Opera Properties Pty Ltd v The Uniting Church in Australia Property Trust (NSW)

[2021] NSWSC 1436

Supreme Court

New South Wales

Medium Neutral Citation:

Opera Properties Pty Ltd v The Uniting Church in Australia Property Trust (NSW) [2021] NSWSC 1436

Hearing dates:

20 October 2021

Date of orders:

8 November 2021

Decision date:

08 November 2021

Jurisdiction:

Equity

Before:

Darke J

Decision:

Statement of Claim dismissed with costs.

Catchwords:

CONTRACTS – discharge by frustration – parties entered into Put and Call Option Deed – Deed contemplated a purchase of a subdivided portion of the defendant’s land to facilitate road access to plaintiff’s development land – envisaged subdivision precluded upon commencement of Pittwater Local Environmental Plan 2014 – options under the Deed could nonetheless be exercised in absence of development consent or registration of subdivision – contract formed upon exercise of either option provided that the defendant would grant a right of carriageway over its land to benefit the plaintiff’s land if subdivision not registered for any reason 3 years after date of the contract – whether Pittwater Local Environmental Plan 2014 gave rise to a fundamental commercial difference between contemplated and actual performance – held that conveyance of portion of defendant’s property not the only purpose of the transaction – held that the grant of the right of carriageway could be seen as an alternative means of achieving road access to plaintiff’s land – Deed not discharged by frustration

Legislation Cited:

Conveyancing Act 1919 (NSW), s 55(2A)

Environmental Planning and Assessment Act 1979 (NSW)

Frustrated Contracts Act 1978 (NSW), s 12

Pittwater Local Environmental Plan 1993, cl 12(2)

Pittwater Local Environmental Plan 2014, cl 4.6(6)

State Environmental Planning Policy No 1—Development Standards, cl 3

Cases Cited:

Brisbane City Council v Group Projects Pty Ltd (1979) 145 CLR 143

Chinatex (Australia) Pty Ltd v Bindaree Beef Pty Ltd [2018] NSWCA 126

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337

Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696

Greencapital Aust Pty Ltd v Pasminco Cockle Creek Smelter Pty Ltd [2019] NSWCA 53

oOH! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd (2011) 32 VR 255; [2011] VSCA 116

Scanlan’s New Neon Ltd v Tooheys Ltd (1943) 67 CLR 169

Thaluntha Pty Ltd v Citic Pacific Mining Management Pty Ltd [2019] WASC 196

Category:

Principal judgment

Parties:

Opera Properties Pty Ltd (Plaintiff)
The Uniting Church in Australia Property Trust (NSW) (Defendant)

Representation:

Counsel:
Mr G A Sirtes SC and Dr S A Baron Levi (Plaintiff)
Mr A M Cheema (Defendant)

Solicitors:
United Advisory Commercial Legal (Plaintiff)
D G Briggs & Associates (Defendant)

File Number(s):

2020/160671

Publication restriction:

None

Judgment

Introduction

1. These proceedings concern a Put and Call Option Deed entered into by the plaintiff and the defendant on about 18 November 2010. The subject matter of the options under the Deed is part of the land contained in Lot 10 in Deposited Plan 5055 and known as 10 Jubilee Road, Warriewood. The land is owned by the defendant. Upon the exercise of either option, a contract for the sale of land would come into existence between the defendant as vendor and the plaintiff as purchaser in respect of Part 10 Jubilee Road Warriewood, being a lot in an unregistered plan of subdivision of Lot 10 in Deposited Plan 5055, as depicted on a certain drawing. The contract would be in the form of the contract annexed to the Deed. However, it is clear that neither option has been exercised, and the time for such exercise expired several years ago.

2. The Deed was evidently entered into in connection with a proposed development by the plaintiff of its nearby land at 120-122 Mona Vale Road, Warriewood.

3. The plaintiff paid a Call Option Fee of $80,000 and a Call Option Extension Fee of $80,000 under the terms of the Deed. The plaintiff seeks to recover those sums upon the basis that the Deed was frustrated by the commencement on 27 June 2014 of the Pittwater Local Environmental Plan 2014 (“the 2014 LEP”). Clause 4.6(6) of the 2014 LEP operated to prohibit any subdivision of Lot 10 in Deposited Plan 5055 so as to create a lot able to be conveyed to the plaintiff as envisaged by the Deed and the form of contract annexed to it. Recovery is sought at general law, or alternatively pursuant to s 12 of the Frustrated Contracts Act 1978 (NSW). Recovery is also sought pursuant to s 55(2A) of the Conveyancing Act 1919 (NSW) on the basis that the option fees should be regarded as deposits within the meaning of the section.

4. The defendant accepts that cl 4.6(6) of the 2014 LEP prohibits any subdivision of its land that would create a lot as envisaged by the Deed and the form of contract annexed to it. However, it disputes that the 2014 LEP brought about any frustration of the Deed. In that regard, the defendant says that the provisions of the Deed show that the plaintiff assumed the risk of its proposed development not being able to proceed. The defendant further says that steps could have been taken by the plaintiff to seek a re-zoning of the defendant’s land which, if successful, would have enabled the envisaged subdivision of the land to occur regardless of cl 4.6(6) of the 2014 LEP. The defendant also disputes that the option fees paid by the plaintiff are deposits within the meaning of s 55(2A) of the Conveyancing Act.

Summary of salient facts

5. There was little dispute between the parties as to matters of fact. Many of the key facts were the subject of a Statement of Agreed Facts.

6. The plaintiff’s land at 120-122 Mona Vale Road consists of Lot 1 in Deposited Plan 383009 and Lots 3, 4 and 5 in Deposited Plan 124602. Prior to the commencement of the 2014 LEP, the applicable instrument was the Pittwater Local Environmental Plan 1993 (“the 1993 LEP”). The plaintiff’s land was zoned 1(a) Non-Urban under the 1993 LEP. The land would thus need to be re-zoned in order to accommodate residential development of the land as proposed by the plaintiff.

7. The plaintiff’s land, which is referred to in the Deed as the Development Land, is roughly triangular in shape. It is bounded by bushland towards the south. It is bounded towards the north by Mona Vale Road and on the east by Boundary Street. The Development Land has access to and from Mona Vale Road, but only via a private driveway which the Pittwater Council considers is in an unsafe location. The Development Land has access to and from Boundary Street, but Boundary Street itself, which formerly ran northwards to Mona Vale Road, is now blocked at that point. It is agreed that as at 18 November 2010 there was no public road access from Boundary Street to the local road network. It is thus accepted that if there is to be a residential development of the plaintiff’s land, suitable road access arrangements will have to be made.

8. One potential option for road access would involve construction of a road from Boundary Street east to Jubilee Road (or Avenue) using part of a property known as 4 Boundary Street (which is owned by Planet Warriewood Pty Ltd, a company related to the plaintiff) and part of the defendant’s land, referred to in the Deed as the Church Land.

9. Under the 1993 LEP, both the property at 4 Boundary Street (Lot 2 in Deposited Plan 816070) and the defendant’s land were zoned 1(b) Non-Urban. It is common ground that although the terms of cl 12(2) of the 1993 LEP, which prescribe minimum lot sizes, would preclude a subdivision of the defendant’s land to create an area for part of the proposed road, cl 3 of the State Environmental Planning Policy No 1 – Development Standards (“SEPP1”) would allow the Pittwater Council to grant consent to such a subdivision if it was of the view that compliance with the minimum lot size was unreasonable or unnecessary in the circumstances.

10. The Deed was entered into on about the date it bears, namely, 18 November 2010. It is necessary to refer in some detail to its provisions.

11. The defendant is referred to in the Deed as the Owner. The plaintiff is referred to as the Grantee. Roy Mustaca and Josephine Mustaca are named as parties to the Deed as Guarantor, but it is not clear on the pleadings or the evidence whether they in fact became parties to the Deed.

12. Recitals to the Deed, under the heading “Background”, state:

A. The Owner is the owner of the Property.

B. The Grantee seeks to rezone the Development Land to allow for the Project to proceed and requires the Property to serve as part of a road for public access to and from the Development Land.

C. At the request of the Guarantor the Owner has agreed to grant the Grantee the Call Option.

D. The Grantee has agreed to grant the Owner the Put Option.

E. The terms and conditions on which the Options are granted are set out in this deed.

Property is defined to mean that part of the Church Land identified in a certain drawing by Mepstead & Associates dated 11 September 2007 (as more particularly described in the contract annexed to the Deed). Church Land is defined to mean Lot 10 in DP5055 and, once the lot is subdivided, Church Land does not include the Property.

13. Clause 2 provides for the grant of options in the following terms:

2.1   Call Option

In consideration of the Grantee paying the Call Option Fee and, if applicable, the Call Option Extension Fee, to the Owner the Owner grants to the Grantee an option to purchase the Property for the Price and otherwise on the terms and conditions contained in the Contract.

2.2   Put Option

In consideration of the Owner paying the Put Option Fee to the Grantee, the Grantee grants to the Owner an option to require the Grantee to purchase the Property for the Price and otherwise on the terms and conditions contained in the Contract.

Call Option Fee is defined to mean $80,000. Call Option Extension Fee is defined to mean $80,000. Put Option Fee is defined to mean $10.00. Contract is defined to mean the contract for sale of the Property in the form annexed to the Deed.

14. Clause 3.1 provides for the preparation by the plaintiff of a Rezone Application (which the defendant may require to be amended), and the lodgement of the application with the Pittwater Council. Rezone Application is defined to mean an application to change the development controls applying in respect of the Development Land to permit it to be developed for the Project. Project is defined to include:

(a)   the development of the Development Land for the maximum approved number of Dwellings; and

(b)   the construction of the Road and the subdivision of the Church Land to create the Property.

Road is defined to mean the road proposed to be built on the Property no larger than the dimensions of and not materially different to the configuration of the Road set out in the Concept Plan. The Concept Plan is a Mepstead & Associates drawing dated 11 September 2007.

15. Clause 3.2 is concerned with the Project DA (defined to mean an application for development consent under the Environmental Planning and Assessment Act 1979 seeking approval for the Project), and certain Buffer & Road Works (which includes works to construct the Road, and fencing to divide the Property from the balance of the Church Land along the boundary between the Property and the balance of the Church Land). In particular, cl 3.2 provides:

3.2   Project DA & Buffer & Road Works

(a)   It is a condition of this deed and the Contract that before construction on the Development Land pursuant to the Project Consent is commenced:

(i)   the Road must be constructed; and

(ii)   the Grantee must:

(A)   give to the Grantor a letter addressed to the Council under which the Grantor and Planet Warriewood Pty Limited (or the owners for the time being of Lot 1 DP383009, Lot 5 in DP124602 and Lot 2 in DP816070) provide irrevocable and unconditional support for the Grantor’s application to Council for the release and extinguishment of the Church Easement; and

(B)   the Grantee and Planet Warriewood Pty Limited (or the owners for the time being of Lot 1 DP383009, Lot 5 in DP124602 and Lot 2 in DP816070) must do all things necessary to produce to the LPMA certificates of title to all those parts of the Development Land benefited by the Church Easement to be released under the Church Easement Release.

(b)   Without limiting the scope of the this deed the Grantee must ensure that the Project DA properly accounts for the proposed Buffer & Road Works which must be approved by the Owner acting reasonably having regard to the Owner’s neighbouring use.

(c)   The Owner (as owner of the Church Land) will approve and sign the Project DA (including any documents reasonably required by the Grantee to enable the Project DA to be lodged with Council or with the Court) promptly after being requested to do [so] provided that the Buffer & Road Works as disclosed in Buffer & Road Works Plan in the Project DA are acceptable to the Owner acting reasonably.

(d)   Before the Grantee may lodge the Project DA, the Grantee must submit the Project DA (in its final form as executed by the Grantee and any other owner of the Development Land) to the Owner for approval as to the design and specification of the Buffer & Road Works and, if approved, for signing as owner of the Church Land.

…

(h)   The Grantee will diligently and with due expedition obtain the Project Consent as soon as practicable after its lodgement with Council.

(i)   If the Council refuses the Project DA (or there is a deemed refusal) and the Grantee, acting reasonably, considers that it is likely that the Project DA would be approved by the Court, the Grantee may, at its own cost, lodge and prosecute an appeal against the refusal of the Project DA with the Court.

(j)   The Grantee must keep the Owner promptly and properly informed as to progress of the Project DA and must promptly provide the Owner with:

(i)   a copy of the Project DA as submitted to Council;

(ii)   copies of all correspondence with the Council relating to the Project DA;

(iii)   written notice of the Council’s grant or refusal of the Project DA; and

(iv)   copies of all relevant correspondence and documents (if any) relating to any appeal to the Court.

(k)   Without limitation, all time limits and other stipulations as to time in this deed continue to apply despite any delay, appeal or other conduct in relation to the Project DA.

(l)   The Grantee acknowledges that the preparation, lodgement, modification and determination of the Project DA are at the Grantee’s sole risk and cost and the Owner is not liable for any costs, expenses or liabilities in respect of the Project DA.

(m)   Without limiting any other provision of this deed a refusal of the Project DA or a failure to determine it does not invalidate the operation of this deed or the Put Option.

16. Clause 4 is concerned with an extension of the Call Option Period by the Grantee in certain circumstances. Call Option Period is defined to mean the period commencing on the Rezone Date and ending at 5.00pm on the first to occur of the following dates:

1. the date 12 calendar months after the Rezone Date;

2. the date 2 calendar months after the Project DA Date; and

3. the date 3 years after the date of this deed.

17. If the Call Option Period is extended pursuant to cl 4, as it was by the plaintiff, the above definition is changed so that the date in (c) becomes 6 years instead of 3 years. The extension was effected on about 13 November 2013. The plaintiff paid the Call Option Extension Fee of $80,000 on or around that date as required by cl 4(c).

18. Clause 5 is concerned with the exercise of the Call Option. It provides:

5.1   Method of exercise

The Call Option may be exercised at any time during the Call Option Period by the Grantee giving the Owner:

(a)   written notice of exercise of the Call Option in the form of Annexure A;

(b)   the Deposit (if any) payable under the Contract;

(c)   the Buffer Works Guarantee; and

(d)   if the notice of exercise of the Call Option is given by a Nominee then the Grantee must give to the Owner a Call Option Nomination Notice in the form of Annexure C properly executed by the Grantee, Guarantor and the Nominee.

5.2   Contract binding

The Contract is binding on the parties from the time the Call Option is exercised even if the Owner does not sign the Contract. The Contract will be deemed to have been entered into on the date of exercise of the Call Option.

19. Clause 6 is concerned with the exercise of the Put Option. It provides:

6.1   Method of exercise

(a)   The Put Option may be exercised at any time during the Put Option Period by the Owner giving the Grantee:

(i)   written notice of exercise of the Put Option in the form of Annexure B; and

(ii)   one copy of the Contract signed by the Owner.

(b)   Once the Put Option is exercised, the Grantee must deliver the Buffer Works Guarantee and the Deposit to the Owner as a condition of the Contract for the benefit of the Owner.

6.2   Contract Binding

The Contract is binding on the parties from the time the Put Option is exercised even if the Grantee does not sign the Contract. The Contract will be deemed to have been entered into on the date of exercise of the Put Option.

6.3   The Put Option not exercisable

(a)   The Put Option will not be exercisable if the Call Option has been properly exercised by the Grantee.

(b)   This Put Option is rescinded if, before the Put Option is exercised, the Grantee gives the Owner a copy of the Alternate Access Approval together with a statement signed by the Grantee notifying the Owner that the Put Option is rescinded.

(c)   Without limiting clause 7.1, if this Put Option is rescinded under subclause (b):

(i)   the Call Option Fee and Call Option Extension Fee (if actually paid to the Owner by the Grantee) remain non refundable and are forfeited to the Owner; and

(ii)   the Grantee must:

(A)   give to the Grantor a letter addressed to the Council under which the Grantee and Planet Warriewood Pty Limited (or the owners for the time being of Lot 1 DP383009, Lot 5 in DP124602 and Lot 2 in DP816070) provide irrevocable and unconditional support for the Grantor’s application to Council for the release and extinguishment of the Church Easement; and

(B)   procure that the Grantee and Planet Warriewood Pty Limited (or the owners for the time being of Lot 1 DP383009, Lot 5 in DP124602 and Lot 2 in DP816070) do all things necessary to produce to the LPMA certificates of title to all those parts of the Development Land benefited by the easement to be released under the Church Easement Release.

Alternate Access Approval refers to access to and from the Development Land along Boundary Road directly from Mona Vale Road.

20. Clause 7.1 provides:

7.1   Non-refundable

(a)   Despite any term of this deed, the Contract and at law the Call Option Fee, Call Option Extension Fee and the Put Option Fee are non-refundable.

(b)   If neither Option is exercised, the Call Option Fee and, if paid to the Owner, the Call Option Extension Fee will be forfeited to the Owner and the Put Option Fee will be forfeited to the Grantee.

(c)   If an Option is properly exercised then the Call Option Fee and, if paid to the Owner, the Call Option Extension Fee or Put Option Fee are not credited to the Price or Deposit under this deed and the Contract.

21. Clause 9.1 is primarily concerned with the determination of the Price for the purposes of the Contract upon the exercise of an option. It also stipulates, in cl 9.1(a), that the Contract Deposit is $10.00. It is not necessary to set out the entirety of this lengthy clause. It relevantly provides:

(d)   The Price is:

(i)   the sum of:

(A)   $800,000; plus

(B)   the Price Adjustment Sum,

(ii)   minus the sum of:

(A)   the Call Option Fee; and

(B)   any Call Option Extension Fee (if actually paid to the Owner).

…

(f)   The Price Adjustment Sum is the greater of the Rezone Dwelling Value and the DA Dwelling Value where:

(i)   Rezone Dwelling Value is the dollar figure (being a positive number) achieved by multiplying $20,000 by the number of Approved Dwellings pursuant to the Rezone Notice and then subtracting $1,200,000; and

(ii)   DA Dwelling Value is the dollar figure (being a positive number) achieved by multiplying $20,000 by the number of Approved Dwellings under the Project Consent and then subtracting $1,200,000.

…

(h)   If the Project DA Date has not yet occurred by the date of exercise of an Option under this deed:

(i)   the Price to be inserted in the Contract by the Owner will be determined using the Rezone Dwelling Value under subclause (f)(i) to establish the Price Adjustment Sum; and

(ii)   if then during the period before completion of the Contract, the Project DA Date occurs, the DA Dwelling Value will be determined. If the DA Dwelling Value proves to be a sum greater than the Rezone Dwelling Value then the Price will be calculated using the DA Dwelling Value to ascertain the Price Adjustment Sum and:

(A)   the Contract will be amended by the Owner’s Solicitor to reflect the amended Price; and

(B)   the Grantee will be notified of any amendment to the Price and must pay the adjusted Price under the Contract.

(i)   If the Call Option Period is properly extended and an Option is exercised during the extended period, then once the Price is ascertained it will be modified to reflect any increase in the CPI as follows:

22. Finally, it should be noted that by cl 14.11, stipulations as to time are stated to be of the essence of the Deed.

23. The contract annexed to the Deed comprises the 2005 edition of the Law Society/Real Estate Institute standard form supplemented by a number of Additional Clauses. The land is described on the front page as Part 10 Jubilee Road Warriewood, being a lot “in an unregistered plan of subdivision (copy attached) of part of Lot 10 in DP5055”. It seems that the attached Mepstead & Associates drawing dated 11 September 2007 was intended to serve as the plan of subdivision. It shows part of Lot 10 in DP 5055 at the southern end being used for a proposed road that would run between Boundary Road and Jubilee Avenue.

24. Additional cl 35 is headed “Pre payment of Purchase Price”. It relevantly provides:

(a)   In consideration for the vendor’s agreement under this contract to grant to the purchaser access to and the right to commence the Works on the property pursuant to the requirements of clause 36:

(i)   the purchaser must pay the Price on the date 14 days after the date of this contract; and

(ii)   if the Project DA Date has not yet occurred by the date of this contract, the purchaser must pay the Price Adjustment Sum, if any, under subclause (d) within 14 days after the Price Adjustment Sum is determined by the vendor and notified in writing to the purchaser.

(b)   The obligation to pay the Price and the Price Adjustment Sum, if any, at the times stipulated in subclause (a) are not conditional on the doing of any act, matter or thing by the vendor.

(c)   The purchaser may not gain access to the property or commence the Works under clause 36 until the purchaser has paid the Price and Price Adjustment Sum, if any.

(d)   If the Project DA Date has not yet occurred by the date of this contract but occurs before completion then once the Project DA Date has occurred the vendor must ascertain the DA Dwelling Value. If the DA Dwelling Value proves to be a sum greater than the Rezone Dwelling Value used under the Put & Call Option then the Price will be re-calculated using the DA Dwelling Value to ascertain the Price Adjustment Sum and the purchaser will be notified of the Price Adjustment Sum and must pay that sum to the vendor in addition to the Price.

…

(h)   Despite any other term of this contract the Price and the Price Adjustment Sum are not refundable to the purchaser.

Price and Price Adjustment Sum have the meanings given to those terms by the Deed (see Additional Clause 42.2(q)).

25. Additional cl 36 relevantly provides:

36.1   Condition

(a)   It is a condition of this contract that:

(i)   the Road must be constructed before construction on the Development Land pursuant to the Project Consent is commenced unless Project DA approved access for construction vehicles can be obtained from Mona Vale Road (without using the Church Easement roadway) in which case Road & Buffer DA Works may be performed from the Boundary Road end of the proposed Road;

(ii)   the purchaser must:

(A)   give to the vendor a letter addressed to the Council under which the purchaser and Planet Warriewood Pty Limited (or the owners for the time being of Lot 1 DP383009, Lot 5 in DP124602 and Lot 2 in DP816070) provide irrevocable and unconditional support for the vendor’s application to Council for the release and extinguishment of the Church Easement; and

(B)   the purchaser and Planet Warriewood Pty Limited (or the owners for the time being of Lot 1 DP383009, Lot 5 in DP124602 and Lot 2 in DP816070) must do all things necessary to produce to the LPMA certificates of title to all those parts of the Development Land benefited by the Church Easement to be released under the Church Easement Release; and

(iii)   the Buffer & Road DA Works are not commenced until the Works Access Date.

36.2   Works Access Date

(a)   The vendor allows the purchaser together with its invitees, contractors, employees and agents access to:

(i)   the property to conduct the DA Works on and from the Works Access Date.

(ii)   the Church Land for the limited purpose of the construction of those parts of the Buffer & Road DA Works (including fence and road buffer work and work on the pathway extending from the Road to the vendor’s church pick up and drop location as specified in the Buffer & Road Works DA) which must be performed on the Church Land.

…

Buffer & Road DA Works is defined to mean the Buffer & Road Works referred to in the Deed and as set out in the development consent given pursuant to the Project DA. Works Access Date is defined to mean the date that is the later of:

(a)   the date the purchaser obtains development consent to the Project DA;

(b)   the date the purchaser pays to the vendor the Purchase Price; and

(c)   the date the purchaser delivers to the vendor evidence (including a copy of the policy if required by the vendor) of public risk insurance for the Buffer & Road DA Works for a sum of not less that [sic] $10,000,000 for any one occurrence with the vendor noted on the policy as an interested party.

26. Additional cl 37.1 is concerned with registration of the plan of subdivision of Lot 10 in DP5055. It relevantly provides:

(a)   The purchaser will at its cost prepare and procure the registration of the Subdivision Documents at the LPMA including any Authority consents necessary to procure registration of the Subdivision Documents.

(b)   The vendor:

(i)   will prepare the Temporary Church Easement and submit it to the purchaser for inclusion with the Subdivision Documents; and

(ii)   undertakes to the purchaser to do all things necessary to assist the purchaser to have the Temporary Church Easement removed from title to the property when all of the property is dedicated to the public as a road.

(c)   The Subdivision Documents must include:

(i)   a plan of subdivision of the Church Land consistent with the Concept Plan;

(ii)   a section 88B instrument which:

(A)   complies with the requirements of the Project DA;

(B)   includes the terms of the Temporary Church Easement; and

(C)   includes any other easement or restriction on use which the vendor acting reasonably notifies the purchaser that it requires for the preservation of the amenity of the residue of the Church Land.

(d)   The purchaser must not lodge the Subdivision Documents for Authority consent or for registration at LPMA until the vendor has given its written consent to the final form of the Subdivision Documents.

…

27. Additional cll 38 and 39 are concerned with completion. They provide:

38.   Completion date

The Completion date is the date 14 days after the first to occur of:

(a)   purchaser or the purchaser’s solicitor notifies the vendor; or

(b)   vendor becomes aware and notifies the purchaser,

that the Subdivision Documents are registered with the LPMA.

39.   Vendor’s Completion Obligations

(a)   In the event that for any reason whatsoever the Subdivision Documents are not registered by the date 3 years after the date of this contract:

(i)   the purchaser must deliver to the vendor the Road Easement for execution; and

(ii)   the vendor must:

(A)   promptly return to the purchaser the Road Easement duly executed by the vendor; and

(B)   provide to the purchaser evidence of the production to the LPMA of the vendor’s certificate of title to the Church Land so as to allow for the registration of the Road Easement against title to the Church Land.

(b)   Once the vendor has complied with its obligations under clause 39(a)(ii):

(i)   the vendor has discharged all of its obligations under this contract and the vendor has, without limitation, no further obligation to transfer title to the property to the vendor or to proceed with the registration of the Subdivision Documents; and

(ii)   this contract is at and [sic] end and neither party has any obligation to the other except in relation to antecedent breaches and the terms of the Road Easement.

Road Easement is defined to mean a right of carriageway in the form of annexure A to the contract having dimensions no greater than those in the attached Concept Plan. The attached Concept Plan appears to be the Mepstead & Associates drawing dated 11 September 2007. Annexure A to the contract is a Transfer Granting Easement form together with terms of the easement. The named transferor is the defendant and the named transferee is the plaintiff. The dominant tenement is described as comprising Folio Identifiers 1/383009, 3, 4 and 5/124602 and 2/816070. These are the properties known as 120-122 Mona Vale Road and 4 Boundary Street. The servient tenement is not described by reference to a Folio Identifier, but is referred to as “part formerly lot 10 DP5055”. That seems incongruent with Additional Clause 39(a) which proceeds on the basis that the proposed subdivision of Lot 10 has not occurred. The terms of the easement include conditions that contemplate the construction of a road on the servient tenement (“the initial road construction”), and keeping the road surface in good and serviceable repair.

28. In February 2011 the plaintiff lodged a development application with Pittwater Council for the construction of a new private road to access 120 Mona Vale Road. The new road was proposed to be constructed over parts of the 4 Boundary Street and 10 Jubilee Avenue properties. It can be inferred that the owners of those properties, Planet Warriewood Pty Ltd and the defendant respectively, gave their consent to the lodgement of the application. A statement to that effect is contained in the Statement of Environmental Effects (“SEE”) that accompanied the application. The SEE includes the following:

This Statement of Environmental Effects accompanies a Development Application lodged on behalf of Opera Developments P/L. The proposal seeks approval for the construction of a private road over parts of land known as 10 Jubilee Avenue & 4 Boundary Street, Warriewood.

The consent of both property owners is provided in support of the subject application.

The subject application is made in response to a resolution of the Council who on the 18^th September 2006 formally resolved to include land known as 120 Mona Vale Road, Warriewood within the Warriewood Land Release for the purpose of residential development on the basis that “the applicant, his advisors and Council staff consult as to the land capability, the potential yield and the securing of adequate access for the site”.

This application seeks to provide adequate access to the site known as 120 Mona Vale Road, Warriewood.

…

The proposal seeks approval for the construction of a new private road. The proposed roadway is to be located within a right of carriageway to be created over each of the subject allotments. The right of carriageway once created will be in favour of 120 Mona Vale Road and will provide access for vehicles with unrestricted access from Jubilee Avenue to Boundary Street and then in turn to 120 Mona Vale Road.

The road as detailed on the accompanying plans prepared by Mepstead & Associates is to have a carriageway width of approximately 9m with a total right of carriageway width of 17m comprising of a 4m landscape/buffer zone located on either side.

Retaining walls required to accommodate the proposed road construction will be generally located adjacent to the extremities of the right of carriageway.

…

The proposed development is identified as local development under the provisions of the Environmental Planning and Assessment Act 1979, as amended. The following is an assessment of the proposal against the relevant provisions of the Act and all of the relevant planning instruments and policies of Pittwater Council.

…

The subject lands are both zoned 1(b) Non-Urban B under the provisions of the Pittwater Local Environmental Plan 1993.

…

Under the development control table contained at Clause 9 of the LEP the construction of a private road is considered to be permissible with the consent of Council as an innominate use.

There are no other provisions of the Pittwater LEP 1993 which are considered to be specifically applicable to the proposal.

29. On 4 July 2011 the Pittwater Council decided to defer consideration of the application. A resolution was passed in the following terms:

1.   Council acknowledges that the applicant has proceeded to seek a resolution to access the site at 120 Mona Vale Road in accordance with Council resolutions of 18 April 2006 and 7 April 2008. Council acknowledges that the applicant has secured owners agreement to lodge an application for the development of the road.

Given that owners agreement to an access road has been secured, Council is in a position to consider an overall Masterplan/rezoning to develop 120 Mona Vale Road and the area proposed for the road over 4 Boundary Street and 10 Jubilee Avenue, subject to the submission of full detailed studies, reports and plans addressing environmental, infrastructure, hazard management, biodiversity and urban capability of the sites.

2.   That consideration of the present application be deferred pending the outcome of the current Strategic Review of the Warriewood Valley and consideration of the Masterplan suggested above.

30. The fate of the application is not clear on the evidence. It may have been withdrawn, but in any case it seems that it has never been finally determined.

31. On 11 October 2012 the plaintiff lodged a Planning Proposal with the Pittwater Council in respect of a proposed rezoning of the Development Land, and also 4 Boundary Street and part of the 10 Jubilee Avenue property. The Council regarded the application as deficient, but after the supply of further information, the Council formally accepted the application as a proposal on 13 November 2012.

32. The plaintiff retained Charles Hill Planning in relation to the rezoning proposal. A letter sent by Charles Hill Planning to the Council on 15 October 2012, which attached further information requested by the Council, included the following:

…

Further to the above, and in relation to your concern in respect of the inclusion of the properly known as 4A Boundary Street (Lot 2 in DP 816070) as part of the rezoning application, it is advised that Mr Mustaca, no longer wishes to proceed with the rezoning of that property, other than that which may be required to permit the alternative road and detention basin, and as such is happy to exclude it from any further consideration by Council at this stage.

In addition, if Council considers that that part of No 10 Jubilee Avenue needs to be rezoned to construct the alternative road, then that property will need to be included as part of the rezoning application.

The reference to 4A Boundary Street seems to be an erroneous reference to 4 Boundary Street.

33. The Planning Proposal itself included the following:

The Planning Proposal pertains to the land currently described as follows Lot 1 in DP 383009, Lots 3, 4 and 5 in DP 124602, Lot 2 in DP 816070, and part Lot 10 in DP 5055. The location of the site in the regional context is shown at Figure 1.

…

The subject land is currently zoned 1(a) Non-Urban in accordance with PLEP 1993 which permits one dwelling per 2 hectares.

Should access to the site be via the alternative route as proposed by the applicant and favoured by the Council in its resolution of July 2011, the site would also include the property known as 4 Boundary Road (Lot 2 in DP 816070) and 10 Jubilee Av Warriewood (Lot 10 in DP 5055).

The subject land is zoned 1(b) Non Urban in accordance with Pittwater Council Local Environmental Plan) [sic] PLEP) 1993.

In that regard it is noted that the Council report dated 9 July 2011 in relation to its assessment of the proposed road claimed that the proposed road was a prohibited use on the basis that:

it is a necessary and ancillary use component of a prohibited use (being the future development of presently non urban zoned land for urban purposes at 120 Mona Vale Road).

However it is noted that roads are not a prohibited use in the non urban zoning, in accordance with PLEP 1993, irrespective as to what that road might be used for, and as such rezoning should not be required for the proposed road, particularly if Council agrees to the rezoning of the property known as 120 Mona Vale Road Warriewood, to permit residential development.

Needless to say, should Council disagree with this interpretation, the land referred to as numbers 4 Boundary Road and 10 Jubilee Avenue (Lots 4 in DP 816070 and 10 in DP 5055 respectively) should also be rezoned to permit the construction of the alternative road to service the future residential development of 120 Mona Vale Road Warriewood, as well as rezoning of that land to permit the associated urban development as shown on the master plan prepared by GMU, dated September 2012.

There is evidence that a draft masterplan that was attached to the proposal provided for a development comprising 71 residential lots. I note in passing that the Planning Proposal seems to constitute a Rezone Application within the meaning of the Deed.

34. The Planning Proposal was not supported by the Council. An internal council report dated 4 March 2013 included a recommendation that the proposal be refused, and a resolution to that effect was passed by the Council. In these circumstances, the plaintiff sought a “pre-gateway review” by the Department of Planning and Infrastructure. On 30 April 2013 the Deputy Director-General of the Department informed the Council that the application met the assessment criteria to enable it to be forwarded to the Joint Regional Planning Panel (“JRPP”) for review. On 22 May 2013 the JRPP recommended that the application be submitted for a “gateway determination”. It advised as follows:

…The Panel’s resolution at Paragraph 2 below becomes effective when and if the proponent satisfies the Department of Planning and Infrastructure that it has either purchased or has an option to purchase that part of Lot 10 [10 Jubilee Avenue] required for the access road. The proponent is requested to provide this information to the Department on or before 7 June 2013.

The Panel agrees to the planning proposal proceeding to gateway determination under s56 of the EPA Act 1979, but only in respect of the land west of Boundary Road and subject to the zoning and minimum lot size proposed on Figure 1 and Figure 2 reproduced below (from the TPG independent report). The panel recommends that any change in zoning to Lot 2 DP 816070 [4 Boundary Street] be limited to E4 Environmental Living or equivalent.

35. On 7 June 2013 the Deputy Director-General of the Department forwarded the advice to the plaintiff and informed the plaintiff that the proposed rezoning would proceed to a “gateway determination”. On 4 September 2013 a “gateway determination” was issued, supporting the proposed rezoning of the Development Land from 1(a) Non-Urban to a combination of R2 Low Density Residential and E4 Environmental Living. The proposal was placed on public exhibition in the period from 23 October 2013 to 19 November 2013.

35. On 19 November 2013 the Council lodged a submission in relation to the proposal which recorded its vehement objection to it, including on the ground that the proposal was premature as the issue of suitable access was unresolved.

36. On 30 May 2014 the 2014 LEP was published on the NSW legislation website and commenced operation 28 days after that date (i.e. on 27 June 2014). Upon the commencement of the 2014 LEP part of the Development Land became zoned R2 Low Density Residential, and part of it became zoned E4 Environmental Living. Accordingly, 27 June 2014 (or perhaps 30 May 2014) became the Rezone Date within the meaning of the Deed. At the same time, the land at both 4 Boundary Street and 10 Jubilee Avenue became zoned RU2 Rural Landscape.

37. As noted earlier, it is accepted that cl 4.6(6) of the 2014 LEP (which applies to various zonings including RU2 Rural Landscape) would prohibit any subdivision of the 10 Jubilee Avenue land so as to create a lot as envisaged by the Deed and the form of contract annexed to it.

Summary of principal submissions

39. The plaintiff emphasised that the options the subject of the Deed were for the purchase of the Property, namely, that part of the Church Land identified in the Mepstead & Associates drawing dated 11 September 2007, and that in order for such purchase to occur it would be necessary to subdivide the Church Land. However, such a subdivision became impossible from 27 June 2014 when the 2014 LEP and cl 4.6(6) in particular commenced to operate. It was submitted that before that date it was within the power of the Pittwater Council to approve a subdivision of the Church Land in order to facilitate a purchase of the Property, but that power was removed by the introduction of the 2014 LEP. The Council was henceforth prohibited from granting consent to the subdivision. It was put that in these circumstances the Deed had been frustrated. The centrepiece or focal point of the transaction was eviscerated.

40. The plaintiff accepted that under the terms of the Deed it bore the risk that the Rezone Application and the Project DA would not be approved. However, it was submitted that it was not contemplated that there would be no possibility that the envisaged subdivision of the Church Land could be approved.

41. The plaintiff submitted that when the Development Land was rezoned, making it possible to exercise the Call Option, cl 4.6(6) of the 2014 LEP meant that no conceivable purpose would be served by an exercise of the option. Had it (or the Put Option) been exercised, the plaintiff would have been bound to pay the Price under the contract that would come into existence, but there was no possibility that the Property could be created and then conveyed. It was submitted that no other genuine benefit was capable of being obtained by the plaintiff under the contract. The plaintiff submitted that the purpose of the Deed, being an option to purchase the Property, was precluded. It was put that the Deed and the contract for sale were predicated on the assumption that consent to the subdivision of the Church Land has either been obtained or will be obtained. In that regard, reference was made to the provisions of the Deed (cl 3.2) and the contract (Additional Clause 36) concerning the carrying out of works including the construction of the Road. The plaintiff submitted that the Road Easement referred to in Additional Clause 39 of the contract was illusory or of only minor significance.

42. The plaintiff referred to well-known statements of principle in relation to frustration of contracts, including the speech of Lord Radcliffe in Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 at 729, which has been adopted by the High Court of Australia in Brisbane City Council v Group Projects Pty Ltd (1979) 145 CLR 143 at 161 and in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 357. The plaintiff submitted that frustration may occur even if it remains possible for the contract to be performed without breach, and even if the nature of the contractual obligations does not change, where events give rise to a fundamental commercial difference between contemplated performance and actual performance (see oOH! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd (2011) 32 VR 255; [2011] VSCA 116 at [64]-[70]).

43. Reference was also made to the judgment of Smith J in Thaluntha Pty Ltd v Citic Pacific Mining Management Pty Ltd [2019] WASC 196 at [99]-[108] where her Honour discussed the authorities that consider situations where some provision is made in the contract for or in relation to events that are alleged to give rise to frustration. Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (supra) was cited as an illustration of how the principles operate in that situation.

44. Finally, in answer to certain contentions of the defendant, the plaintiff submitted that the conclusion of frustration was not defeated merely because it may have been possible to avoid the effect of cl 4.6(6) of the 2014 LEP by taking timely steps to achieve a subdivision of the Church Land or a rezoning of the Church Land before the commencement of the 2014 LEP. The plaintiff submitted that the taking of such steps was neither required nor envisaged by the Deed. It was submitted that there was no obligation under the Deed to seek a subdivision, and the only required rezoning concerned the Development Land. It was submitted that the Deed envisaged that subdivision of the Church Land would occur pursuant to the Project Consent.

45. The defendant submitted that the Call Option could have been exercised at any time after the Deed was signed, as it was not a term that it could only be exercised during the Call Option Period. It was then submitted that cl 3.2(h) of the Deed obliged the plaintiff to diligently and with due expedition obtain the Project Consent. By reference to the definitions of Project, Project DA, and Project Consent, the defendant submitted that the Project Consent would include consent to a subdivision of the Church Land. The defendant submitted that the plaintiff failed to diligently and with due expedition pursue a subdivision of the Church Land. It was pointed out that the development application lodged by the plaintiff in February 2011 did not propose a subdivision of the land; it only proposed the construction of a new road. The defendant submitted that a subdivision could have been applied for if the application was accompanied by a “SEPP1 objection”. That would allow the Council to consider and approve the application notwithstanding the minimum lot sizes prescribed by the then current 1993 LEP.

46. The defendant further submitted that prior to the commencement of the 2014 LEP the plaintiff could have sought to have the Church Land rezoned, and that if that had occurred, the 2014 LEP might not have precluded a subdivision of the land. It was pointed out that the Planning Proposal that was ultimately pursued to a “gateway determination” concerned a rezoning of only the Development Land. The defendant submitted that the definition of Rezone Application (which refers to “the Project”) means that the application must include an application to rezone (or perhaps subdivide) the Church Land.

47. The defendant submitted that the commencement of the 2014 LEP did not bring about a situation that was fundamentally or radically different to what was contemplated by the parties, unlike the situation that arose in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (supra). The defendant referred to the provisions of the Deed that placed upon the plaintiff the risk of the Project Consent not being obtained. It was put that the plaintiff, which failed to act diligently and expeditiously, should be regarded as the author of the situation in which it ultimately found itself.

48. In relation to Additional Clause 39 of the Contract, the defendant submitted that it was expressed to operate if “for any reason whatsoever” the Subdivision Documents were not registered three years after the date of the Contract. It was also noted that once the defendant had complied with its obligations in relation to the Road Easement, it was taken to have discharged all of its obligations under the Contract and was under no further obligation to transfer title to the Property or proceed with registration of the Subdivision Documents.

49. The defendant submitted that frustration of a contract should not be found merely because it has become more difficult or less profitable to perform (see Scanlan’s New Neon Ltd v Tooheys Ltd (1943) 67 CLR 169 at 187). It was submitted that there was here no fundamental change of situation, or a situation that was radically different to what was contemplated by the parties.

Principles concerning frustration of contracts

50. In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (supra), Mason J expressed agreement (at 356-7) with the earlier acceptance by Stephen J in Brisbane City Council v Group Projects Pty Ltd (supra) of the approach adopted by Lord Reid and Lord Radcliffe in the House of Lords in Davis Contractors Ltd v Fareham Urban District Council (supra). (See also Aickin J at 378). In that case, Lord Reid said (at 720-1):

It appears to me that frustration depends, at least in most cases, not on adding any implied term, but on the true construction of the terms which are in the contract read in light of the nature of the contract and of the relevant surrounding circumstances when the contract was made. There is much authority for this view. In British Movietonews Ltd. v. London and District Cinemas Ltd Viscount Simon said: “If, on the other hand, a consideration of the terms of the contract, in the light of the circumstances existing when it was made, shows that they never agreed to be bound in a fundamentally different situation which has now unexpectedly emerged, the contract ceases to bind at that point — not because the court in its discretion thinks it just and reasonable to qualify the terms of the contract, but because on its true construction it does not apply in that situation.” In Sir Lindsay Parkinson & Co. Ltd. v. Commissioners of Works Asquith L.J. said: “In each case a delay or interruption was fundamental enough to transmute the job the contractor had undertaken into a job of a different kind, which the contract did not contemplate and to which it could not apply, although there was nothing in the express language of either contract to limit its operation in this way.” I need not multiply citations, but I might note a reference by Lord Cairns so long ago as 1876 to “additional or varied work, so peculiar, so unexpected, and so different from what any person reckoned or calculated upon” (Thorn v. London Corporation). On this view there is no need to consider what the parties thought or how they or reasonable men in their shoes would have dealt with the new situation if they had foreseen it. The question is whether the contract which they did make is, on its true construction, wide enough to apply to the new situation: if it is not, then it is at an end.

Later (at 723) his Lordship described frustration as “the termination of the contract by operation of law on the emergence of a fundamentally different situation”.

51. Lord Radcliffe said (at 729):

…frustration occurs whenever the law recognises that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract…It was not this that I promised to do.

52. In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (supra) Mason J continued (at 357):

It is implicit, if not explicit, in the judgment of Stephen J, as in the speeches of Lord Reid and Lord Radcliffe in Davis Contractors, that to express a preference for this view of frustration as against the theory of the implied condition and other suggested bases is not to cast doubt on the authority of earlier decisions. This is of critical importance because the earlier cases provide many illustrations of the proposition that a contract will be frustrated when the parties enter into it on the common assumption that some particular thing or state of affairs essential to its performance will continue to exist or be available, neither party undertaking responsibility in that regard, and that common assumption proves to be mistaken…

53. In oOH! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd (supra) Nettle JA discussed the test for frustration at [63]-[74]. After referring to the judgment of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (supra) his Honour stated at [70]:

I approach this case on that basis. Consistently with Codelfa, I take the law to be that a contract is not frustrated unless a supervening event:

a)   confounds a mistaken common assumption that some particular thing or state of affairs essential to the performance of the contract will continue to exist or be available, neither party undertaking responsibility in that regard; and

b)   in so doing has the effect that, without default of either party, a contractual obligation becomes incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract.

In Chinatex (Australia) Pty Ltd v Bindaree Beef Pty Ltd [2018] NSWCA 126 Barrett JA (with whom McColl and White JJA agreed) expressed the opinion at [44] that the above passage represented the current state of the law (see also Greencapital Aust Pty Ltd v Pasminco Cockle Creek Smelter Pty Ltd [2019] NSWCA 53 at [56] per Leeming JA).

54. Whilst Lord Radcliffe spoke of frustration occurring when a contractual obligation becomes incapable of being performed because circumstances would render it radically different from that which was undertaken by the contract, this has not been understood as saying that without a change in obligation there can be no frustration (see Stephen J in Brisbane City Council v Group Projects Pty Ltd (supra) at 161). In oOH! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd (supra) Nettle JA said (at [64]):

In a passage which Mason and Aickin JJ later endorsed in Codelfa, Stephen J observed that, although Lord Radcliffe spoke in Davis Contractors in terms of a “change in obligation”, his Lordship was not to be understood as saying that there can be no frustration without a change in obligation. The emphasis on obligation was the result of the factual situation with which his Lordship was concerned. Thus, in some cases it has been said to be enough to engage the doctrine of frustration that events have given rise to a “fundamental commercial difference” between contemplated and actual performance or to a “fundamentally different situation” arising for which the parties made no provision “so much so that it would not be just in the new situation to hold them bound to its terms”.

(See also Aickin J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (supra) at 379-80 where his Honour notes that Lord Radcliffe spoke of a change in the significance of an obligation.)

Determination

55. The plaintiff contends that cl 4.6(6) of the 2014 LEP gave rise to such a fundamental commercial difference between contemplated and actual performance, and a fundamentally different situation, that the principles of frustration operate to bring the Deed to an end.

56. The relevant enquiry calls for a consideration of the nature and terms of the Deed, read in the light of the circumstances existing at the time it was made, and the event or events which are said to bring about the frustration of the contract (see Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (supra) at 358-9).

57. It should be noted at the outset that the relevant contract is the contract embodied in the Deed itself. In circumstances where neither the Call Option nor the Put Option has been exercised, no contract has come into existence on the terms of the Contract that is annexed to the Deed. Accordingly, no question of frustration of such a contract arises. However, the terms of the contract annexed to the Deed are relevant to the question whether the Deed has been frustrated as contended by the plaintiff. Those terms identify what the parties intended their legal relationship to become in the event an option under the Deed was exercised.

58. The Deed was entered into in circumstances where the plaintiff wished to develop its land, the Development Land, for residential purposes, and needed to arrange suitable road access for such development. A new road, extending from Boundary Street to Jubilee Road (or Avenue) across a portion of the defendant’s land, the Church Land, was a potential option for achieving suitable road access. These background circumstances are broadly reflected in Recital B to the Deed in the following terms:

The Grantee seeks to rezone the Development Land to allow for the Project to proceed and requires the Property to serve as part of a road for public access to and from the Development Land.

59. The granting of the options the subject of the Deed can be seen as acts in furtherance of that broad objective. Both the Call Option (granted pursuant to cl 2.1) and the Put Option (granted pursuant to cl 2.2) refer to a purchase of the Property “for the Price and otherwise on the terms and conditions contained in the Contract”. Price is the amount calculated in accordance with cl 9 of the Deed. The Contract is a contract in the form of that which is annexed to the Deed. It is a standard form of contract for the sale of land supplemented by a number of Additional Clauses.

60. Exercise of the options is dealt with in cll 5 (Call Option) and 6 (Put Option). I do not accept the defendant’s submission that the Call Option could have been exercised at any time after the Deed was signed. In my opinion, cl 5.1 identifies a period within which the Call Option may be exercised, namely, at any time during the Call Option Period. That is the natural reading of the language of cl 5.1. Were it read otherwise, as contended for by the defendant, the definition of Call Option Period would have little or no work to do, and neither would the provisions of cl 4 which give a right to extend the Call Option Period in certain circumstances. Further, and as also pointed out by the plaintiff in submissions, there would be difficulties in calculating the Price under cl 9 if the option could be exercised before the Rezone Date. Accordingly, the Call Option is only able to be exercised by the plaintiff during the Call Option Period which commences on the Rezone Date and ends on the first to occur of the dates specified in the definition (or the amended definition if, as later occurred, the Call Option Period is extended pursuant to cl 4). Similarly, cl 6.1 identifies a period within which the Put Option may be exercised, namely, the Put Option Period. That period cannot commence unless either a Rezone Date or a Project DA Date occurs.

61. Clause 3.1 of the Deed sets out the obligations of the parties in respect of the preparation and lodgement of the Rezone Application. That is an application to change the development controls applying in respect of the Development Land to permit it to be developed for the Project. If the application succeeds so that the Development Land is rezoned, there will be a Rezone Date for the purposes of the Deed.

62. Clause 3.2 of the Deed sets out the obligations of the parties in respect of the preparation and lodgement of the Project DA and the obtaining of the Project Consent. It is envisaged that the Project DA will incorporate certain Buffer & Road Works, and it is stipulated that the Road (as defined) must be constructed prior to commencement of construction on the Development Land pursuant to the Project Consent.

59. If either option is exercised, the Contract (as defined) becomes binding upon the parties from the time of exercise (see cll 5.2 and 6.2). In that event, the Price for the purposes of the Contract is determined in accordance with cl 9 of the Deed. In essence, the Price is $800,000 plus the Price Adjustment Sum (if any), minus the Call Option Fee and any Call Option Extension Fee. By cl 9.1(a), $10.00 is stated to be the amount of the deposit. This should be regarded as forming part of the Price (see cl 9.1(b)). By Additional Clause 35 of the Contract, the Price is to be paid 14 days after the date of the contract, although in certain circumstances a Price Adjustment Sum is to be paid at a later date. The Price and any Price Adjustment Sum is not refundable to the plaintiff (see Additional Clause 35(h)).

60. Additional Clause 36 of the Contract is concerned with the carrying out of various works, including the Buffer & Road Works the subject of the Project Consent.

61. Additional Clause 37 of the Contract is concerned with the obligations of the parties in respect of the registration of the subdivision of the Church Land (in a manner consistent with the Mepstead & Associates drawing dated 11 September 2007) so as to create the Property. If the Subdivision Documents are registered, notification of that fact operates to set the Completion Date for the Contract (see Additional Clause 38). However, Additional Clause 39 contemplates a situation where the Subdivision Documents are not registered by the date three years after the date of the Contract. (Where no contract date is dated on the front page, the contract date is the date the contract is made – i.e. the date when the relevant option is exercised.) Additional Clause 39 provides that if for any reason whatsoever the Subdivision Documents are not registered three years after the date of the Contract, the defendant must provide the duly executed Road Easement to the plaintiff so as to allow it to be registered. Once the defendant complies with its obligations in that respect it is taken to have discharged all of its obligations under the Contract. In particular, the defendant is under no further obligation to transfer title to the Property, and no further obligation to proceed with the registration of the Subdivision Documents. Moreover, it is provided that in those circumstances neither party has any obligation to the other except in relation to antecedent breaches and the terms of the Road Easement.

62. The asserted frustrating event is the commencement on 27 June 2014 of the 2014 LEP, and in particular cl 4.6(6) of the 2014 LEP. The asserted frustrating event is not said to prevent the performance of any obligations under the Deed, or the exercise of any option under the Deed. Rather, it is said to undermine the fundamental purpose of the Deed, being the purchase of the Property.

63. Clause 4.6(6) of the 2014 LEP undoubtedly precludes a subdivision of the Church Land such as would be necessary in order to create the Property. As explained by Mr Doyle, a consultant town planner called by the defendant, recourse to the provisions of SEPP1 was not available in relation to the 2014 LEP as it is a “standard instrument LEP”. Mr Boston, a consultant town planner called by the plaintiff, agreed with Mr Doyle on that point. The position thus differed from that which pertained when the 1993 LEP applied (see [9] above).

64. As the Property is the subject of the Contract that would come into existence upon the exercise of one of the options, cl 4.6(6) of the 2014 LEP stood in the way of the conveyance that is contemplated to occur following an exercise of an option. To that extent, the purpose of the Deed can be seen to have been defeated. However, even if that purpose is regarded as of central or primary importance in the transaction embodied in the Deed, the terms of the Deed and the Contract referred to above show that conveyance of the Property is not the only purpose of the transaction. It is apparent from Additional Clause 39 that the parties contemplated that in some circumstances the conveyance of the Property would not occur, and the Road Easement would be granted instead. That is to say, the parties contemplated circumstances in which an option was exercised (so that they became bound by the Contract) and the Contract would be completed not by the transfer of title to the Property but by the transfer of the Road Easement. The parties contemplated that the Contract would be so performed in the event that, for any reason whatsoever, the Subdivision Documents were not registered by the date three years after the date of the Contract.

65. At the time the Deed was entered into the parties evidently turned their minds to the possibility that registration of the Subdivision Documents may not be achieved even three years after the exercise of an option (which itself might not occur for several years). The potential cause or causes of such a failure to achieve registration are various, and obviously include changes in applicable planning laws. The parties stipulated that there would be a transfer of the Road Easement if such a failure to achieve registration occurred “for any reason whatsoever”. It is not correct that the Deed and the Contract were predicated on the assumption that consent to the subdivision of the Church Land has either been obtained or will be obtained.

66. In these circumstances I do not think it can be concluded that the parties entered into the Deed on a common assumption that there would be no change to applicable planning laws that would preclude a subdivision of the Church Land so as to create the Property. Or, put another way, that there was a common assumption that it would continue to be the case that consent could be given to such a subdivision.

67. Neither can the continuation of that state of affairs be regarded as essential to the performance of the Deed (or any contract that arises upon the exercise of an option under the Deed). A departure from that state of affairs would not preclude the performance of any obligations under the Deed, including the obligations in relation to the Project DA and the Project Consent. If the Project DA was refused in whole or in part because consent could not be given to the subdivision of the Church Land, the Deed continues to operate (see cl 3.2(m)). If, following the exercise of an option, the registration of the Subdivision Documents was not achieved by the date three years after the date of the Contract, the provisions of Additional Clause 39 would operate so as to require the grant of the Road Easement instead of the conveyance of the Property.

68. It may be accepted that the preclusion of a subdivision of the Church Land brought about a significant change. It was henceforth highly unlikely, if not impossible, that the Property could be created and conveyed to the plaintiff. The situation would plainly affect the commercial calculations of the parties, in particular in relation to the possible exercise of the options. In that regard, it should be noted that as the Rezone Date occurred at or about the same time, it was open to the plaintiff to exercise the Call Option, and the Put Option Period would commence no later than 12 months thereafter. The preclusion of a subdivision of the Church Land may well have made an exercise of the Call Option unattractive to the plaintiff. However, the provisions of the Deed show that the options might be exercised in a variety of situations. It is expressly envisaged, for example, that either option might be exercised at a time when there is no consent to the Project DA (see cl 9.1(h)). The Project DA involves seeking consent for a development that includes the subdivision of the Church Land. The parties should thus be taken to have contemplated that either option might be exercised before any subdivision is approved. Moreover, the terms of Additional Clause 39 indicate an appreciation that, for whatever reason, the subdivision might not be achieved within three years after the exercise of an option.

69. It seems to me that the preclusion of a subdivision of the Church Land, brought about by the commencement of the 2014 LEP, did not give rise to such a fundamentally different situation that the Deed should be held to be frustrated. I do not think that the continued performance of the obligations under the Deed was rendered a thing radically different from that undertaken under the Deed. The parties evidently appreciated that advancement of the Project depended upon various consents being given. The parties made provision against the possibility that one or more of the consents might not be forthcoming. For example, if a rezoning of the Development Land is not achieved there is no Rezone Date; and if the Project DA is refused the Deed continues to operate. Here, upon the happening of the Rezone Date, it was open to the plaintiff to exercise the Call Option, and within 12 months it would be open to the defendant to exercise the Put Option (unless the Call Option was exercised first). That is so regardless of the status of the Project DA. In either case, upon the exercise of the option, a contract would come into existence which would oblige the defendant to grant the Road Easement if for whatever reason the subdivision was not registered within three years. Again, the parties envisaged that, for whatever reason, registration of the subdivision might not be achieved. I do not accept the plaintiff’s submission to the effect that the benefit of the Road Easement that would be granted in those circumstances is illusory or of only minor significance. It is a tangible property right, and in the context of a proposed residential development comprising 71 residential lots that lacked suitable road access, an easement of that character may be of considerable value. The Road Easement can be seen as an alternative means of achieving the broad objective that is referred to in Recital B to the Deed.

70. The present case is unlike Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (supra). In that case, the parties entered into a construction contract acting on erroneous advice that the work could not be the subject of an injunction to restrain noise or other nuisance. The parties thus proceeded on the basis that the work would be completed within 130 weeks, by a method involving three 8 hour shifts a day. The contract was held to be frustrated due to the issue of injunctions that precluded work between 10:00pm and 6:00am. The injunctions made it impossible for the work to be lawfully completed in accordance with the contract. Performance of the contract in the new situation became fundamentally different from performance in the situation contemplated by the contract. Here, for the reasons set out above, the preclusion of a subdivision of the Church Land did not cause performance of the Deed to become fundamentally different from performance in the situation contemplated by the Deed at the time it was made. Of course, questions of degree arise in applying the principles of frustration to the particular facts of the case at hand (see Brisbane City Council v Group Projects Pty Ltd (supra) at 162-3 per Stephen J). To my mind, the impact of the allegedly frustrating event in the present case is insufficient to warrant a conclusion that the Deed was frustrated.

71. The Deed was not discharged by frustration upon the commencement of the 2014 LEP. The plaintiff is not entitled to recover either the Call Option Fee of $80,000 or the Call Option Extension Fee of $80,000 on that basis. Neither is the plaintiff entitled to recover those sums pursuant to s 55(2A) of the Conveyancing Act. Whilst this claim was not formally abandoned, Senior Counsel for the plaintiff fairly conceded that there were difficulties in the way of treating the option fees as deposits within the meaning of the section. In my view, s 55(2A) applies only to deposits paid under contracts for the sale of land. The Deed is not such a contract, although the exercise of an option under the Deed would give rise to one. That did not occur. The option fees paid by the plaintiff would not in any event be regarded as deposits paid under the contract. Clause 9.1(a) of the Deed stipulates that the Contract Deposit is $10.00.

72. The above conclusions are sufficient to dispose of the plaintiff’s case. It is not necessary to consider certain other arguments advanced by the defendant in opposition to the frustration case. However, I will state that insofar as the contentions of the defendant rested on the proposition that the plaintiff breached the provisions of the Deed (notably cl 3.2(h)) I would not have accepted them. It was not pleaded that the plaintiff was in breach of the Deed. Neither was it pleaded that any breach of the Deed prevented the plaintiff from relying upon the commencement of the 2014 LEP as an event of frustration.

73. The Statement of Claim will be dismissed. The Court will also order that the plaintiff pay the defendant’s costs of the proceedings.

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Decision last updated: 08 November 2021