Pierce Bell Sales Pty Ltd v Frazer

[1973] HCA 13

HIGH COURT OF AUSTRALIA

. Barwick C.J., McTiernan and Gibbs JJ.

PIERCE BELL SALES PTY. LTD. v. FRAZER.

(1973) 130 CLR 575

10 May 1973

Vendor and Purchaser

Vendor and Purchaser—Settlement purchase grant (N.S.W.)—Transfer of settlement purchase to company prohibited without a certificate from Minister—Sale to company—Whether vendor obliged to obtain certificate—Requisitions on title—Vendor unwilling to comply—Right to rescind—Circumstances in &hich court of equity will restrain rescission—Closer Settlement Act, 1904 (N.S.W.), as amended, ss. 4 "settlement purchase", 26, 30, 31.

Decisions

1973, May 10.
The following written judgments were delivered :-
BARWICK C.J. Some time ago the respondents husband and wife made a settlement purchase of thirty-three acres of land at Commercial Road, Vineyard, near Sydney, under the provisions of the Closer Settlement Act, 1904 (N.S.W.), as amended, (the Act). In due course they became entitled to a Crown grant in respect of this land for which s. 34 of the Act provides. Accordingly, a settlement purchase grant was made by the Crown and duly registered under the provisions of the Real Property Act, 1900 (N.S.W.), as amended. However, s. 31 of the Act provides that no holder of a settlement purchase can transfer, convey, assign or lease such a purchase without having first obtained the written consent of the Minister. Section 30 of the Act further provides that, subject to that section, no person shall unless qualified under s. 26 of the Act acquire by transfer or otherwise a settlement purchase. It is clear from the provisions of the Act that this statutory limitation on the capacity of the holder of a settlement purchase to transfer continues to operate notwithstanding the issue of the settlement purchase grant and its registration under the provisions of the Real Property Act. See s. 4 of the Act, definition of "settlement purchase". Accordingly, the Registrar-General by means of a stamp indorsed on the folium of the certificate of title in the names of the respondents the following statement - "Attention is hereby directed to the provisions of s. 31 of the Closer Settlement Act 1904 relating to transfer". (at p578)

2. It has been assumed throughout the argument of this case, and on consideration I think rightly, that the limitation imposed by ss. 30 and 26 in combination prevents a corporation from acquiring a settlement purchase even after the issue of the Crown grant. (at p578)

3. However, an amendment was made to the Act in 1970 around which much of the argument of the present case turns. Section 31 was amended by the insertion of a new sub-section numbered (4) . This gave authority to the Minister to certify that the land to which the certificate referred had ceased to be affected by the terms of the Act. Once such a certificate is given the holder of the settlement purchase can transfer it without the consent of the Minister and he can transfer it to a person who is not qualified under the Act to be its holder. However, a sum has to be paid to the Minister on the grant of the certificate which could be as much as five per cent of the unimproved capital value of the land and, in any case, not less than ten dollars. (at p579)

4. The respondents on 6th November 1971 gave to the appellant in writing an option to purchase in the following terms :

"We A.T. Frazer &D.B. Frazer

hereafter described as the vendors, hereby offer to sell to Pierce Bell Sales Pty. Ltd. our property of about 33 acres at Commercial Road, Vineyard under the terms and conditions as laid down in the standard form of contract as prepared by the Law Society of NSW. This offer is irrevocable for a period of three months from this date in consideration for the sum of $300 to be paid at the rate of $100 per month. This first payment being made now and each subsequent payment to be made on the 1st day of each month or thereabouts. My signature to this document being receipt of the first payment. If the said Pierce Bell Sales Pty. Ltd. shall exercise this option within the said three months the said $300 shall be counted as part of the purchase price of $65,300. This option may be only exercised in writing. Dated this sixth day of November 1971. Aubrey Thomas Frazer Doreen Bernard Frazer."

The incorporated printed terms and conditions of sale included the following relevant provisions :

"2. - The title to the property is under the REAL PROPERTY ACT OLD SYSTEM CROWN LANDS ACT OR OTHER ACT RELATING TO CROWN LAND UNDER WHICH THE PROPERTY OR PART OF IT IS HELD, viz. :".

5. - AS TO LAND HELD UNDER ANY ACT RELATING TO CROWN LANDS : . . . (d) The Vendor shall apply for any necessary consent of the Minister of Lands or other prescribed authority to the transfer of the property or any part of it whether still under Crown tenure or not and pursue such application and shall pay all costs and fees (other than those of the Purchaser's Solicitor) in respect thereof. The Purchaser shall promptly join in the application as may be necessary. If such consent is refused either party may rescind this agreement. If consent is granted subject to any condition which either party may be unable or reasonably unwilling to comply with, that party may give to the other notice in writing that the conditional consent is unacceptable to him and thereupon the consent shall be deemed to have been refused.

7. - The Purchaser shall be deemed to have waived all objections or requisitions which he has not made and delivered to the Vendor or to the Vendor's Solicitor within 21 days from the delivery of the said abstract or particulars. Within 28 days from delivery of the said abstract or particulars, or, in any case where a consent as mentioned in clause 5 (d) of this agreement is required to the transfer of the whole or part of the property, within 14 days of the Purchaser or his Solicitor being notified of the granting of such consent, the Purchaser shall at his own expense tender to the Vendor or to his Solicitor for execution the appropriate assurance of the property.

10. - No objection or requisition or claim for compensation shall be made by the Purchaser in respect of any of the following matters : (d) any exception reservation or condition contained in any relative Crown Grant.

12. - The property is sold with vacant possession ; subject to existing tenancies, particulars whereof are set out in the Third Schedule hereto. The Vendor agrees to give the benefit of possession to the Purchaser at the date of . . .

14. - If the Vendor shall be unable or unwilling to comply with or remove any objection or requisition which the Purchaser has made and shall not waive within fourteen days after the Vendor has given him notice of intention to rescind this Agreement, the Vendor, whether he has or has not attempted to remove or comply with such objection or requisition, and notwithstanding any negotiation or litigation in respect thereof, and whether the Purchaser has or has not taken possession shall be entitled by notice in writing to rescind this Agreement."

The option agreement was prepared by the appellant and presented to the respondents who had no legal advice before its signature. (at p580)

5. The appellant on 1st February 1972 exercised the option. During the examination of the respondents' title to the land the appellant insisted that the respondents, in pursuance of the contract of sale formed by the exercise of the option, should transfer to the appellant an unencumbered fee simple in the land. Amongst the requisitions on title made by the appellant there were two paragraphs to which reference must be made :

"1. The relevant Certificate of Title must be clear of all encumbrances notifications and caveats etc., not provided for in the Contract and must be handed over on completion. In whose possession is the same held at the present time and where may same be inspected.

22. The Vendors must complete the appropriate application under Section 31 of the Closer Settlement Act and the Memorial on Crown Grant Volume 5270 Folio 229 regarding Section 31 of the Closer Settlement Act must be removed prior to completion."

To these paragraphs the respondents' solicitors replied :

"1. Noted, subject to the Consent of the Minister for Lands which is referred to in Section 5 (d) of the Contract. The Certificate of Title may be inspected at this Office.

22. No. The Vendors rely on the Contract in this respect and will do all things which may be necessary under the terms of the Contract."

The appellant indicated its willingness to bear the costs of an application to the Minister under s. 31 (4), though after some vacillation it became clear that the sum payable on the issue of the certificate was not intended by the appellant to be included in the "cost of the application". The respondents refused to make any such application though prepared to apply for consent of the Minister to the transfer of the land to the appellant, something which by dint of s. 30 he would have been unable to do. (at p581)

6. The respondents' solicitors gave notice that the respondents were unable to comply with requisition 1 because of the existence of an easement over a strip of the land in favour of the Electricity Commission of New South Wales and that, in any case, the respondents were unwilling to comply with the requisition. They also gave notice that "whether or not they are able to do so, the vendors are unwilling to comply with requisition no. 22". (at p581)

7. They also gave notice of unwillingness to comply with requisition no. 1 in relation to the clearance from the certificate of title of the indorsement as to the Act. (at p581)

8. Finally, they gave notice of intended rescission of the contract if these requisitions were not waived within fourteen days. (at p581)

9. The appellant did not withdraw the requisitions 1 and 22 so far as the same related to the operation of the Act. In the face of the appellant's attitude the respondents then resorted to cl. 14 of the printed terms of sale and gave notice of rescission of the contract. Nothing presently turns on the existence of the easement in favour of the Electricity Commission. (at p582)

10. The appellant commenced the present suit by originating summons in the Supreme Court of New South Wales in Equity, seeking a declaration that the contract constituted by the exercise of the option was on foot and a declaration that it was a term of the contract or alternatively the defendants were so bound by the terms of the contract that the defendants were obliged to apply pursuant to s. 31 (4) to the Minister for the certificate to which that sub-section refers. (at p582)

11. The primary judge held that the subject-matter of contract was a settlement purchase grant which was subject to the notification in respect of the effect of the provisions of s. 31 of the Act and that it was not a term of the contract that the defendants were obliged to apply to the Minister for a certificate pursuant to s. 31 (4) of the Act. In reaching this conclusion his Honour followed a decision of the now Chief Judge in Equity in a case of Preston Development and Investments Pty. Ltd. v. Frame (26th May 1972 (unreported)) holding that an indorsement on the certificate of title by the Registrar-General in relation to the Act in the terms to which I have referred was a condition "contained" in the Crown grant within the meaning of cl. 10 (d) of the printed terms and conditions of contract. (at p582)

12. The appellant now appeals to this Court submitting that the indorsement on the certificate of title was not such a condition as is referred to in cl. 10 (d) of the printed terms of sale; that the subject-matter of the purchase was thirty-three acres of land as described and that the obligation of the respondents under the contract was to transfer to the appellant an unencumbered fee simple in that area of land. It was argued that the respondents had the ability, albeit on payment of what the appellant claimed to be a relatively small sum of money, to put themselves in a position to make such a transfer and that nothing in the terms of sale excused them from doing so. It was further submitted that because it was their obligation under the contract to convey the fee simple in the land they were not entitled to resort to cl. 14 of the printed terms to rescind the contract. Alternatively it was submitted that it was unconscionable for the respondent to exercise the right of rescission. (at p582)

13. All of these propositions were contested and, in addition, the respondents' counsel claimed that the subject-matter of the contract was not land but a closer settlement purchase subject to the conditions of the Act and that the only obligation of the vendor was to join in any necessary instruments to obtain consent of the Minister to a transfer of that interest. It was said by the respondents that the difficulty arose in the case because of the inability of the appellant to be a transferee or to have any interest in a closer settlement purchase and that there was no obligation upon the respondents to take steps to make the appellant a qualified transferee. (at p583)

14. The first question to be determined, in my opinion, is what is the subject-matter of the contract. I am of opinion that upon its proper construction the subject-matter of the contract was land, thirty-three acres of land as described. The words of the option are "to sell . . . our property of about 33 acres". It was not the respondents' interest in that land and, in particular, it was not a settlement purchase which was offered to be sold. I have had occasion recently to deal with a similar question and to proffer some observations on the ascertainment of the subject-matter of a contract of sale. See Travinto Nominees v. Vlattas (1973) 129 CLR 1 . (at p583)

15. The next question to consider is what was the obligation in relation to the transfer of title which fell upon the respondents by virtue of the contract of sale of which the subject matter was land. Nothing is said in the option as to the Act or any effect it might have on the ability of the respondents to transfer the land or as to the nature of the title they might have to the land. Prima facie therefore the obligation of the respondents was to transfer the fee simple in the land. The contract of sale must then be examined to determine whether any term or terms of it reduce or limit the obligation to transfer a fee simple which an "open" contract for the sale of land imports. Nothing in the printed terms and conditions of sale which are deemed to be incorporated in the option in any way limits the normal obligation of a person who sells an area of land without qualification as to the title which he will convey except possibly cll. 5 and 10 (d). We are not troubled here with any question of vacant possession, though there having been no specification as to which of the alternatives in cl. 12 of the printed terms and conditions applied it might well be said that the contract calls for vacant possession on settlement. (at p583)

16. It now becomes necessary to decide whether the title to the land is under the Real Property Act or under the Act, i.e. the Closer Settlement Act, within the meaning and operation of the contract of sale: that is to say, which of the alternatives of cl. 2 should be regarded as relevant to the transaction. In my opinion, the title to the land was under the Real Property Act and not under the Act although the Act contains provisions which restrict the use which the registered proprietors may make of the estate which they have by virtue of that registration. The Crown Lands Act, 1900, (N.S.W.) as amended, similarly to the Act, contains restrictions on transfer of certain tenures created by the Crown Lands Act. The estate of a registered proprietor thus affected by that Act or by the Act is often referred to as "a conditional fee simple". This is a convenient enough expression to describe a fee simple which under the statutory provisions the proprietor may not transfer without the consent of the Minister or which he may only transfer to a limited class of person. But, in my opinion, the expression is imprecise. The effect of the registration of the Crown grant as a certificate of title must result in the proprietor being seized for an estate in fee simple of the described land subject, of course, to the estates or interests noted in the certificate. Statutory provisions of various kinds may restrict the use he may make of the land or of his title to it. Thus town planning statutes bear on the use which the proprietor may make of the land; but those statutes do not render his fee simple in any proper sense conditional. A statute which prevented the transfer of land to some class of persons, e.g. aliens, would not, in my opinion, reduce the estate of the proprietor in the land though up to the point of registration, a transfer of the land in breach of the statute may well be ineffective, or even illegal. Here the respondents had a fee simple in the land, none the less so in my opinion because of the statutory limitations on transferability. The fee simple in the land derived from their registration as proprietors in fee simple. Their certificate of title was in no sense a qualified certificate. Cf. the Real Estate Act, Pt IVA. (at p584)

17. An obligation therefore fell upon the respondents to place the appellant in a position to be registered as proprietors under the Real Property Act of the land in fee simple. (at p584)

18. The respondents' counsel submitted that the obligation of the respondents in relation to title was affected by cl. 5 of the printed terms of sale. Clause 5 is limited in its operation, in my opinion, to the case where the title to the land is still held under the Act. Therefore, in my opinion, it applies only to a settlement purchase up to the point of time before a Crown grant is registered under the provisions of the Real Property Act. Although par. (d) of this clause purports to cover the situation of the title "whether still under Crown tenure or not", the entire clause is, in my opinion, controlled by the opening words which confine it to "Land held under any Act relating to Crown lands". That category is in contrast, as in cl. 2, to land held under the Real Property Act. From the moment of registration the title is held under that Act. In so saying I would not be lending any support to the view that the respondent would not have been under an obligation to join with a purchaser who was a natural person in an application for the consent of the Minister to the transfer to that purchaser. But that obligation would arise out of the general law and not, in my opinion, out of the operation of cl. 5. (at p585)

19. Therefore, because the title to the land was, as I think, under the Real Property Act, cl. 5 of the printed terms of sale, in my opinion, had no application to this sale. (at p585)

20. The advisers to the respondents evidently considered that cl. 5 (d) did apply as they offered to join in an application for the Minister's consent to the transfer of the land. However, as I have already remarked, this was in this case an empty gesture because of the combined effect of ss. 26 and 30 of the Act in relation to the qualification of the appellant to be a transferee of the land. Indeed, those sections and the corporate nature of the appellant make the applicability of cl. 5 of no real consequence in this case. (at p585)

21. The respondents, however, submit that by reason of cl. 10 (d) of the printed terms of sale the appellant could not object to the limitations present in ss. 30 and 31 of the Act even if the respondents were obliged to transfer a fee simple in the land. It is said that the provisions of these sections are "contained in the Crown grant" because of the indorsement made on the folium of the register book by the Registrar-General. In support of that view, reliance is placed on Travinto Nominees v. Vlattas (1973) 129 CLR 1 to which I have already referred. But, in my opinion, the Crown grant contained no condition referable to the provisions of the Act. I have already expressed my view as to the relationship of the provisions of that Act to the estate in the land declared by the certificate of title. It was the Crown grant which, upon registration, constituted that certificate. The Real Property Act declares the consequences of registration. The Crown grant itself clearly contained no relevant condition. The indorsement by the Registrar-General on the folium of the register book did not, in my opinion, import any condition into the grant. It was no more than a warning as to the existence of a statutory provision bearing on the transferability of the title to the land. I can find no authority in the provisions of the Real Property Act for the making of this indorsement, which in my opinion has no statutory effect. It is not a caveat and does not protect or record the interest of any person in the land : see s. 12 (f) of the Real Property Act. But it is, of course, a convenient practice for the indorsement to be made, and the notice it gives on inspection of the certificate of title of the relevance of the Act may be important in some circumstances. Indeed, because the Crown grant contained no relevant conditions, some indication of the limitation upon transferability is desirable. (at p586)

22. I am therefore of opinion that the primary judge was in error in concluding as he did that the notification on the folium of the register book as to the provisions of the Act was a condition contained in the Crown grant within the meaning of cl. 10 (d) of the printed terms and conditions. It also follows that, in my opinion, the case of Preston Development and Investments Pty. Ltd. v. Frame (26th May 1972 (unreported)) was not well decided and ought not to be followed. (at p586)

23. I therefore agree with counsel for the appellant that not only was land as described the subject-matter of the contract but that the contract did impose on the vendor an obligation to tender on settlement a memorandum of transfer of an estate in fee simple and otherwise place the appellant in a position to be registered as proprietor of the land for an unencumbered estate in fee simple. (at p586)

24. The limitation on the respondent's capacity to transfer the land to the appellant was not in the nature of a caveat such as the Court had before it in Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd. (1972) 128 CLR 529 . Whilst the Act does not, in my opinion, diminish the extent of the estate which the certificate of title vests in the respondents, because it limits the power of the respondents to transfer that estate, the applicability of the Act to the respondent's land was properly the subject of a requisition on title. It was none the less so by reason of the fact that until the limitation the Act imposed was removed the respondents could not perform the obligation which, in my opinion, fell upon them by reason of the contract of sale. Such a requisition as requisition 22 was not, in my opinion, in the same case as requisitions 2 and 33 with which the Court was concerned in Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd. (1972) 128 CLR 529 . Requisition 22 calls attention to the statutory limitation on transferability and requires the taking of appropriate steps to secure its removal. (at p586)

25. Therefore, in my opinion, cl. 14 of the printed terms and conditions became available to the respondents in respect of par. 22 of the appellant's requisitions on title. The respondents did resort to this clause and gave an appropriate notice of intended rescission in default of the waiver of the requisition. It is noticeable that the respondents did not in terms say they were unable to comply with the requisition. They said they were unwilling to do so, whether or not able to do so. Notice of actual rescission had not been given before the commencement of the suit but was given shortly thereafter and in any case before the Supreme Court, which had evidence of the giving of the notice, made its declarations in the suit. (at p587)

26. The question now arises whether the respondents should not be allowed to exercise their contractual rights under cl. 14. (at p587)

27. This aspect of the case was not considered by the primary judge because of the view he formed as to the applicability of cl. 10 (d). If consideration of the question involved the ascertainment of any facts additional to those appearing in the appeal book, the appropriate course would be to remit the case to the primary judge for his further consideration. However, it seems to me that such a course is unnecessary in this case. All the matters which properly bear on the resolution of the question are already evident ; no questions of credibility are involved and, in my opinion, this Court is in a position to dispose of the matter. (at p587)

28. The principles upon which a court of equity should decide whether a vendor should be restrained from exercising a right of rescission given by a clause such as the present cl. 14 were recently canvassed and applied by this Court in Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd. (1972) 128 CLR 529 . I have no need to refer here to the earlier decisions on which members of the Court drew in those cases. Broadly it may be said that the vendor will not be allowed to use his contractual right if it would be unconscionable in the circumstances to do so. Where, as here, compliance with the requisition is physically and legally possible but involves the expenditure of money, the matter may be resolved by determining whether in all the circumstances it would be unreasonable to require the respondents to take the necessary step to obtain the Minister's consent and to pay the amount required on the issue of the certificate. (at p587)

29. In my opinion, the following are the relevant circumstances. It may be taken that neither party was aware, at the respective times of the grant of the option to purchase or of its exercise, of the statutory limitation on transferability. No doubt the respondents were at least aware of the fact that they had a settlement purchase grant and may possibly have known that ministerial consent to its transfer was necessary. But it is not consent to transfer which is here in question : it is the qualification of the appellant to be the proprietor of the land which made a transfer impossible. I do not think the respondents, or for that matter the appellant, should be taken to have known of the disability of a corporate person in relation to the transfer of their land. (at p587)

30. The appellant prepared the option agreement. The respondents had no legal assistance when giving the option to purchase. There was nothing in the conduct of the respondents which could be said to have been reckless. The application to the Minister under s. 31 (4) might very well have been little more than a formality but, on the other hand, it might have proved not to be : and, in any case, the amount of money required to be paid was $629. Of course, had an application been made and refused, the right to rescind would have been, in my opinion, unquestionable. (at p588)

31. According to my view of the contract between the parties, the obligation to transfer to the appellant the fee simple in the land was central and fundamental to their bargain. It must be a relatively rare case, in my opinion, in which cl. 14 can conscionably be used to avoid performance of such an obligation. On this matter, I observed in Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd. (1972) 128 CLR, at p 538 :

"If the matter be approached, as in my opinion it should not, by assuming that what the appellant had said in his 'requisitions' 2 and 33 were requisitions within the meaning of cl. 14 of the contract, it ought, in my opinion, to be held that it would be unconscionable for the respondent to have attempted to exercise his powers under cl. 14, in the circumstances. I would have thought clearly it was so, because what he would be doing would be to deny to the purchaser the performance of an essential obligation which he had undertaken when entering into the contract with knowledge of the existence of the caveat. In this connexion I find no need to refer to decisions on the use of this type of clause in connexion with land under common law title. The title to this land is under the Real Property Act. The caveat was lodged and presumably notified before the sale was made. To allow the vendor to rescind in the circumstances would be to afford him the right, in substance, to say that the sale was in reality no sale at all : only a transaction conditioned on his own willingness to perform." (at p588)

32. Here, however, as I have said, the major impediment to the respondents' ability to transfer the land to the appellant is the fact that the appellant is corporate. But of the appellant's disqualification to be a transferee of the land the respondents were unaware. The certificate of the Minister under s. 31 (4) would not merely remove the need for ministerial consent to transfer : it would remove the appellant's incapacity to accept a transfer and to become registered in respect of the fee simple in the land. (at p588)

33. There is room for diversity of view as to whether it would be reasonable to require the respondents to apply to the Minister. On one view, there is little hardship on the respondents in making an application and paying such sum as the Minister may demand, a sum which would be the sum of $629. It might be thought that the latter sum is relatively small compared with the price fixed by the contract. (at p589)

34. On the other hand, there being no elements of personal conduct of the respondents which could be classed as reckless or as being the cause of the respondents' present situation, the payment of a substantial sum of money to improve the appellant's situation may well seem to be an unreasonable requirement. There is, to my mind, perhaps no single fact which is definitive in this connexion. One begins with a contractual right to rescind, all the circumstances covered by cl. 14 being present. The onus thereafter of convincing the Court that the respondents ought not to be allowed to exercise their contractual right must rest on the appellant. Bearing this in mind, after due consideration, I am not convinced that it would be unreasonable or unconscionable on the part of the respondents to exercise their right of rescission. I am not convinced that it was unreasonable on the part of the respondents to be unwilling to apply for the Minister's certificate and to pay the amount of money he might demand. I think, to use the words of Turner L.J. in Duddell v. Simpson (1866) LR 2 Ch App 102, at p 107 , the respondents in all the circumstances of the case could reasonably say that to comply with the requisition they "will be involved in expenses far beyond what" they "ever contemplated". Indeed, the respondents could be said to satisfy the elements referred to in In re Jackson and Haden's Contract (1906) 1 Ch 412 , as relevant to the question whether a vendor may properly be allowed to exercise his rights under such a clause as cl. 14. They were ignorant of the limitation on their power to transfer their land to a corporation. They were not responsible for the form of the contract in that they did not prepare it, or understand its relevant provisions in the sense which, in my opinion, they bear. Although wisdom would dictate consultation with a solicitor before signing an option to purchase I do not think that a failure to do so, in the circumstances, was a "shortcoming" on their part of which the appellant can take advantage. (at p589)

35. Accordingly, I conclude that the respondents' notice of rescission was effective to bring this contract to an end. The second declaration sought by the appellant by the originating summons should be answered in the negative, "now" in the question being the date of hearing of the summons in the Supreme Court. (at p589)

36. The declaration made by the Supreme Court should be set aside and in lieu thereof declare that the contract was duly rescinded by the notice of rescission given by the respondents on 30th March 1972 and with this variation of the decretal order the appeal should be dismissed. (at p590)

McTIERNAN J. I have had the advantage of reading the reasons of the Chief Justice and agree with him that for those reasons the appeal should be allowed and the declarations made by the Supreme Court of New South Wales should be set aside. (at p590)

GIBBS J. I am in agreement with the reasons prepared by the Chief Justice and, except on one point, have nothing to add to them. (at p590)

2. The question whether the respondents were entitled to avail themselves of the contractual right of rescission given by cl. 14 of the standard terms of contract is not without difficulty. The equitable principles which control the right of rescission given by a clause such as cl. 14 were discussed by Viscount Radcliffe in Selkirk v. Romar Investments Ltd. (1963) 1 WLR 1415, at pp 1422-1423 , where his Lordship said :

"Thus, it has been said that a vendor, in seeking to rescind, must not act arbitrarily, or capriciously, or unreasonably. Much less can he act in bad faith. He may not use the power of rescission to get out of a sale 'brevi manu', since by doing so he makes a nullity of the whole elaborate and protracted transaction. Above all, perhaps, he must not be guilty of 'recklessness' in entering into his contract, a term frequently resorted to in discussions of the legal principle and which their Lordships understand to connote an unacceptable indifference to the situation of a purchaser who is allowed to enter into a contract with the expectation of obtaining a title which the vendor has no reasonable anticipation of being able to deliver."

In the present case, there was no evidence that the respondents, in exercising their right of rescission, were acting in bad faith. They were not cross-examined upon their affidavit in which they swore that they were unwilling to complete an application under s. 31 of the Closer Settlement Act, 1904 (N.S.W.), as amended, ("the Act") or to pay the amount payable to obtain the removal from the Crown grant of the indorsement drawing attention to the provisions of the Act, and it would be the merest speculation to say that they availed themselves of the power of rescission not really because they were unwilling to comply with the requisition but as an excuse to enable themselves to get rid of the contract for some ulterior purpose, such as to obtain a higher price for the land from some other purchaser. Further, I do not consider that the respondents were guilty of recklessness in the sense that they failed to satisfy themselves before they signed the contract that they would be in a position to convey what they were contracting to sell. They were in a position to convey a good title to any purchaser qualified to receive it. It is true that the effect of ss. 26,30 and 31 (4) of the Act was that the appellant, being a company and not qualified to apply for a settlement purchase under s. 26 of the Act, could not acquire the land by transfer unless the Minister gave a certificate under s. 31 (4) of the Act. However, at the time when the contract was made, the respondents, if they had known of the legal effect of the Act, would have been entitled to contemplate either that the Minister might give a certificate or that the appellant might nominate some qualified person to whom the conveyance could be effected (see Norton v. Angus (1926) 38 CLR 523, at pp 528,538 ). (at p591)

3. It remains to consider whether the action of the respondents, in seeking to rescind, can be said to have been arbitrary, capricious or unreasonable. To decide this question it is necessary to consider the correspondence that was exchanged between the solicitors for the parties before and after the requisition in question was made. The solicitors for the appellant, having been informed by the solicitors for the respondents that it was the policy of the Department of Lands that the consent of the Minister for Lands would not be granted in respect of the proposed transfer to a company of land under the Act, wrote on 24th January 1972 saying that the appellant was prepared to bear the cost of an application for a certificate under s. 31 (4) and enclosing a form of application for signature by the respondents. On 1st February 1972 the respondents' solicitors replied that the respondents would not make the application under s. 31 (4), by which they meant, as they later explained by a letter of 7th February 1972, that they "would not make the application to have the restriction under s. 31 (4) of the Closer Settlement Act removed"; they were prepared to apply for the consent of the Minister for Lands under s. 31 (1) although it is obvious that such consent would not have been given, or, if given, would have been futile, since in the absence of a certificate under s. 31 (4) the appellant was forbidden by the Act to acquire the land by transfer. These communications caused the solicitors for the appellant to change their attitude and on 10th February 1972 they wrote saying that the respondents were obliged to make the application under s. 31 (4), and that it was to be made at the respondents' expense. With this letter they forwarded the requisitions. On 14th February 1972 the solicitors for the respondents wrote to inquire whether they were right in assuming that the solicitors for the appellant considered that the respondents should pay the amount required to be paid under s. 31 (4) (viz. $629) and on 16th February 1972 they received the following reply : "We wish to confirm that it is considered that the vendors must bear the cost of the appropriate application under section 31 of the Closer Settlement Act." On 21st February 1972 the respondents replied to the requisitions. On 10th March 1972 their solicitors write a further letter in which they said (inter alia) that the respondents were unwilling to comply with the requisitions that they must complete the appropriate application under s. 31 of the Act and that the memorial on the Crown grant regarding s. 31 must be removed prior to completion, and giving notice of their intention to rescind the agreement unless the appellant waived compliance with the relevant requisitions within fourteen days of receipt of the letter. The appellant did not waive compliance with the requisitions, and the respondents gave notice of rescission. (at p592)

4. In my opinion the respondents were under an obligation, implied in the contract, to take all reasonable steps to render the contract efficacious in accordance with the presumed intention of the parties (Butts v. O'Dwyer (1952) 87 CLR 267, at p 280 ). A transfer to the appellant could only have been completed if the Minister's certificate under s. 31 (4) had been obtained. An application for such a certificate is to be made as prescribed and by r. 52A (a) of the regulations made under the Act the application is required to be in or to the effect of form 143 as prescribed under the Crown Lands Consolidation Act, 1913 (N.S.W.). Form 143 provides for the application to be made by "the holder/s of the land". The combined effect of these provisions appears to be that an application under s. 31 (4) can only be made by the holder or holders of the settlement purchase, that is, in the present case by the respondents. To enable the contract to be completed by transfer to the appellant it was therefore necessary that the respondents should make an application under s. 31 (4). Notwithstanding that the appellant might have nominated a qualified person to take the conveyance, it seems to me that the parties must be taken to have intended that the contract would be completed by transfer to the appellant if the latter did not choose to nominate someone else for the purpose. In those circumstances it should be implied that the respondents would do all things reasonably necessary to obtain the certificate without which the transfer could not be made. McFarlane v. Wilkinson (1927) VLR 359 , in which Lowe J. (1927) VLR, at p 364 expressed the opinion that it was not the vendor's duty to remove a disqualification attaching to the transferee, under legislation similar to that now in question, is distinguishable, for the disqualification was there personal to the transferee and could have been removed by appropriate action on the part of the transferee. Here, as I have said, the appellant's disqualification could have been removed only if application had been made by the respondents for the Minister's certificate. The respondents, in my opinion, acted unreasonably in saying, by the letters of 1st February 1972 and 7th February 1972 that they would not make the application. However, the appellant, in insisting that the respondents should meet the costs of an application, met unreasonableness with unreasonableness. The requisition, read in the light of the letters of 10th February 1972 and 16th February 1972, clearly required the respondents not only to make application to the Minister for his certificate under s. 31 (4) but also to pay the amount of $629 prescribed under that subsection and by r. 52A (d). In my opinion although the respondents were obliged to make the application, their implied obligation did not extend to require them to make the necessary payment out of their own moneys. It was not reasonable that they should have to provide the funds to support an application which was necessitated by the fact that the appellant was disqualified. The respondents were therefore entitled to refuse to make the application at their own expense. The appellant did not, during the fourteen days allowed, change its attitude to the question of the payment of the fee, although it should be added that it was not expressly asked to do so. (at p593)

5. The amount of $629 was small in comparison with the total purchase price of the land ($65,300) but it was not inconsiderable in itself; it was not merely trivial and was not an expense which the appellant was entitled to require the respondents to meet. The present can I think rightly be said to be a case where a vendor finds that he is to be put to "so much expense ... as to make it unreasonable that he should be called upon to do it" (Greaves v. Wilson (1858) 25 Beav 290, at p 293 (53 ER 647, at p 649) , cited in Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd. (1972) 128 CLR 529, at p 552 ). In these circumstances I have reached the conclusion, not without some hesitation in view of the fact that the earlier conduct of the respondents was unreasonable, that the respondents had a reasonable ground for their unwillingness to comply with the requisition, and in rescinding were not acting arbitrarily, capriciously or unreasonably. I therefore consider that the power given by cl. 14 of the contract was validly exercised. (at p593)

6. There were other grounds which the respondents advanced to justify their rescission but in the view that I take they need not be considered. (at p594)

7. I would dismiss the appeal but would vary the order in the manner suggested by the Chief Justice. (at p594)

Orders

Declaration of the Supreme Court of New South Wales in Equity "that it is not a term of the contract between the plaintiff and the defendants whereby the plaintiff is bound to purchase from the defendants and the defendants are bound to sell to the plaintiff the land referred to in the option dated the 6th day of November last granted by the defendants to the plaintiff that the defendants are obliged pursuant to s. 31 (4) of the Closer Settlement Act 1904 (as amended) to apply to the Minister for Lands for and to do everything necessary to obtain the Certificate referred to in that subsection" set aside and in lieu thereof declare that the contract between the appellant and the respondents was duly rescinded by the notice of rescission given by the respondents on 30th March 1972 and that there is now no contract subsisting between the appellant and the respondents for sale and purchase of the land referred to in the option dated 6th November 1971 given by the appellant to the respondents. Otherwise the appeal is dismissed with costs.