points out that the deposited plan proposes a 4.8 m wide battleaxe leg, which is a little wider than the 4.5 m suggested by the engineers, but states that she is prepared to advise the WAPC that '[c]ondition 6 should be cleared'. She concludes by saying:
The 4.8 metre wide leg appears to be generally consistent with the building licence proposal, if the western side of the battleaxe leg is taken to be the inner edge of the retaining wall adjacent to the existing dwelling.
From all this it is apparent that the final width of the proposed battleaxe laneway is yet to be determined. Despite the condition imposed on the subdivisional approval that it be a minimum of 4 m, it is probable that it will be greater than this - somewhere in the vicinity of 4.5 m or 4.8 m or thereabouts. While the final decision will rest with the WAPC, it is evident that the clearing authority, the Town of Claremont, is prepared to endorse compliance with the conditions of subdivision approval with a driveway of 4.8 m in width. There is a significant likelihood that that will be accepted by the WAPC.
At this stage, therefore, my findings must be that the vendor is unable to transfer a subdivided lot with a laneway of 6 m in width, but will probably be able to transfer a subdivided lot with a laneway slightly narrower - in the region of 4.5 m to 4.8 m - and that this would meet the approval of the Town of Claremont and probably the WAPC. Therefore, what the final dimensions of the laneway will be can only await these eventual decisions, but it will almost certainly be less than 6 m but more than 4 m in width.
In these circumstances the plaintiffs, by amendment, now seek specific performance with an abatement of the purchase price because of the small reduction in the area available for sale. The question is whether this equitable doctrine is available in these particular circumstances.
Because of the claimed ability of the purchasers to obtain specific performance with compensation for the reduction in the area sold, the result may be to modify the price payable. It is, therefore, desirable to address those issues in the case before turning to the question of whether or not the vendor has validly terminated the contract as attempted. This is because the reasonableness of the conduct of the vendor in attempting to terminate, and hence its ability to do so under amended general condition 13.5, will depend upon the consequences of these changes. It is necessary, therefore, to identify the potential consequences of those changes in order to address the reasonableness or otherwise of the attempt to terminate the contract.

Specific performance for a reduced area with abatement of the price payable

This doctrine of specific performance with abatement was analysed and applied in Gall v Mitchell (1924) 35 CLR 222, where a claim for specific performance of a contract to sell certain land, not all of which the vendor owned, was defended on the basis of alleged hardship to the vendor. Reliance was placed on the doctrine that where a vendor includes in land which he contracts to sell some land which belongs to someone else, a court will grant specific performance of so much of the contract as the vendor is able to perform: Burrow v Scammell (1881) 19 Ch D 175, 182 ‑ 183; Barker v Cox (1876) 4 Ch D 464; Rudd v Lascelles [1900] 1 Ch 815. Isaacs J then cited (at 229), with approval, a passage in the judgment of Lord Eldon in Mortlock v Buller (1804) 10 Ves 292, 316; (1804) 32 ER 857, 866:
If a man, having partial interests in an estate, chooses to enter into a contract, representing it, and agreeing to sell it, as his own, it is not competent to him afterwards to say, though he has valuable interests, he has not the entirety; and therefore the purchaser shall not have the benefit of his contract. For the purposes of this jurisdiction, the person contracting under those circumstances, is bound by the assertion in his contract; and, if the vendee chooses to take as much as he can have, he has a right to that, and to an abatement; and the Court will not hear the objection by the vendor, that the purchaser cannot have the whole.
In Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1, 27 Menzies J set out the chief duties of a vendor at common law, quoting from Williams on Vendor and Purchaser (3^rd ed, 1965). These included the vendor's obligation to 'produce land corresponding substantially in all respects with the description contained in the contract and available to be transferred to the purchaser in fulfilment of the contract'. Menzies J confirmed that, '[a]t common law, any difference, however trivial, between the land described in the contract and the land produced constituted a defect which entitled the purchaser to rescind'. His Honour went on to describe the position in equity:
Where there was only a slight difference, the Courts of Equity began to interfere and introduced the principle of compensation for deficiency: see Erskine LC in Halsey v Grant [(1806) 13 Ves Jun 73, 76 ‑ 79]. Unless the deficiency was so substantial as to give the purchaser something entirely different from what he had contracted, equity would order specific performance on giving compensation for the deficiency.
Also to avoid the harsh effect of the common law, it became the practice to insert in contracts a clause stating that a difference from the description of the subject matter would not annul the sale. These clauses were of two types: those which allowed compensation to the purchaser for a deficiency, and those which did not. The right to compensation under a clause in the contract was independent of the right to compensation in a claim for specific performance.
However, where there was a clause in the contract preventing the sale from being annulled even if the purchaser had the right to compensation for a misdescription, equity would still permit the purchaser to rescind if the misdescription was a substantial one (27 ‑ 28). (Some citations omitted)
Travinto Nominees Pty Ltd v Vlattas is a case where the alleged misdescription, or error, in respect of the property sold, was the failure of the vendor to reveal that the lease to which the subject land was sold contained an option to renew. The purchaser sought to annul the sale because of this defect in title, but the vendor relied upon the contractual clause providing that errors and misdescriptions in the property would not give rise to a right to annul the sale. The court held, in the words of Menzies J, that:
[T]he words 'error or misdescription of the property' cover only an erroneous description of the land sold and not an error in the statement of the title to it (29).
Consequently, the non‑disclosure of the option to renew the lease did not give rise to an entitlement to compensation under that contractual provision. See also Barwick CJ at 25 ‑ 26.
This doctrine is considered by Viscount Haldane when delivering the advice of the Privy Council in Rutherford v Acton‑Adams [1915] AC 866, 869 ‑ 870:
In exercising its jurisdiction over specific performance Court[s] of Equity look at the substance and not merely at the letter of the contract. If a vendor sues and is in a position to convey substantially what the purchaser has contracted to get, the Court will decree specific performance with compensation for any small and immaterial deficiency, provided that the vendor has not, by misrepresentation or otherwise, disentitled himself to his remedy. Another possible case arises where a vendor claims specific performance and where the Court refuses it unless the purchaser is willing to consent to a decree on terms that the vendor will make compensation to the purchaser, who agrees to such a decree on condition that he is compensated. If it is the purchaser who is suing the Court holds him to have an even larger right. Subject to considerations of hardship he may elect to take all he can get, and to have a proportionate abatement from the purchase‑money. But this right applies only to a deficiency in the subject‑matter described in the contract. It does not apply to a claim to make good a representation about that subject‑matter made not in the contract but collaterally to it. In the latter case the remedy is rescission, or where a claim for damages for deceit where there has been fraud, or for breach of a collateral contract if there has been such a contract.
The subject is also discussed in Spry ICF, Equitable Remedies (6^th ed, 2001) 289 ‑ 312. The learned author observes (at 295) that 'these principles apply whether the material defect has arisen before or after the date of entry into the contract [Nelson v Bridges (1839) 2 Beav 239; (1839) 48 ER 1172], subject, of course, to any indication of a contrary intention by the parties'. Further, the doctrine is confined to compensation or abatement of price for a deficiency or defect in title or for a misdescription and does not apply to enable compensation for breaches of other terms of the contract, such as, for example, delay: see King v Poggioli (1923) 32 CLR 222.
Spry also explains (at 302) how the courts are more inclined towards the grant of specific performance with abatement or compensation at the suit of a purchaser, citing Mortlock v Buller; Barnes v Wood (1869) LR 8 Eq 424 and Rutherford v Acton‑Adams [1915] AC 866, 870. The learned author goes on to write that:
Examples of this jurisdiction are found even when it appears that the area of land to be conveyed is very much less than that which was contracted to be sold, or when the vendor is able to provide, not an absolute interest, but a partial interest, such as that of a tenant in common or of a tenant for life or of a remainder man. (footnotes omitted)
In the later edition of Williams on Title (4^th ed, 1975), the learned author addresses the topic of specific performance with compensation, distinguishing between a vendor's action and a purchaser's action and, in the case of a purchaser, writes (at 753 ‑ 754):
The second case is very different, for the reason that the vendor is the party in default and it is equitable to put him upon terms even against his will, whereas the innocent party, the purchaser, is entitled to stand upon his strict rights. The vendor in the case here considered has expressly or impliedly contracted to convey a certain thing, and it has turned out that in truth he is unable to fulfil that contract to its full extent, though he can perform it in part. In such circumstances the purchaser can insist upon specific performance (i.e. the conveyance by the vendor of what he has got), subject to an adjustment in the purchase price [Castle v Wilkinson (1870) 5 Ch App 534; Rutherford v Acton‑Adams], where the following conditions all exist: (i) the vendor must have expressly or impliedly represented to the purchaser that he could convey a certain property or a certain estate or interest in it; (ii) the deficiency must be capable of pecuniary assessment; (iii) the purchaser must have relied upon the representation of the vendor; (iv) where the deficiency is substantial, the performance of his contract in part (i.e. the conveyance of what he has got) must not entail hardship on the vendor or be unjust to third parties; (v) the purchaser must not have had knowledge of the defect at the time when he entered into the contract; and (vi) the misdescription must be made in the contract and not collaterally. It will thus be seen that not only is there a reason for the vendor being treated differently from the purchaser in such circumstances, but also that there is a very considerable difference in the rights of the parties to an open contract to obtain specific performance with compensation. It was to remedy this inequality that the special condition as to misdescription was first inserted in contracts [Re Terry and White's Contract (1886) 32 Ch D 14, 22], and these matters have an important bearing on the construction of such conditions, as has already been shown. (some footnotes omitted)

Earlier, when speaking of a condition in a contract relating to the effect of a misdescription, the learned author observes (at 529):
Despite the wide terms in which the condition is sometimes worded, its operation is merely to provide against this difference in the rights of the parties. In whatever form the condition is expressed, it cannot override the fundamental rule that in substance the purchaser shall have that which he contracted for and not be compelled to take that which he did not mean to have [Flight v Booth (1834) 1 Bing NC 370]. Therefore, where the misdescription is so substantial that the purchaser will not get the thing which was really the subject of the sale, he is, notwithstanding the condition, entitled to treat the contract as void and to repudiate it ...
If the misdescription is not substantial enough to allow the purchaser to repudiate the contract, he must, if the condition provides for compensation, take the appropriate compensation; but, if the condition excludes compensation the purchaser must take the property without compensation for the error. The vendor, on the other hand, can only have the contract enforced if the error is small, and he must, in any event, pay compensation to the purchaser. If the purchaser in such a case is getting more than the strict construction than the contract allows him, the vendor is not in any case entitled to compensation. (some footnotes omitted)
Again quoting from Williams on Title, the learned author writes (at 530):
The ordinary wording of the condition is now 'any error, mis‑statement or omission' and applies to defects of title as well as to the physical description of the land (Re Courcier and Harold's Contract [1923] 1 Ch 565; but it was held in Debbenham v Sawbridge [1901] 2 Ch 98, that this form of the condition did not apply to defects of title) but where the words are 'errors of description' the condition refers only to mistakes in the physical description of the land (Re Beyfus and Master's Contract (1888) 39 Ch D 110). (some footnotes omitted)
This controversy is referred to by Barwick CJ and Menzies J in Travinto Nominees Pty Ltd v Vlattas and a narrow scope of the application of the condition was there preferred.
For an example of where specific performance of a contract was decreed at the suit of a purchaser together with an abatement in purchase price, because of an undisclosed defect in the title concerning the use to which the property could be put, see Topfell Ltd v Galley Properties Ltd [1979] 2 All ER 388 (Templeman J). This case is of significance because specific performance with compensation was decreed notwithstanding a general condition in the particulars of sale which provided that no error or misdescription would annul the sale or entitle any party to compensation. Templeman J decided that this condition should not be given effect because of inconsistency with the fundamental obligation accepted by the vendor to give a good title to the entirety of the land specified in the particulars of sale.
The doctrine is also fully described in Stonham RM, Vendor and Purchaser (1964) [373] ‑ [398], where a large number of examples of the doctrine being applied and specific performance ordered can be found (at [380]). Stonham makes the point that, when interpreting compensation clauses, the court must construe the clause as part of the whole contract so that effect is given to the intention of the parties as expressed in the document. Unless the clause expressly provides to the contrary, a clause allowing a purchaser compensation is in augmentation, and not in diminution, of the equitable rights of the purchaser to compensation in a suit for specific performance: McGavin v Gerraty (1911) 17 ALR 85. Further, no definition of the words 'error', 'omission' or 'misdescription' can be adopted which can ignore those principles. See, also, Voumard's The Sale of Land (5^th ed, 1995) [7300] ‑ [7350].
One example of a compensation clause available for use in this State is that contained in cl 5 of the 26^th schedule (General Conditions of Sale) to the Transfer of Land Act 1893 (WA). This condition may, if expressly adopted, apply to any sale by auction or private treaty in this State. It is not, however, suggested that it applies to the present contract.
In the very recent case of Trust Company Ltd v Chief Commissioner of State Revenue [2007] NSWCA 255, concerning stamp duty, there is to be found a detailed analysis of the reasons for decision of Barwick CJ in Travinto Nominees Pty Ltd v Vlattas in a situation where it was necessary to identify what was the subject matter of the particular sale. The passage from the judgment of Barwick CJ in Travinto Nominees Pty Ltd v Vlattas, set out in full, explains that qualifications, or restrictions upon the use to which land would be put, could not be regarded as a misdescription of the property so as to come within a compensation clause, such as is under examination here. However, the passage also emphasises the importance of construing the provision in the setting of the individual contract.
None of these cases is directly analogous to the present case, nor determinative of its result. This is because, as earlier explained, the present case does not involve a sale of an area of land wrongly described by the vendor. Rather, it involves a sale conditional upon subdivisional approval being achieved to allow the sale of a designated area. Subsequent to the contract, and without any error or misdescription by the vendor, the WAPC imposed a condition on the grant of subdivision which will prevent the vendor from being able to convey all the land which was the subject of the conditional contract. Instead the vendor is left in a position where it can convey approximately 92% or more of the land - the discrepancy being the small strip of land adjacent to the battleaxe driveway of an area dependent on the eventual width of that driveway.
No submission is made on either side that there is some vital feature of this narrow strip of land in the laneway which imposes a great hardship or disadvantage on one party rather than the other, or which greatly diminishes the value of the property to be conveyed or retained. The question is, in these circumstances, whether, because of the imposition of this condition by the WAPC preventing the vendor from conveying all that was originally agreed upon, the doctrine of specific performance, with or without an abatement, will nevertheless allow a decree to be made in favour of the purchasers.
There does not seem to be any doubt about the ability of the vendor to convey the differently subdivided lot of slightly smaller area or any prejudice to the vendor in doing so, except that, if specific performance is ordered, the vendor may, by operation of the compensation clause in the contract, or by the doctrine of equity, or both, be required to accept a lower price.
It is clear that this vendor is willing to sell the subdivided lot with a narrower laneway of 4 m in width because, following its attempt to terminate its contract with the plaintiffs, it has already advertised the property for sale with that smaller dimension. The vendor's position is, I am satisfied on the evidence, explained by its refusal to accept anything less than the entire original sale price of $7.25 million for the sale of the subdivided lot, whatever minor variations might be required to establish its final dimensions.
The vendor's position appears to be that, if it is free to offer the property for resale, the probabilities are that it will secure another sale at or above the original sale price of $7.25 million. Consequently, it is reasonable to exercise the power to terminate the contract in order to preserve that opportunity, rather than to submit to the continuation of the present contract and the chance that a court may order specific performance with a reduction in the purchase price, either pro rata in accordance with standard condition 11, so subtracting $584,000 or thereabouts from the purchase price, or by taking evidence as to the reduction, if any, in market value produced by the reduction in the area available for sale. Such a determination could, unquestionably, be achieved by ordering an inquiry by a master and taking evidence from valuers. It is not possible now to forecast the result of such an enterprise, but it is by no means improbable that the difference in valuation, if any, may be significantly less than the $584,000 calculated by the pro rata formula in standard condition 11.
When referring to this doctrine in Rudd v Lascelles [1900] 1 Ch 815, 818, Farwell J adopted the language of Lord Langdale MR in Thomas v Dering (1837) 1 Keen 729, 746; (1837) 48 ER 488, 495:
It is impossible not to see that the cy‑près execution of the contract which is given in these cases is in fact the execution of a new contract which the parties did not enter into, in which there is no mutuality, and which there are no adequate means of ascertaining the just price.
In Rudd v Lascelles specific performance was refused in the exercise of the discretion because the learned judge considered that it was not possible to assess the quantum of compensation which would be appropriate because of undisclosed restrictive covenants upon the land agreed to be sold. Farwell J did, however, go on to express his opinion that the jurisdiction to enforce specific performance with compensation on a vendor, where the contract is silent as to compensation, rests upon the doctrine of equitable estoppel - namely, that a vendor representing and contracting to sell an estate as his own, cannot afterwards be heard to say he has not the entirety. This attribution of the doctrine to an underlying express or implied estoppel has been doubted by Spry (at 290) and has been bypassed in more recent authorities: see Drummoyne Municipal Council v Beard [1970] 1 NSWR 432. However, it is not altogether absent from the present case.
True it is, that this vendor did not give any misdescription of the area of the land which it agreed to sell. However, the land which the first defendant agreed to sell was not then in the form of a lot and, for this reason, the contract was conditional upon subdivisional approval. There was no certainty that subdivisional approval would be given for a lot exactly of the dimensions proposed for the subdivision, or that other conditions requiring the performance of obligations by the vendor, which might be more or less onerous, might not be imposed.
Accordingly, it is evident that this contract of sale, conditional upon subdivisional approval, anticipated that some variations or additions to the obligations expressly agreed between the parties in the contract might be imposed as a result of conditions on the desired grant of subdivisional approval and that, subject to the right of the vendor to terminate the sale, acting reasonably in the event of some unacceptable condition being imposed, the parties would perform the contract with such variations or additions as may be necessary. This being so, there is no basis to accept that the vendor only ever agreed to sell the subject matter of the land as delineated in the diagram accompanying the original contract of sale. The vendor must be taken to have accepted that some minor variations to this proposed plan of subdivision might be imposed as a condition of the grant of approval for subdivision.
This, in my view, also amounts to an acceptance, and if it were necessary for the creation of an estoppel, to a representation or an understanding, that performance of the contract may require some variations, at least of a minor character, both to the area and quality of the subject matter and that the vendor was willing to submit to these, subject to the right of termination, acting reasonably, under amended general condition 13.5. This shows that there is an interdependence between any obligation to adjust the purchase price because of variations in area of the land sold, whether under standard condition 11 or whether pursuant to general equitable doctrine, and the right to terminate, acting reasonably, under amended general condition 13.5.
More importantly, the reasonableness of the conduct of the vendor in exercising a right to terminate under amended general condition 13.5 must be assessed from the point of view that the possibility of variations to the contract, whether in subject area or by the imposition of obligations on the vendor to carry out certain works or provide services, was anticipated by the parties and was taken to be within the scope of their original bargain. Any question of the reasonableness of the vendor in attempting to exercise the right to terminate under amended general condition 13.5 therefore takes on an element of relativity or proportionality, having regard to the degree of flexibility which the parties acknowledged by agreeing to sell and to purchase, subject to conditions imposed on subdivisional approval.
The primary position of the first defendant is that standard condition 11 of conditions of sale has no bearing on the present dispute because it is concerned only with errors or misdescriptions, either of the area of the land sold or, not that it is necessary so to decide, with respect to the title available. The first defendant's position is that there was no defect or inadequacy or misdescription at the date of sale and that the problem which has arisen is due to a supervening force; namely, the imposition of the condition on subdivision by the WAPC that only a 4 m, and not a 6 m, laneway may be created. This, so counsel submits, is important in two respects. Firstly, it means there is no error or misdescription at the date of sale to which standard condition 10 and therefore, by construction, standard condition 11 can apply. Secondly, there can be no blame or responsibility attributable to the vendor such as might ground an estoppel which, so counsel submits, is the basis of the doctrine of specific performance with compensation when sought at the suit of a purchaser.
The alternative submission put by counsel for the first defendant is that if standard condition 11 does apply, and/or if specific performance with compensation might be decreed at the suit of this purchaser, those remedies should not be granted in this particular case. There are various grounds for this submission but, essentially, they have one feature in common; namely, that the effect of applying standard condition 11, or of ordering specific performance with abatement, may be to require the vendor to sell at a price of $584,000 or so less than the agreed contract price (or even some lower price if compensation were to be ordered and it should turn out that an effect of the narrower driveway would be to preclude future subdivision of the riverside land into two lots).
The potentiality for the reduction of the purchase price by a factor of up to 8%, and perhaps even more, means, so the vendor submits, that the variation in the value of what was agreed to be purchased and sold is so substantial as to take it beyond the scope of standard condition 11 and/or beyond the scope of the doctrine of specific performance with abatement. The vendor's position is that it would not have agreed to sell at all if there were any chance that a reduction in the agreed selling price of this dimension might eventuate. This also accounts for the first defendant's counterclaim that, if the contract of sale remains on foot, the purchaser can only require completion and take, even a reduced land area, by paying the full purchase price of $7.25 million without reduction.
The significance to the vendor of the purchase price of $7.25 million without reduction can readily be confirmed by the vendor's subsequent conduct. Since the attempt to terminate this present contract of sale the vendor has again offered the riverside property for sale, together with a battleaxe access driveway, but of 4 m in width. The dimensions of this offer for sale also disclose that there is another small reduction in the area of the land offered for sale; namely, a right of way, running along the western boundary from the river's edge to the old heritage block (Lot 1) which, so it seems, is to ensure that there is footway access from that block to the river foreshore. This conduct shows that the vendor is ready, willing and able to sell the reduced area of the land and, by inference, is seeking to recover more than $6.666 million ($7.25 million minus $584,000). This reveals that it is the pecuniary benefit of the sale which is the dominant factor in the vendor's mind.
It can be accepted that the present problem facing the vendor in not being able to convey the full area which is the subject of this contract of sale is due to events which arose after the executory agreement was made. The problem was caused by the conditions imposed by the WAPC. This, therefore, supports the first defendant's submission that the problem has arisen without blame or fault on the vendor's part. However, with respect to this argument, I do not consider that it is at all material. As already explained, this executory contract of sale, subject to subdivisional approval, anticipated that some variations, by way of increase or decrease, might well result before the contract could be completed and contained a mechanism for accommodating the effects of at least some of those variations. Furthermore, as already noted, and as Spry has observed (at 290), estoppel does not seem to be an adequate basis for this equitable doctrine of specific performance with an abatement in the purchase price once it is appreciated that the doctrine has a well‑established application at the suit of a vendor and that, rather, the implications are that wider equitable doctrines are involved.
The impact of a reduction in the purchase price due to a destruction by fire of a building constructed on the property to be sold which occurred before completion, was the subject of a recent decision in New South Wales in Shadlow v Skiadopoulos (1987) 4 BPR 9259. The ability to reduce the purchase price for the destruction of the building by fire arose under special statutory provisions (Conveyancing Act 1919 (NSW) s 660(2)), rather than under the equitable doctrine. However, it was held by Needham J that specific performance should not be withheld, despite the reduction in the purchase price, unless the reduction were so great as to lead to the conclusion that the vendor would not have agreed to sell the land in its affected state at that price and unless the vendor provided evidence that it would be unjust or inequitable to require them to complete at the reduced price. There is some analogy between that decision and the present case.
Also, in Goldsmith v Smith (1951) 52 SR (NSW) 172, it was held that in an appropriate case a court will order specific performance with an abatement in the price on account of an error or misdescription of the property sold, notwithstanding that the assessment of the compensation for the error or misdescription gives rise to real difficulties, especially where there is an express provision in the contract for compensation and for the method of assessing it.
A helpful and thorough discussion of the doctrine is to be found in the decision of the Court of Appeal of New South Wales in Drummoyne Municipal Council v Beard [1970] 1 NSWR 432. In that case, Walsh and Mason JJA (Wallace P dissenting) upheld a decision of Hardie J in the Equity Court that a purchaser, under a contract of sale of land which had been represented as suitable for the construction of home units but which, unknown to the parties, had a subterranean sewer which severely restricted the number of units which could be erected on the block, was entitled to compensation for the reduction in value caused by the sewer line under a standard compensation clause in the conditions of sale. Significantly, for the present case, in Drummoyne Municipal Council v Beard the vendor had, unsuccessfully, sought to argue that the effect of ordering compensation under such a clause would be so substantial in the particular case that it would take the matter out of the scope of the compensation clause and prevent the application of the doctrine of specific performance with abatement. In a very thorough judgment, Walsh JA explained (at 442 ‑ 443) that if the error or misdescription were so substantial 'that it may reasonably be supposed that, but for the misdescription, the purchaser might never have entered into the contract at all' (quoting from Flight v Booth (1834) 1 Bing NC 370, 377; (1834) 131 ER 1160, 1163 the contract would not be enforced. However, Walsh JA was unable to find any case in which such a principle had been successfully invoked by a vendor where the purchaser had elected to proceed with the contract and take, together with compensation, whatever the vendor was able to convey (see 442 ‑ 443). Walsh JA then observed (at 445):
It has been stated that the relief of the specific performance with compensation against a vendor should not be extended to cases 'where the subject‑matter is substantially different' - see Rudd v Lascelles [1900] 1 Ch 815 at p 189, and Gander v Murray (1907) 5 CLR 575 at p 587 - and it is, therefore, arguable that, where there is a defect of the character described in Flight v Booth, a purchaser would not have the right under general equitable principles to obtain specific performance with compensation. But his right to do so has not always been treated as being limited to that extent and, in Rutherford v Acton‑Adams [1915] AC 866, at p 870, their Lordships, having discussed the right of the vendor to enforce specific performance with compensation 'for any small and immaterial deficiency', went on to say:
'If it is the purchaser who is suing the Court holds him to have an even larger right. Subject to considerations of hardship he may elect to take all he can get, and to have a proportionate abatement from the purchase‑money.'
With these considerations in mind, I am not prepared to accept these submissions of the appellant.

When addressing the same submission by the vendor in Drummoyne Municipal Council v Beard - namely, that the common form compensation clause, on its true construction, would deny to a purchaser the right to seek completion of a contract with compensation for a defect or deficiency which is so substantial and material that it would have entitled the purchaser to rescind the contract had he or she chosen to do so - Mason JA went on to observe (at 466):
Yet it is well established that in the absence of a compensation clause the purchaser's rights in relation to such a defect or deficiency are not limited to rescission. The principle that, subject to considerations of hardship, the purchaser may elect to take all that he can get, with compensation for any defect or deficiency, has been affirmed on two occasions by the Privy Council (Rutherford v Acton‑Adams [1915] AC 866 at pp 869 ‑ 70, per Viscount Haldane; Basma v Weekes [1950] AC 441 at 455 per Lord Reid). If it be correct, as it may well be, to regard the concept of hardship as comprehending situations in which specific performance with compensation would result in the performance of a contract which, viewed from the position of the vendor, involves a substantially different subject‑matter, (Re Terry & White's Contract (1886), 32 Ch D 14 at p 22, per Lord Esher MR; Rudd v Lascelles [1900] 1 Ch 815 at pp 819 ‑ 20 per Farwell J; Gander v Murray (1907) 5 CLR 575 at p 587 per Barton J), that qualification upon the general principle does not in my opinion extend to every case in which the purchaser would be entitled to rescind a contract for a substantial and material defect or deficiency.
In the present case, the reduction in the area of land available for sale does not, apart from its effect on price, appear to have any particularly great significance. The plaintiffs, as purchasers, remain ready, willing and able to take the land, albeit with the reduced area. The vendor, as already explained, has already attempted to put the property up for resale with its reduced area. There is no suggestion that the utility of the land to be sold, or, if it is significant, the land remaining on Lot 1, is significantly affected by the change in area. The potential reduction in price of up to $584,000, if standard condition 11 applies, represents about 8% of the purchase price. That reduction may itself diminish, eventually to vanishing point, if the vendor is successful in its present attempt to have a revised boundary for the laneway approved with a width of 4.8 m or more. If compensation should be determinable by a valuation, then the market value of the difference, if any, produced by the reduction in area can be determined by valuers and there is no reason to suppose that that process would result in any hardship other than, of course, the reduction in the price by the differential in the value so identified.
I am not satisfied, on the authorities, and particularly in the light of Drummoyne Municipal Council v Beard, that the court can pronounce against the application of a compensation clause such as standard condition 11, or deny the application of the doctrine of specific performance with compensation, at the behest of a vendor. No authority has been cited to me to suggest that that can be done and those cases dealing with substantial differences are, I am satisfied, largely, if not entirely, dealing with instances where a vendor is not permitted to force upon an unwilling purchaser something materially different from that which the purchaser agreed to take. However, even if I were satisfied that a substantial discrepancy would take this case outside the scope of standard condition 11, or deny the application of the doctrine of specific performance with compensation to this purchaser, I have no hesitation in concluding that the discrepancy in the area produced by the changes insisted upon for the plan of subdivision for the laneway, specified by the WAPC, and the intended reduction in the price, whether of $584,000 or some other figure slightly more or less, is not so substantial a variation in a contract for sale for an overall price of $7.25 million as to deny access to these remedies.

Attempted termination of contract by vendor

In the present case, I consider that:
1.The imposition of the condition on subdivision by the WAPC, which has the effect of reducing the area which the vendor is able to sell to the purchasers, does not justify a vendor acting reasonably to terminate the contract unless significant prejudice or disadvantage can be shown to result from enforcing or implementing the contract in that modified form.
2.If the imposition of this condition and the attendant reduction in the area available to be sold means that there is no reduction in the agreed purchase price payable to the vendor, there could be no such hardship or disadvantage, nor any justification for termination of the contract by a vendor acting reasonably.
3.If the enforcement of the contract involves an obligation by the vendor to convey as much of the land as it is able to convey in conformity with the subdivisional condition, and the contract itself contains a provision (as this does by standard condition 11) providing for adjustment to the purchase price in that situation, it could not be said that this would result in any significant prejudice or hardship to the vendor because the terms of the contract provide the parties' own solution for the resolution of the problem which has arisen. Holding the vendor to the terms of that bargain would not be unreasonable, or at least not unreasonable in a situation where the discrepancy is in the order of 5% to 8% or so of the area to be conveyed and 5% to 8% or so of the price agreed to be paid.
4.In the event that the imposition of the condition gives rise to circumstances where equity would allow the discretionary grant of specific performance with abatement of the purchase price to reflect the diminution in value of the property receivable by the purchaser, it would be unreasonable for the vendor to exercise a power to terminate the contract because its implementation would require him to submit to such an abatement. Again, the reason for this is that the vendor must be regarded as contracting on the footing that the rights of the parties under the contract are to be determined in accordance with law and equity and, if those rules and doctrines require an abatement of the purchase price, it is unreasonable to exercise a power of termination to avoid that consequence - again, at least when the reduction in the area of the land to be transferred and the corresponding reduction in the purchase price are relatively minor.
In these circumstances, I am satisfied that the court should declare that the first defendant's attempts to terminate this contract are invalid and ineffective and that the contract remains on foot. The plaintiffs remain ready, willing and able to perform the contract in accordance with law - whether or not that requires payment of $7.25 million, the original purchase price without reduction, or whether they are entitled to some form of abatement, either by the application of standard condition 11 or by general equitable principles.
It has not been suggested by the first defendant that the plaintiffs' assertion by their correspondence that they are entitled to complete, by paying the contract price less the $584,000, amounts to a repudiatory breach. Further, no attempt has been made by the vendor to terminate the contract by acceptance of such a putative repudiation. Indeed, it is accepted, and in any event I find, that the purchasers' assertion that they were entitled to acquire the land by paying the original purchase price, less $584,000, is a genuine statement of their belief of their obligations under the contract. It is not inconsistent with their readiness to perform the contract in accordance with its proper construction: cf DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423, 433 ‑ 434.

Form of the abatement

The question for consideration now is whether or not specific performance should be ordered, with or without an abatement of the purchase price and, if with an abatement, whether calculated in accordance with standard condition 11, or determined as a result of an inquiry at which valuation evidence as to the extent, if any, of the reduction in value at the date of contract can be conducted.
By their counsel, the appellants laid particular stress on that passage in standard condition 11 which specified that, if for any reason, the area in the title to be transferred to the purchasers is less than the area in the plan accompanying the contract, then an adjustment to the purchase price, if more than 5% difference, would be calculated in accordance with the further provisions of that condition. This, so submitted the plaintiffs, meant that an adjustment to the purchase price is available for any variations in area whether they result from errors or misdescriptions or for other reasons. This was to meet a submission by the first defendant that the mechanism in standard condition 11 should be taken to be related entirely to standard condition 10, and that only adjustments to purchase price arising from causes associated with errors or misdescriptions qualified for application of the formula for alteration of price. Submissions then turned to whether, if the vendor's submissions were correct, the doctrine of specific performance with compensation for variations in area would nevertheless apply, notwithstanding that this contractual formula were limited to situations other than had arisen.
I am of the view that the doctrine of specific performance with compensation would, in those circumstances, still apply and be available in the discretion of the court. However, as a matter of construction, I am satisfied that the plaintiffs' submissions in relation to the scope of standard condition 11 are correct and that the formula for the reduction or increase in price, because of a variation in the area of land available for transfer, applies in any eventuality where the land to be transferred does not correspond precisely in area with that which was agreed by the parties in the contract. That being the case, this contract contains its own solution to the problem which has arisen here and the plaintiffs are, accordingly, entitled to proceed with the performance of their purchase with such variations in price, as the events might ultimately warrant, as will be achieved by the application of the formula in standard condition 11.

Relief

It is premature to make any final order for specific performance. First, final subdivisional approval has not yet been obtained. Secondly, and of particular importance, the WAPC is yet to specify precisely what width it will accept for this laneway (that is a minimum of 4 m but less than 6 m). Finally, it appears that there is some prospect that the vendor may secure subdivisional approval for a laneway with a width of 4.8 m which, should that occur, means that the vendor will be able to transfer more than 95% of the area of the land originally agreed to be sold and that, therefore, the price adjustment mechanism contained in standard condition 11 would not (because of the greater width of the laneway) require any reduction in the price of $7.25 million. Consequently, it appears to me that the relief which the plaintiffs are entitled to obtain at present is:
(a)A declaration that the contract of sale between the plaintiffs and the first defendant of 20 November 2006 for the purchase and sale on conditions of an unsubdivided lot, being part of the land situate at 50 Victoria Avenue, Claremont, and part of the land in Certificate of Title Volume 2114 Folio 371, remains in force and effect and has not been terminated by the vendor's purported notice of termination dated 5 June 2007 or by its later notice of 19 October 2007.
(b)A declaration that the vendor remains bound by its contractual obligation to use its best endeavours to secure, and to implement, subdivisional approval from the WAPC so as to create a new subdivided lot as close as possible to the dimensions specified in the diagram accompanying the agreement for sale and as submitted to the WAPC on 15 January 2007 and, in particular, for an access laneway of a width of, or as close to, 6 m throughout its length as the WAPC is, or may be willing, to approve.
(c)A declaration that in the probable event that the area of land of the new subdivided lot is less than the area in the original lot in the contract of sale, the price payable by the purchasers to the vendor under the contract will be determined in accordance with standard condition 11 and, should the reduction in area be greater than 5%, the price will reduce in the manner prescribed by the formula contained in that condition. If, however, the area of the land in the subdivided lot which the vendor is able to transfer is not less than 95% of the area of the land the subject of the contract, there will be no reduction in the original purchase price.
Furthermore, I consider that the court should otherwise adjourn the plaintiffs' application for specific performance pending the completion of the consideration of the application for subdivisional approval and, in particular, the specification by the WAPC, or its agents, of the precise dimensions of the laneway acceptable to it for compliance with its conditions of subdivision. I will allow the plaintiffs liberty to relist the application for specific performance if and when desired, but that, pending the relisting of the application for specific performance, both parties should have liberty to apply.
The only other order which may be necessary at this time, is an order dismissing the counterclaim.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: ODGERS -v- BACICH INVESTMENTS PTY LTD [2007] WASC 269 (S)

CORAM: EM HEENAN J

HEARD: 29, 30 OCTOBER & 2 NOVEMBER 2007 & 23 JULY 2010

DELIVERED : 16 NOVEMBER 2007

SUPPLEMENTARY
DECISION :11 AUGUST 2010

FILE NO/S: CIV 1895 of 2007

BETWEEN: DAVID MATTHEW GLENN ODGERS
LINDA MAE WONG
Plaintiffs
AND
BACICH INVESTMENTS PTY LTD
First Defendant
REGISTRAR OF TITLES
Second Defendant

Catchwords:

Costs

Legislation:

Rules of the Supreme Court 1971 (WA), O 66 r 1(3)

Result:

The first defendant pay the plaintiffs' costs of the claim and the counterclaim, including reserved costs and the costs of this summons to be taxed if not agreed

Category: B

Representation:

Counsel:

Plaintiffs:     Mr S V Forbes
First Defendant              :     Mr P N Poliwka
Second Defendant         :     No appearance

Solicitors:

Plaintiffs:     Corser & Corser
First Defendant              :     Q Legal
Second Defendant         :     No appearance

Case(s) referred to in judgment(s):

McKechnie v Connell (Unreported, WASC, Library No 940023, 20 December 1993)
Odgers v Bacich Investments Pty Ltd [2007] WASC 269; (2007) 35 WAR 320
Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569

EM HEENAN J: This action was tried as an urgent matter on 29 and 30 October and 2 November 2007. I gave reasons for decision on 16 November 2007: Odgers v Bacich Investments Pty Ltd [2007] WASC 269; (2007) 35 WAR 320. On that day judgment was entered for the plaintiffs and a series of declarations made which are contained in the judgment of the court of that date.
Those orders provided that the plaintiffs have liberty to relist the application for specific performance on notice and, pending that application, that both the plaintiffs and the first defendant have liberty to apply; that the first defendant's counterclaim be dismissed; and that all costs of the claim and the counterclaim be reserved.
This was an action brought by the plaintiffs, who were purchasers of certain land at the riverfront at Claremont, from the first defendant as vendor. The contract of sale was conditional upon: certain subdivisional approval being granted for the land so as to provide for a battleaxe subdivision; the land on the riverfront lower down the hill being the land to be subdivided out and sold to the plaintiffs; and access to that land being provided by a narrow laneway running from Victoria Avenue down to the front block.
The contract contained a formula for the adjustment of the purchase price in the event that the conditions of subdivision required less aggregate area of land to be available for sale than had been identified in the contract of sale. At the time of the litigation, the position of the subdividing authorities was that the proposed laneway was to be narrower than had been provided for in the contract of sale. The effect of this, applied to the formula in the contract, would have been to reduce the aggregate area sold and, therefore, the selling price. In view of the very high value of the land, the anticipated reduction in the selling price was believed by the first defendant to be so considerable as to justify it withdrawing from the contract of sale. A notice of rescission had been given by the first defendant relying on that ground.
The action came to trial on the basis that the plaintiffs sought enforcement of the contract, seeking a declaration that it remained on foot. The first defendant was seeking the dismissal of that claim and advanced a counterclaim for an order that the contract had been validly rescinded because of the anticipated change in the area available for transfer and the corresponding reduction in the purchase price.
At an early stage of the trial, it became apparent that both parties then believed that some reduction in the aggregate area of the land available for sale would be inevitable because of conditions likely to be imposed on the subdivision and that therefore there was also likely to be some reduction in the purchase price. However, the contract contained a term (standard condition 11) that if the reduction in area would otherwise cause a reduction in price of less than 5%, there would be no variation to the contract price and the original price would remain payable.
There was some uncertainty as to whether the eventual reduction would be such as to produce more than a 5% reduction in the purchase price. Nevertheless, the position was that at that stage the parties were not disposed to wait and see but, rather, were intent upon vindicating their claims.
I adverted to this matter during the first day of the trial and, having pointed out that some reduction in the area of the land to be sold seemed to be regarded then as inevitable, and that, consequently, the contract as agreed was unlikely to be capable of precise performance, I raised with the parties the question of whether or not the plaintiffs were in effect seeking specific performance or other relief on the basis that there should be an abatement of the purchase price to take into account the unstable reduction in the area of land available for sale.
On the second day of the trial, the plaintiffs applied for an amendment to the statement of claim to seek relief in that form. The trial proceeded on the original issues but then also included a claim for specific performance with an abatement of purchase price.
The ultimate result of the trial was that I declared that the plaintiffs would be entitled to an order for specific performance with an abatement of the purchase price if necessary but, because the actual terms of the proposed subdivision had not then been finalised, and it was not certain that they would produce a reduction in the area available of more than 5%, the question of specific performance with an abatement was stood over until the results of the subdivision application were known.
All that happened, as I have already said, in October and November 2007. In the time which has passed from then until now, subdivisional approval has been granted. There has been some minor reduction in the width of the laneway producing some corresponding minor reduction in the area of the land available for sale but that reduction has not been great enough to trigger the provisions of the contract which would result in a reduction pro rata of the purchase price because the reduction was less than 5%.

It follows that the contract has been performed according to its terms insofar as price is concerned. The land has been transferred and no further proceedings are necessary, except as to costs.
This present application deals with costs. The plaintiffs are seeking an order that the first defendant should pay their costs of the action to be taxed. The first defendant, however, is submitting that the plaintiffs should not have all the costs and that the court should apply the principles to be found in O 66 r 1(3) of the Rules of the Supreme Court 1971 (WA) as considered and applied in McKechnie v Connell (Unreported, WASC, Library No 940023, 20 December 1993) and as further examined by Anderson J in the case of Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569.
The effect of O 66 r 1(3) of the Rules of the Supreme Court is that if a successful party nevertheless fails on some discrete or identifiable issue, and it is apparent that that discrete or identifiable issue added to the costs of the proceedings, the successful party should not recover the costs associated with that discrete or identifiable issue and that an appropriate order should be made to take that into account.
It has been submitted, and I accept, that such a discrete or separate issue can be an issue of law. So it is that counsel for the first defendant submits in the written submissions and again orally that costs associated with the issue of specific performance with abatement should not be the subject of any costs order for the plaintiffs because, in the end, that issue was not finally determined by the judgment of 16 November 2007 and in the events which have since happened, it has proved unnecessary to make any such abatement in the purchase price. The submission is that the action as originally constituted could have led to a satisfactory and authoritative resolution of the rights of the parties without embarking upon the issue of an entitlement to specific performance with abatement.
I do not accept the submission. In my reasons for decision at [40], I expressed the view that it was necessary to deal with the application for specific performance with an abatement of the purchase price in order to determine whether or not the contract would otherwise be enforceable; that is, in the event that the area available for sale became reduced.
At common law any reduction in the area of the land to be sold, however trivial, would entitle a party to the contract to rescind. At the time of this trial the parties were proceeding on the assumption, a reasonable one, both at the time and as subsequent events have demonstrated, that there would be some reduction. Therefore, for the plaintiffs to obtain any declaration that the contract was still enforceable or access to remedies such as specific performance, invocation of the equitable remedy was necessary.
Furthermore, I considered at the time, and still consider, that invocation and application of these principles was necessary in order to consider the first defendant's counterclaim. The question was what was the impact, if any, of the reduction, or the likely reduction, in the area of the land to be sold upon the purchase price, because the measure of that effect went to the question of whether or not it was reasonable for the vendor to rescind.
In short, I am satisfied that it was necessary to deal with the issue of possible abatement of the purchase price and the availability of equitable remedies at the trial. Therefore, the plaintiffs should have the whole of their costs of the proceedings paid by the first defendant to be taxed. In making that observation, I do not overlook the fact that when the amendment was made on the second day of the trial, the usual order in relation to amendments was made directing that the first defendant should be entitled to its costs of the amendment and any costs thrown away by reason of the amendment and that order stands.
If the first defendant is in a position to identify any costs associated with the amendment which otherwise would not have been incurred for the proper disposition of the case, then it would be entitled to prepare a bill of costs and seek to have that bill taxed under the provisions of that earlier order. However, that is not a reason for depriving the plaintiffs of their costs of the action. Accordingly, I order that the first defendant pay the plaintiffs' costs of the claim and the counterclaim, including reserved costs and the costs of this summons to be taxed if not agreed.