Rehins Pty Ltd v Debin Nominees Pty Ltd [No 2]

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: REHINS PTY LTD -v- DEBIN NOMINEES PTY LTD [No 2] [2011] WASC 168

CORAM: MURRAY J

HEARD: 16-21, 23, 24 & 27 AUGUST 2010

DELIVERED : 8 JULY 2011

FILE NO/S: CIV 1562 of 2007

BETWEEN: REHINS PTY LTD (ACN 116 998 095)
First Plaintiff
GOLDBEACH NOMINEES PTY LTD (ACN 068 766 496)
Second Plaintiff
AND
DEBIN NOMINEES PTY LTD (ACN 008 810 688)
First Defendant
FIORE CONSTRUCTIONS PTY LTD
Second Defendant

Catchwords:

Contract - Sale of unsubdivided land by offer and acceptance - Incorporation of General Conditions 2002 - Defendants to use their 'best endeavours' to obtain subdivision approval as soon as practicable - The question of an 'unacceptable condition' re cost of subdivision approval - Principles of construction of contract - The contract construed - The term as to time - Breach of contingent condition - Availability of specific performance - Damages in the alternative

Legislation:

Nil

Result:

Judgment for plaintiffs
Counterclaim dismissed
Orders for specific performance made

Category: B

Representation:

Counsel:

First Plaintiff                :     Mr R R Cywicki
Second Plaintiff            :     Mr R R Cywicki
First Defendant             :     Mr L A Tsaknis
Second Defendant         :     Mr L A Tsaknis

Solicitors:

First Plaintiff                :     Taylor Linfoot & Holmes
Second Plaintiff            :     Taylor Linfoot & Holmes
First Defendant             :     J D Finlay & Co
Second Defendant         :     J D Finlay & Co

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

Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Automasters Australia Pty Ltd v Bruness Pty Ltd [2004] WASCA 229
Bosaid v Andry [1963] VR 465
Brown v Heffer (1967) 116 CLR 341
Butt v M'Donald (1896) 7 QLJ 68
Butts v O'Dwyer (1952) 87 CLR 267
Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 83 ALJR 903
Casella v Hewitt [2008] WASCA 13; (2008) 36 WAR 1
Ciavarella v Balmer (1983) 57 ALJR 632
Douglas v Cicirello [2006] WASCA 226
Expectation Pty Ltd v Pinnacle VRB Ltd [2002] WASCA 160
Foran v Wright (1989) 168 CLR 385
Gange v Sullivan (1966) 116 CLR 418
Hawkins v Pender Bros Pty Ltd [1990] 1 Qd R 135
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
IBM United Kingdom Ltd v Rockware Glass Ltd [1980] FSR 335
Johnson v Agnew [1980] AC 367
Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705
Mehmet v Benson (1965) 113 CLR 295
New Zealand Shipping Co Ltd v Societé des Ateliers et Chantiers de France [1999] AC 1
O'Rourke v P & B Corporation Pty Ltd [2008] WASC 36; (2008) 36 WAR 197
Pacific Carriers Pty Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
Paltara Pty Ltd v Dempster (1991) 6 WAR 85
Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537
Pianta v National Finance & Trustees Ltd (1964) 180 CLR 146
Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370
SDS Corporation Ltd v Pasdonnay Pty Ltd [2004] WASC 26
Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 497
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
Shepherd v Baster [2006] WASC 176
Suttor v Gundowda Pty Ltd (1950) 81 CLR 418
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Zieme v Gregory [1963] VR 214

MURRAY J:

A distillation of the pleaded issues and some background facts

The plaintiffs' action, commenced by a writ issued on 1 June 2007, is for the breach of a contract for the purchase of a piece of land by them from the defendants. They say that although the defendants have sought to terminate the contract on a number of occasions, those efforts have been contractually and legally ineffectual. They say that the contract remains on foot and that they are ready, willing and able to perform their part directed towards the completion of the purchase. They seek a decree of specific performance or, alternatively, if the contract is at an end, they rely on the defendants' breach of contract and claim damages.
The defendants deny that they have breached the contract. They assert that they have validly terminated the contract, and they offer a variety of dates and circumstances in which they say they acted effectively in that way. Alternatively, they assert that the performance of the contract has been frustrated and it has been brought to an end.
They say that if the contract remains on foot it would, in the circumstances of the case, be unconscionable for the plaintiffs to seek the specific performance of the contract, and such a decree should be refused on that equitable ground. By way of counterclaim, the defendants seek the appropriate declarations and an order that a caveat lodged by the plaintiffs over the land should be removed to leave the defendants free to deal with it as they will.
It will be necessary later to examine the pleadings in more detail against the background of some basic facts. The pleadings appear, as is often the case, to have been amended on a number of occasions. Particularly is that so in respect of the statement of claim.
The defendants own a piece of land, Lot 420, situated at 31 Office Rd, Kwinana. It is industrial land, something over 2 hectares in area. They are the registered proprietors as tenants in common. The plaintiffs own, as tenants in common, a piece of land known as 16 Ocean St, Kwinana, which they purchased at about the time of the events material to this case.
Lot 420 actually runs between Office Rd and Ocean St. There are factory and other commercial premises on the lot, two of which front onto Ocean St, and one of which fronts onto Office Rd. In September 2002, the factory premises fronting onto Office Rd were leased by a company called Quadron Manufacturing Pty Ltd (Quadron), controlled by a Mr Greaney, a director of the first plaintiff (Rehins) and Dr Franklin, a director of the second plaintiff (Goldbeach).
It seems that Mr Greaney and Dr Franklin were, from the outset, interested in acquiring that part of Lot 420 which was occupied by Quadron. They had executed a Heads of Agreement by Quadron with the defendants, providing not only for the lease of a portion of the land, but for the first right of refusal to purchase the land. This portion of Lot 420 has a common boundary (in part) with 16 Ocean St.
That portion of Lot 420 which fronted Ocean St, upon which there were two sets of factory and other commercial premises, was occupied in the following manner. The factory premises immediately adjacent to 16 Ocean St were leased, with surrounding land, by a company called Andreco Hurll Pty Ltd (Andreco), and the other part of this portion of Lot 420, upon which were erected an office building and associated workshop, with open ground as a storage area and for parking, was leased by a company called CMS Constructions Pty Ltd (CMS). This company was controlled and substantially owned by a Mr Elpitelli.
This portion of Lot 420 fronting onto Ocean St, about half the total area of the lot, which the plaintiffs were not seeking to purchase, was informally divided into two parts by a fence separating the portion leased by Andreco from that leased by CMS.
Negotiations to acquire the land were certainly going on from about the end of 2003. I may need to return to those negotiations in more detail later, but for the moment it is sufficient to note that they were initiated by Dr Franklin and Mr Greaney, acting for Goldbeach and Rehins, respectively. The person involved for the defendants was principally Mr Elpitelli, a director of the first defendant (Debin). The co‑owner, the second defendant (Fiore) was, to the extent that it was involved, represented by Mr Fiore.

The terms of the contract

At the conclusion of the negotiations, on 18 November 2005, the parties entered into a contract for the sale of land by offer and acceptance. In the form in which they executed it, it was drawn up by the plaintiffs' solicitor, Mr Linfoot. That was substantially to clean up earlier documents which had been used as drafts and upon which changes had been made, to provide for the annexure of special conditions and to incorporate the 2002 Joint Form of General Conditions for the Sale of Land, drawn up by the Real Estate Institute of WA.
As executed, the document provided for the sale of land by Debin and Fiore to Rehins and Goldbeach as tenants in common in equal shares. The land was described as, 'a new lot of about 10,000 m² (see Special Conditions for particulars) caused by subdividing Lot 420'. The land being purchased was further identified, by special condition 5, by reference to an annexed survey plan setting out the indicative boundaries of the new lot being purchased, with a frontage to Office Rd.
For the moment it is sufficient to note that the plan showed that the internal boundary which would divide Lot 420 into roughly two equal portions of about a hectare each, was to be moved from the line originally proposed, in a southerly direction, away from Ocean St and towards Office Rd. The effect of that was to reduce the area of land which was to be acquired by the plaintiffs.
The original proposal had been that the defendants would sell to the plaintiffs, or originally Quadron, a subdivisional lot of just under 12,000 m². When agreement was ultimately reached, on 18 November 2005, it was for the sale of a new subdivision lot of about 10,000 m². The change in the boundary was of no particular significance on the ground. It involved moving the boundary south by about 14 m, so that the portion of Lot 420 to be retained by the defendants - that portion which fronted onto Ocean St, was rather larger, adding a piece of land upon which, it appears, equipment, building materials and other industrial items were stored, particularly by CMS.
The purchase price was agreed in the sum of $1.25M, with the addition of the words '+ GST IF APPLICABLE'. The evidence is that Mr Elpitelli, who handled the negotiations for the vendors, the defendants, was concerned about this, although the view of Dr Franklin and Mr Greaney, who were involved in the negotiations for the purchasers, the plaintiffs, was that goods and services tax would not be applicable to this transaction.
A deposit of $20,000 was provided for. It was to be paid upon the execution of the agreement, and was to be, 'non‑refundable'. The evidence is, and I find that it was agreed, that the $20,000 was not to be refunded in any circumstance, whether the contract failed for any reason which was the fault of the vendors, or otherwise.
I reach that conclusion because initially it had been proposed that a deposit of $50,000 would be paid. In the end that was reduced to the sum of $20,000, a sum sufficient to cover the expenses which would be incurred in respect of the provision of electric power as part of the process of subdivision. The sum of $20,000 was established to be sufficient to meet the costs which would be charged by Western Power.
But Mr Elpitelli made the point that those costs were to be incurred in any event by the vendors, the registered proprietors, whether or not the sale of the subdivisional lot fronting Office Rd proceeded. The evidence is that Mr Greaney established what was required of the vendors in this regard, by making his own inquiries of Western Power. Rehins and Goldbeach, having satisfied themselves of that obligation, agreed to the defendants' terms in that respect.
I should add that Mr Fiore was particularly concerned that the deposit should be non‑refundable, because he thought that, having regard to past negotiations, it might be the case that the plaintiffs would prove to be unable to raise finance and proceed with the purchase. He thought that requiring a non‑refundable deposit would give the defendants some assurance that the plaintiffs would indeed proceed. Originally it was proposed that the sum of $50,000 would be the deposit, but when it was required to be 'non‑refundable', the defendants agreed to reduce this amount to $20,000.
The deposit having been paid, as indeed it was, the money being held in the trust account of the vendors' settlement agents, the balance of the $1.25M was to be paid on the settlement date. That date was expressed in the contract to be:
15 January 2006 or within 15 days of the issue of a new title, whichever is the later, but no later than 21 February 2006.
For the plaintiffs, the contract was subject to finance being obtained by 15 December 2005. It was proposed to obtain a bank loan for the amount of $1.15M.
The contract was not completed by the final settlement date of 21 February 2006. It was the failure of the defendants, the vendors, to complete the subdivision process and obtain good title to the subdivision lot which was the subject of the contract, which brought that about.
I have mentioned that the General Conditions for the Sale of Land were incorporated into the contract. Clause 4 relates to delay in settlement and contains provisions applicable when the delay is the fault of the buyer and the seller, respectively. If the seller is in default, compensation may be payable by deduction from the purchase price, provided the buyer is ready, willing and able to complete at settlement, and notifies the seller accordingly: cl 4.2 and 4.5.
Special Condition 5 made it clear that the land being purchased was the new lot with the frontage to Office Rd, which would be created by the subdivision of Lot 420. The General Conditions deal with that in cl 13, which applies when the land to be sold is not a lot as at the date of the contract. Clause 13.4 and 13.5 are particularly relevant to this case. They are in the following terms:
13.4Application and Subdivision Plan
(a)The Seller must, if the Seller has not already done so, lodge an application with the Planning Commission for the subdivision of the Subdivision Lot, from the Original Land, within 15 Business Days after the Contract Date.
(b)Following the lodgement of the application in accordance with subclause (a), the Seller must use best endeavours to:
(1)obtain the approval of the Planning Commission, to the subdivision of the Subdivision Lot from the Original Land; and
(2)subject to the approval of the Planning Commission to the subdivision, arrange for preparation of a Subdivision Plan including the Subdivision Lot, and for the Subdivision Plan to be:
(A)lodged at DOLA; and
(B)endorsed as in Order for Dealing,
as soon as practicable.
13.5Unacceptable condition imposed by Planning Commission
If the Planning Commission grants approval for the subdivision of the Lot from the Original Land subject to a condition with which either the Seller or the Buyer, acting reasonably:
(a)is unwilling to comply with; or
(b)considers it to be prejudicial,
the party who:
(c)would be bound to comply with the condition, or
(d)is prejudiced by the condition,
may within 10 Business Days of being notified of the condition elect by Notice to the other Party to withdraw from and terminate the Contract.

The plaintiffs' case

Central to the plaintiffs' formulation of their case are pars 10, 10A and 10B of the statement of claim. As I understand the pleading, the breach of contract relied upon is the alleged failure of the defendants to use 'best endeavours' to obtain the approval of the WA Planning Commission (WAPC) to the subdivision of Lot 240 and to provide a subdivision plan to be lodged with the Department of Land Administration (DOLA) to be endorsed as in order for dealing, to enable the settlement of the contract to occur.
It is alleged that the defendants failed to lodge the application for approval to the subdivision with the WAPC within 15 days, as required by cl 13.4(a), they failed to ask the WAPC to expedite the application, and they failed to satisfy the conditions imposed by the WAPC for the approval of the subdivision in that:
(i)they failed to obtain a certification from the Water Corporation in relation to the connection of a water supply service;
(ii)they failed to make arrangements with Western Power Corporation to satisfy the conditions for the installation of power;
(iii)they failed to ensure that trafficked areas and non‑trafficked lay‑down or storage areas were sealed and drained so as to comply with the requirements of the Town of Kwinana;
(iv)the defendants otherwise failed to meet the requirements of the WAPC so that unconditional approval would be granted; and
(v)they failed, upon obtaining the approval of the WAPC, to lodge the approved subdivision plan at DOLA to be endorsed as in order for dealing.
By pars 10A and 10B of the statement of claim, the plaintiffs assert, in the alternative, that if it is not possible to rely upon cl 13.4 and the obligation for the defendants to use 'best endeavours' to obtain approval for the subdivision and provide a subdivision plan in order for dealing to enable the contract to be performed, then it was an implied term of the contract that the defendants should behave in that way. It is not asserted that the implied term would have a content different from the contractual term, cl 13.4, and, in my view, the question of an implied term need not be considered.
I should briefly explain my view. If the content of such an implied term, the burden of which in this case would be borne by the defendants, is the same as the express term contained in cl 13.4 of the General Conditions, then it is unnecessary to consider the question of implication. If the content of such a term that would be implied at law, in the absence of an express term, is different from the express term contained in cl 13.4, then no such term will be implied: Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 83 ALJR 903, 936 [166] ‑ [168]. The reason for that, of course, is that not only may it not be said that the implication of such a term is necessary to give business efficacy to the contract as made, but, to the extent that it differs from the contractual provision, it will be at odds with or inconsistent with that provision.
In any event, in my opinion, the debate evaporates completely when one considers that the term to be implied would be that the contracting party in question (the defendants) must cooperate in doing all that can reasonably be done to secure to the other party the benefit of the contract: see Butt v M'Donald (1896) 7 QLJ 68, 70 ‑ 71, as adopted by the High Court in Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 497, 607. That is what cl 13.4 provides for.
The statement of claim notes that, by letter dated 28 February 2006, the defendants, acting by their agent, Sheridan's Settlement Agency, purported to terminate the contract (and, incidentally, to return the $20,000 deposit). The pleading asserts that it was not open to the defendants to take that course because the failure to obtain title by 21 February 2006, the final settlement date, did not entitle the defendants to terminate the contract, upon the proper construction of the contract, referring to cl 4, to which I have also referred above.
In any event, the plaintiffs assert that the defendants were in default under cl 13.4, and were therefore precluded from issuing a valid notice terminating the contract. Their letter of 28 February 2006 is said, therefore, to constitute a repudiation of the contract, which was not accepted by the plaintiffs, who required the contract to be performed and returned the $20,000.
The plaintiffs plead that, if it was the case that the conditions required to be satisfied before approval of the subdivision could be finally provided were unreasonable, then, because the defendants did not act in accordance with cl 13.4 of the contract, they were not entitled to elect to terminate the contract and continued to be bound by its terms.

The plaintiffs assert that they are ready, willing and able to perform their obligations under the contract, and they therefore seek an order for its specific performance. Alternatively, they claim damages for its breach, quantified as the assessed value of the property as at the date of trial, less the purchase price of $1.25M, payable under the contract (remembering that the non‑refundable deposit of $20,000 has already been paid).

The defendants' case

The defendants admit that they did not lodge an application for subdivision with the WAPC within 15 business days after the contract was made on 18 November 2005. They agree that such an application was required because of the agreed change in the boundary between the north and south sections of Lot 420, which was to form the northern boundary of the subdivision lot, reducing the area of that lot to just over 1 hectare, and leaving the same area in the portion of Lot 420 fronting Ocean Street which was to be retained by the defendants. The defendants agree that the application was not lodged with the WAPC until 19 January 2006.
The work to enable the defendants to perform the contract was being done by Mr Elpitelli. His evidence is that he would consult with Mr Fiore when a decision was to be made beyond the framework of decisions already taken by the defendants. Otherwise it was accepted that Mr Elpitelli should have the carriage of the process of performance of the contract. Mr Fiore's evidence was to the same effect.
For some years prior to the execution of this contract on 18 November 2005, the parties had been involved in negotiations, off and on, in respect of the subdivision of lot 420 and the purchase, by the plaintiffs from the defendants, of portion of that land. Conditional approval of the subdivision had been provided by the WAPC. I may need to return, in due course, to some aspects of this process of negotiation which may have a bearing upon the operation of cls 13.4 and 13.5 of the General Conditions incorporated in the contract made on 18 November 2005.
The point of mentioning it now, however, is that a Mr Peter Neale, of P J Neale Surveys Pty Ltd (Neale), had previously been instructed by the defendants to produce the necessary plan and lodge it for the approval of the WAPC.
The contract having been executed on 18 November, the period of 15 business days after the contract date provided by cl 13.4(a), would have expired on close of business three weeks later, on Friday 9 December 2005. Appreciating that the matter was urgent, Mr Elpitelli was on the job on Monday 21 November 2005. He telephoned Mr Neale to discuss what was required, and spoke to a Mr Smith, the manager of planning and building services for the Town of Kwinana. On 22 November he sent a letter by facsimile to Neale, to which he attached a copy of Neale's original plan showing the changes required, which document had been annexed to the contract made on 18 November and was signed by the four men involved for the vendors and purchasers; Messrs Elpitelli and Fiore, Dr Franklin and Mr Greaney.
After that, Mr Elpitelli was away in the country for a short period. On his return he attempted, unsuccessfully, to contact Neale by telephone on 3 January and 10 January 2006. On the latter date he re‑sent the facsimile communication, adding a handwritten note, 'Peter, very important to get this done.' Unbeknown to Mr Elpitelli, Mr Neale was away from his office over the summer holidays. He seems to have attended to the matter promptly upon his return, and the revised plan of subdivision was lodged on 19 January with the WAPC, but it appears that Mr Elpitelli was still having difficulty progressing the matter in dealings with Western Power.
As I understand it, on 22 February 2006, having noted that the final settlement date of 21 February 2006 had gone by without settlement being achieved, he telephoned Sheridan's Settlement Agency who were holding the plaintiffs' deposit in trust, and instructed them to return the deposit. They asked for confirmation of those instructions. On 28 February 2006, Mr Elpitelli sent an email (exhibit 56A). It said:
We confirm that to date we have not been able to complete the subdivision for the above lot [portion of Lot 420 Office Road] and obtain a title. The application is with the WAPC. We are not able to advise as to when it will be available. We authorise you to refund the Buyer their deposit of $20,000.00 as the O & A contract stipulated no later than the 21st February 2006.
When Sheridan's Settlement Agency sent their cheque for $20,000 to the plaintiffs on the same day, it was under cover of a letter (said not to have been received by the plaintiffs until 8 March 2006) in the following terms:
We refer to the proposed settlement of the abovementioned property and wish to advise that the Seller has not been able to complete the subdivision for the above lot and obtain a Title by the due date of 21st February 2006. We therefore enclose our Trust account cheque for $20,000.00 for the deposit which was being held in our Trust account. Should you have any queries please do not hesitate to contact the writer (exhibit 56).
I have mentioned the way in which the matter is pleaded by the plaintiffs. The defendants respond that they were entitled to terminate the contract at this stage. They plead that the breach of cl 13.4(a) was not a factor that materially contributed to the failure to achieve the settlement date, 21 February 2005, because had the defendants lodged the application for subdivision with the WAPC, as required by the contract, by 9 December 2005, a new title for the subdivision lot would not have issued, and completion by 21 February 2006 would not have been possible in any event.
The facts are clear enough. I have mentioned Mr Elpitelli's efforts to engage Neale to produce the necessary plan so that an application could be lodged with the WAPC. I have noted that that did not occur until 19 January 2006. The WAPC forwarded the revised plan of subdivision to the Town of Kwinana on the following day, 20 January 2006. They requested to know the Town's views by 10 February 2006. That did not occur. 21 February 2006 came and went. The settlement agency wrote to the plaintiffs, returning the deposit, in accordance with Mr Elpitelli's instructions, on 28 February 2006.
That letter was received by the plaintiffs on 8 March 2006. On 15 March 2006, the plaintiffs' solicitors rejected the purported termination, returned the deposit and insisted upon the performance of the contract. On the same day, Mr Elpitelli and Mr Fiore discussed the matter and they agreed to continue with the performance of the contract, to negotiate with the Town of Kwinana to secure clearance of the conditions required by the Town, and to seek to have the proposed subdivision approved. I shall return to the significance of all that in due course. But, as I have said, the defendants do plead that they validly terminated the contract on about 8 March 2006, when the letter from the settlement agent was received.
In the alternative, the defendants plead, in par 5 of the defence, that despite using their best endeavours to obtain the approval of the WAPC to the subdivision of Lot 420, they were unable to obtain unconditional approval, arrange for preparation of a subdivision plan and lodge the subdivision plan at DOLA, to be endorsed as in order for dealing, by reason of the cost of complying with the Town's requirements to seal Lot 420.
They say that they were therefore entitled to terminate the contract, as they did, although they admit, in par 12 of the defence, that they failed to give the notice of termination to the plaintiffs, pursuant to cl 13.5. They say they were not required to do so because they were entitled to terminate the contract, pursuant to cl 13.7 and under the general law.
Clause 13.7 is in the following terms:
13.7Termination of Contract
(a)if:
(1)any condition specified in this clause is not satisfied within the time specified for satisfaction of that condition; or
(2)a Party withdraws from, and terminates the Contract, following the imposition of a condition by the Planning Commission,
subclause (b) will apply.
(b)Where subclause (a) applies, the following apply.
(1)The Deposit and any other money paid by the Buyer under the Contract, must be promptly repaid to the Buyer.
(2)If the Deposit has been invested by the Deposit Holder in accordance with clause 1.9, the Buyer will be entitled to the interest on the Deposit.
(3)If any other money has been paid to the Deposit Holder by the Buyer, and invested by the Deposit Holder with a Deposit Financial institution, the Buyer will be entitled to the interest on that other money.
(4)Subject to subclause (1) to (3), no Party will have any claim or right of action against the other arising from the termination, except in respect to any matter which arose before the termination.
The defendants say they terminated the contract by the letter of 28 February 2006 or -
(1)by a letter dated 4 June 2008, a letter written by the solicitors for the defendants to the solicitors for the plaintiffs purporting to terminate the contract;
(2)by a letter dated 1 December 2008, a letter written by the solicitors for the defendants to the solicitors for the plaintiffs confirming the termination of the contract;
(3)by the filing and service of the defence and counterclaim on about 21 December 2007 or shortly thereafter.
Paragraph 16 of the defence is something of a rolled‑up plea. The contention that the contract was terminated by the written notice given by the defendants on 28 February 2006, which was received by the plaintiffs on 8 March 2006, is repeated. Then there is a reference to cl 13.3 of the General Conditions. It seems from the terms of the pleading that the reference should be to cl 13.2 and cl 13.3. They are in the following terms:
13.2Contract conditional
The Contract is conditional on the following.
(a)An application for the subdivision of the Lot from the Original Land being lodged with the Planning Commission within 3 months after the Contract Date.
(b)The Planning Commission granting approval for the subdivision of the Lot from the Original Land within 6 months after the Contract Date, or any longer period as specified in:
(1)the Contract; or
(2)a subsequent agreement in writing between the Parties.
13.3Further condition for subdivision
(a)The Contract is also conditional on the following.
(1)The Planning Commission endorsing approval on a Subdivision Plan within 6 months after approval for subdivision by the Planning Commission.
(2)The Subdivision Plan being In Order for Dealing within 3 months after the date of endorsement of approval by the Planning Commission in accordance with subclause (1).
(b)Each period specified in subclause (a) will, if applicable, be extended as specified in:
(1)the Contract; or
(2)a subsequent agreement in writing between the Parties.
The defendants plead that the contract was terminated because, despite the best endeavours of the defendants, the WAPC did not grant unconditional approval for the subdivision and therefore that approval was not endorsed on the subdivision plan and the subdivision plan was not therefore in order for dealing.
In the alternative, it is pleaded that the contract was frustrated because of the cost of meeting the requirement of the Town of Kwinana for the sealing of trafficked areas and non‑traffickable, or storage, areas of the entire lot, causing the subdivisional costs, which might otherwise have been in the order of $50,000, to be inflated by over $300,000, to a total in excess of $350,000.
Hence the counterclaim for declarations that the contract was validly terminated by the notices given on 8 March 2006, 4 June 2008, 1 December 2008 or by the defence; a declaration that the contract has been frustrated, and a further alternative declaration that it is unconscionable for the plaintiffs to seek specific performance of the contract.
While some of the matters raised emerge from the pleading of the defence and counterclaim almost by the way, in the end, I think the issues are clear enough and they were fully addressed by the plaintiffs' pleaded reply and defence to the counterclaim, despite the fact that the statement of claim, the defence and the reply were all being amended as late as 10 and 11 August 2010, five days before the trial commenced.

The plaintiffs' reply: in particular the plea of estoppel

The document commences by raising a new, but related, response to the defence, that the defendants are estopped from purporting to terminate the contract by the notice dated 28 February 2006 received by the plaintiffs on 8 March 2006. They plead that throughout the long series of negotiations between the parties for the purchase by the plaintiffs of a portion, but not exactly the same portion, of Lot 420, Mr Elpitelli, on behalf of the defendants, expressed confidence that a subdivision of Lot 420 could be effected and would be approved.
The plaintiffs' evidence was that Mr Elpitelli told them that he was consulting with the Town of Kwinana as to their requirements, that he had engaged Neale, that they were proceeding with the subdivision, that the conditional approval of the WAPC could be satisfied, and that he was confident that outstanding issues with Western Power in respect of the provision of electrical services to the subdivision could be resolved. Mr Elpitelli told them that he thought the timetable was tight, but could be achieved because the defendants had effectively complied with the conditions and were only changing a boundary.
The plaintiffs say that it was in reliance upon those statements or representations that the plaintiffs entered into the contract on 18 November 2005 for the purchase of the land, in its final form, including, I presume, the specification of the settlement date as:
15 January 2006 or within 15 days of the issue of a new title, whichever is the later, but no later than 21 February 2006.
In support of that pleading, counsel for the plaintiffs referred to that form of equitable estoppel classically described by the High Court in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387. Where an equitable estoppel is relied upon as a cause of action, reference is frequently made to the judgment of Brennan J at 428 ‑ 429:
In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed or expected that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff's reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.
Of course, here the plaintiffs assert that the defendants are estopped from denying that the term of the contract which provided for the settlement date was legally effectual, and from denying that it was achievable, a proposition advanced by the defendants to support the contention that the failure to achieve the settlement date was not a default on their part, so that they would be entitled, as they assert they did, to terminate the contract by the letter dated 28 February 2006 received by the plaintiffs on 8 March 2006. As I have said, I will deal later with what I understand to be the legal effect of that document.
However, turning to the alleged estoppel, I must say that I do not understand the plea or the need for it. By an ordinary process of negotiation, which included the representations of Mr Elpitelli for the defendants, and the statements made by Dr Franklin and Mr Greaney for the plaintiffs, the contract was made on 18 November 2005 in a form which included the term as to the settlement date, worded as I have set it out above.
That was, in fact, the particular legal relationship into which the parties entered. It is not the case that what eventuated was of a different legal character from the contract which was made. The plaintiffs have suffered detriment as a result of the breach of that contract, so they allege, but they have not suffered detriment as a result of being denied the benefit of the contract into which they wrongly thought they were entering. In my opinion, this plea need not be further mentioned.
Of more moment is the pleading that the defendants did not truly purport to terminate the contract by the letter of 28 February 2006, but affirmed the contract by banking the $20,000 deposit cheque which was returned to them on 15 March 2006, by proceeding with the application for subdivision and by the defendants, through Mr Elpitelli and their solicitors, regularly keeping the plaintiffs informed of progress with the subdivision application from March 2006 through to October of that year. The plaintiffs plead that there was no later capacity to terminate the contract.
The notion that the cost of the works required to be performed by the Town of Kwinana caused the contract for the sale of the subdivision lot to be terminated by frustration is contested by the plaintiffs. Paragraph 10 of the reply expands upon their contention at great length, but the essential point is that the need to seal parts of Lot 420 applied to areas of the retained lot and was a requirement of the Town of Kwinana Planning Scheme No 2, which the defendants could be required to undertake, whether or not they subdivided Lot 420.
Any requirement to seal the subdivision lot is pleaded not to have arisen until 2007, well after the contract should have been performed. In any event, it is pleaded that the matters relied upon in this regard do not constitute acts of frustration of the contract because its purpose and the capacity to perform it remain intact. For similar reasons, the plaintiffs plead, it could not now be unconscionable to require the defendants to perform the contract.
In truth, the plaintiffs say, in par 13 of the reply, the motive of the defendants in not proceeding with the contract and in seeking to terminate it from the beginning of January 2007 was the perception that the value of the proposed subdivision lot had increased above the contract price. They allege that the defendants sought to avoid the contract on the ground that they had been tricked into entering into it because they were not aware that the plaintiffs were the purchasers, an allegation not pursued by the defendants since that time.
As to the effluxion of time defeating the capacity to perform the contract, the plaintiffs plead, by pars 14 and 15 of the reply, that the defendants may not rely, or are estopped from relying, upon the termination of the contract in that way because that situation was brought about by their breach, particularly by failing to use their best endeavours to complete the subdivision and proceed to final settlement.

By the end of the trial, the issues had narrowed somewhat because the defendants abandoned reliance upon the proposition that the performance of the contract was frustrated and that it would be unconscionable now to require it to be performed (ts 603 ‑ 605).

Principles of construction

The resolution of the issues raised by the pleadings in this case is substantially dependent upon the construction of the contractual instrument and a proper understanding of the effect of its terms. The agreement must be construed as a whole, having regard to the context which the entire agreement provides to particular terms. There is no suggestion that any relevant provision had a meaning of a technical kind, and the words used in the agreement are to be given their ordinary and natural meaning.
In my respectful opinion, no more need be said about that process of construction than was said by Gibbs J in a passage, oft quoted, of his Honour's judgment in Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99, 109:
It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course, the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious, one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust.
In addition, in a case such as this it is proper to have regard to the commercial context in which the agreement is made. The matrix of facts and circumstances known to the parties must be considered. I will refer to such matters from time to time.
What is sought is the meaning and effect of the contract which expresses the intention, to be determined objectively, to be attributed to the parties as to the terms of their agreement. It may or may not be the same as a subjective understanding that the parties, or either of them, had about the effect of what was achieved by the agreement they made.
There seems to me in this case to be an indication, particularly by Mr Elpitelli on behalf of the defendants, that he may have had a confused idea about the effect of the agreement into which the plaintiffs and defendants had entered on 18 November 2005, with respect to whether and if so when, the deposit paid by the plaintiffs might be refundable.
The relevant principles of construction are contained in a passage from the judgment of the High Court in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, 179 [40]:
This Court has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.
In expressing itself in that way, the court reaffirmed what it had said in its earlier decision, Pacific Carriers Pty Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451.

The statutory background

I have mentioned that the contract for the sale of the land incorporated the 2002 General Conditions. The conditions of the contract, cl 3, provided for their application, 'so far as [the 2002 General Conditions] are not varied by or inconsistent with the express terms of this Contract'. I have mentioned my conclusion about the non‑refundable $20,000 deposit. In view of that term, I conclude that cl 13.7 of the General Conditions, to which I have referred at [46], could not operate entirely in its terms in respect of the process of termination of the contract in a case where there has been breach of a condition contained in cl 13.
Clause 13.7(b)(1) provides that a primary part of the process of termination is the prompt repayment of the deposit. That would not be required in the case of this contract, although it seems to be abundantly clear that Mr Elpitelli, when he sent the email, exhibit 56A, on 28 February 2006, to the settlement agent, may have thought that was required upon the failure to achieve settlement by 21 February 2006.
Apart from that, however, it is clear that the contract is intended to operate within the statutory framework provided by the applicable planning legislation. Clause 26 is the definition clause. It defines 'Town Planning Act' to mean the Town Planning and Development Act 1928 (WA). The same clause defines the word 'Lot' by giving it the same meaning as the definition of 'lot' in the Town Planning Act.
The Act identified is certainly that which was in operation when this contract was executed on 18 November 2005. The current statute, the Planning and Development Act 2005 (WA), was, in material portions, proclaimed to come into operation on 9 April 2006 (Government Gazette, 21 March 2006, p 1077). The interpretation section of the Town Planning Act was s 2(1) in which there is a definition of 'lot' to mean a portion of land defined and registered within the provisions of various enactments.
By s 20(1)(a) of the Town Planning Act, land may only be sold as a lot unless the approval of the WAPC to the subdivision is obtained. The WAPC:
may give its approval under this paragraph subject to conditions which shall be carried out before the approval becomes effective.
It is not necessary, for the purpose of this case, to conclusively determine what is meant by an approval of the WAPC granted under s 20, but the language of par (a) certainly suggests that the legislation draws a distinction between the grant of approval of a subdivision, even though conditions are imposed, and the approval of the dealing becoming effective once the conditions are satisfied, or, as the jargon of this area has it, once they are 'cleared'.
Under s 20AA(1), the person to whom approval of a plan of subdivision has been given, the vendor, has 3 years from the date of that approval to submit to the WAPC a diagram or plan of survey of the subdivision so that it may be approved by the WAPC. Section 20AA(2) provides that the WAPC will do that if the diagram or plan of survey is in accordance with the plan originally approved under s 20(1)(a), and if that approval was conditional, the conditions have been complied with. The WAPC then endorses its approval on the diagram or plan, which becomes in order for dealing and may be lodged with DOLA to enable the subdivision lot to be transferred from the vendor to the purchaser as part of the process of settlement of the contract of sale.
If that is not done within 3 years of the date upon which the approval under s 20(1)(a) was given, then the approval of the plan of subdivision ceases to have effect: s 20AA(3). Wherever the statute talks about approval, it is noteworthy that it is the approval of the WAPC to which reference is made, and where that approval is conditioned, the conditions will be those imposed by the WAPC: Casella v Hewitt [2008] WASCA 13; (2008) 36 WAR 1.
In a case such as this, as often happens, the contract for the sale of the land was a contract for the sale of a defined portion of Lot 420 made in advance of the necessary subdivision being approved by the WAPC. By s 20B of the Town Planning Act, that is a lawful process if, as in this case, the contract was entered into subject to the approval of the WAPC to the subdivision, and if an application for that approval is made within 3 months after the date of the agreement, and the WAPC gives its approval within 6 months after the date of the agreement or within such further period as may be agreed.

The contract construed - the term as to time

I have mentioned that the contract provided for the payment of the $20,000 deposit and that the balance of the $1.25M purchase price was to be paid on the settlement date. The term 'settlement date' is defined in cl 26 of the General Conditions to mean the date when each party must complete settlement under cl 3.5 and any other relevant provision. By 'settlement' is meant the completion of the sale and purchase of the land.
Relevantly, for present purposes, cl 3.5(a) reinforces the proposition by providing that each party must complete settlement on the date for settlement specified in the contract. I have set out the way that is expressed in par (v) of the schedule to the contract. Specific provision was made for settlement to take place no later than 21 February 2006.
The parties at times referred to that as a condition, but in my view it is a term of the contract and an essential term at that. The failure to comply with that term is a breach of the contract, in this case conferring a right of termination on the plaintiffs.
It is the rules of equity which govern the question when a term is of the essence of a contract: Property Law Act 1969 (WA), s 21. But here it is expressly provided by cl 22 that, 'time is of the essence in relation to the provisions of the Contract'. That provision is subject to cl 23 which requires the party seeking to terminate the contract (not the party in default) to give a default notice to the defaulting party and to afford that party an opportunity to remedy the default within the time required, unless the defaulting party repudiates the contract: cl 23.3.
Equity will generally treat performance on time as essential where that has been expressly agreed: Ciavarella v Balmer (1983) 57 ALJR 632, 634, although as the judgment of the High Court there makes clear, in the end that will depend upon the proper interpretation of the contract.
It has been said that in commercial contracts, the performance on time of a significant obligation such as the final settlement of the process of sale, would be regarded as an essential term. But again, in a case such as this, it depends upon the construction of the contract and the conclusion that the contract would not have been made in the terms that it was without the specification of the final settlement date, making performance on time of the essence of the agreement: Douglas v Cicirello [2006] WASCA 226 per Steytler P (McLure JA agreeing) at [13] ‑ [15] and per Pullin JA at [41] ‑ [45]. See also Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at 555 per Mason J.
There was some debate between the parties about how, as a matter of fact, the date 21 February 2006 came to be specified in the final form of the contract which was executed on 18 November 2005. The evidence is confusing, but it reflects difficulties of recollection. There was a flurry of activity leading up to the execution of the contract. Previous drafts had been exchanged, and to some extent signed.
The final form of the contract was produced by Mr Linfoot. He was the plaintiffs' solicitor. I think that the evidence establishes that he advised that there should be a final settlement date. Mr Greaney and Dr Franklin for the plaintiffs, agreed. They were not particularly concerned as to what the date should be, but they agreed that an end date to the performance of the contract was required so that the defendants could be held to the contract if they did not perform.
Mr Elpitelli, I think, secured Mr Fiore's agreement and he executed the contract conscious of the terms in relation to the settlement date. I think that Mr Elpitelli accepted that that date was achievable because he thought that in the light of previous negotiations and an earlier approval by the WAPC (which I shall discuss shortly) there was little more that needed to be done. Despite the fact that Christmas would intervene, Mr Elpitelli thought that the date 21 February 2006 was achievable.
As I say, in the end it seems to me that this is an example of the fact that it is irrelevant what the individual parties or those speaking for them, thought was being achieved. The relevant factual matrix is that the settlement date was discussed and it was a date inserted deliberately to mark the end point of the performance of the contract. That confirms my conclusion that the final settlement date was an essential term. In the context of this litigation, it gave the plaintiffs the right to terminate the contract when the defendants failed to achieve settlement and it matters not whether to that point in time the defendants had done all that they might reasonably be expected to do to achieve settlement.
However, contrary to that view, the defendants do rely on the proposition that they were entitled to terminate the contract by reason of the failure to achieve settlement and they did so by the letter of 28 February 2006, received by the plaintiffs on 8 March 2006 (exhibit 56). That contention cannot succeed.
The defendants' argument depends upon the proposition that although they may have been the party who failed to achieve the settlement date, they were not in default, as any failure on their part to act so as to make good title and achieve settlement by 21 February 2006 was not causally relevant, because if they had acted with all the expedition which was practicable, between 18 November 2005 and 21 February 2006, and made their application to the WAPC for subdivisional approval by or before 9 December 2005, they would not, given the time of the year and the intervention of Christmas, the New Year and the holiday season, have been able to cause the WAPC to give their approval, clear any conditions imposed so that unconditional approval could be obtained from the WAPC, and so that the plan could be endorsed by DOLA as being in order for dealing within the time available.
The defendants argue that although it may be said that they failed to be ready by the settlement date, that simply led to the non‑fulfilment of the condition as to settlement. As I understand their argument, they say that if they could not, in any event, have been ready, no matter how hard they tried, their failure may not be said to deprive them of the capacity to terminate the contract upon the non‑fulfilment of the condition, citing Gange v Sullivan (1966) 116 CLR 418 and a passage from the judgment of Taylor, Menzies and Owen JJ at 441 ‑ 442.
I accept that the proposition is correct in relation to a contingent condition which is not promissory in character, but that is not the type of provision with which we are dealing here. I have held the specification of the settlement date to be an essential term of the contract. It required timely action of a different character on the part of both the plaintiffs and the defendants to achieve its fulfilment. The plaintiffs had to be ready, willing and able to pay the purchase price; the defendants had to be able to achieve the creation of the subdivision lot which was to be transferred to the plaintiffs on settlement.
Although on the surface, what brought the contract to grief in Gange might appear to be similar to the settlement date, in fact that is not so. In Gange, the sale was conditioned upon the local council giving approval to a proposed redevelopment of which the sale of the land in question was a part. That approval had to be provided by a specified date. The local council failed to provide that approval. All that was done was that the council's town planner advised the purchaser of approval of the proposal in principle, without approving some specific features of the way the proposal had been put to council.
It was held that, being a condition, failure to meet it did not necessarily constitute a breach of the contract by one party, for which the other could terminate the agreement. It required an election to terminate the contract, which was voidable. That election could be made by either party, unless the party making the election was at fault, in which case the right to terminate the contract would be lost, because to allow it would be to allow that party to benefit from conduct which caused or contributed to the non‑fulfilment of the condition, or from inactivity having that effect.
In my view, the term as to the settlement date is, in the way that I have described it above, an essential term of a different character. Failure by a party to be ready, upon the settlement date, to perform the contract was a breach entitling the other, in this case the plaintiffs, to terminate the contract. But the defendants, being in default, had no such right.
If I am wrong about that, then it is necessary that I look at the evidence upon which the parties respectively rely in relation to the question whether the defendants could have been ready to perform their part of the contract at the settlement date, even had they moved with all reasonably possible speed.
In my view, it is clear that the defendants bear an evidentiary onus in relation to this matter. They relied upon the evidence of a Mr Millar, a land development consultant and licensed surveyor, who was familiar with the processes of dealing with the WAPC in relation to subdivision of land and the issue of a new title. For their part, the plaintiffs relied upon the evidence of a Mr Fairfoul, a town planner, also familiar with the process of dealing with the WAPC in relation to subdivision and the issue of a new title. Their evidence was basically evidence of fact, but each man was permitted to offer an opinion as to whether the defendants could achieve readiness to perform the contract as at the settlement date.
In brief summary, Mr Millar noted that, at the relevant time, the WAPC had somewhat altered their processes. In a case such as this, a new Form 2A process was available which extended, by six weeks, the period ordinarily required for the grant of approval, to allow referral to and responses by relevant authorities such as, in this case, the Water Authority, Western Power and the Town of Kwinana. The time available from 18 November 2005 to 21 February 2006 was just under 14 weeks.
In Mr Millar's view, allowing the six‑week period for clearance of conditions, and having regard to the various steps which had to be taken, including obtaining new certificates of title, the whole process would take a minimum of 15 weeks from 9 December 2005, by which date the fresh application for subdivisional approval was supposed to have been made. That would mean readiness to perform the contract could not have been achieved by the defendants earlier that 25 March 2006, a total period of 18 weeks from the date when the contract was made, even if the various agencies involved were pressed to deal with the matter on an urgent basis.
It was put to Mr Millar in cross‑examination that the new application, which involved merely an internal boundary change in Lot 420 between what would be the retained lot and the subdivision lot, was a minor amendment to the earlier application which would allow a more expedited process than the Form 2A application procedure. He thought that it was not an amendment of such a minor character as to enable the employment of a more truncated process of application because of the change to the area of land to be included in each of the two new lots.

But he did concede that if it was possible to use the abbreviated process of application for approval described by Mr Fairfoul, there would be a saving of time and he would need to recalculate his time frame for the processes involved and come to a new estimate of the total time that would be required (ts 486 ‑ 487).
The evidence of the planner, Mr Fairfoul, was that because of the minor nature of the change to the proposed subdivision, it was possible for the defendants to lodge the modified deposited plan with the WAPC during the process of clearance of the conditions. The WAPC could have endorsed the deposited plan with that minor modification. The Form 2A application process was not required.
But even if that application process was employed, Mr Fairfoul thought that the process of having the WAPC deal with the matter could have been completed well within the standard 42‑day period because the conditions of approval were standard generic conditions and, in the case of the Town of Kwinana, were standard requirements under their Town Planning Scheme No 2. All of that could have been dealt with comfortably well short of the 42‑day period, given proper communication by the defendants of the need for prompt action to the various agencies involved. To enable settlement, it was necessary that the subdivision plan was in order for dealing. It was not essential that the new certificate of title be immediately available at that time (but note that the term as to the settlement date assumes it would be available).
Mr Fairfoul expressed complete confidence that settlement could have been achieved by 21 February 2006 if the amended deposited plan process had been used to make the application for approval of the subdivision. He expressed substantial confidence that it was achievable, even upon the basis of a fresh Form 2A application, given prompt and effective action by the defendants and their surveyor, particularly in relation to communicating their need for prompt action to the various agencies involved.
I prefer the evidence of Mr Fairfoul. He spoke of the utilisation of a truncated process which would clearly condense the time‑frame involved to achieve readiness as at the date of settlement. Mr Millar had not proposed any departure from the process of amended application. When Mr Fairfoul's proposal was put to him, he thought it might not be possible to employ it because the change in the area of land involved may have been greater than 10% of the total area of the subdivision lot. He did not, however, offer any convincing views as to why the WAPC would not have regarded the change as of a minor character, both from the point of view of planning considerations and having regard to the lack of impact upon the conditions of approval previously determined in respect of the original application.
The defendants have, in my view, failed to establish that it was likely that, even had they performed their obligations diligently, they could not have achieved readiness for settlement by 21 February 2006. They are not to be relieved of the consequences of their default in that regard upon the basis that it was not causally relevant to the achievement of readiness by the settlement date. The plaintiffs have proved the fact of causation.
Further, in my view, as the plaintiffs assert, the defendants did not clearly seek, by the return of the deposit, to terminate the agreement. But if they did, they were not entitled to do so. That was the right of the plaintiffs, a right which they did not seek to exercise; but on the contrary, they affirmed the contract and insisted that it be performed.
At [39] and [40], I have set out the terms of exhibit 56A and exhibit 56. I accept that in relation to that correspondence, Mr Elpitelli was acting for the defendants. The documents speak of the defendants' incapacity to achieve the settlement date. They say that they are unable to advise when they may receive approval of the subdivision from the WAPC. The return of the deposit is instructed, but there is nothing to indicate that the defendants regarded the contract as being at an end.
Indeed, to the contrary, it seems to me that the defendants were simply dealing with what they conceived to be an obligation to return the deposit and that was all that Sheridan's Settlement Agency did on their behalf. They did not clearly seek to terminate the contract and, as I have said, they did not in fact have the right to do so.
The plaintiffs' response was prompt. They affirmed the contract and insisted upon performance. Exhibit 57 is the letter addressed to Sheridan's Settlement Agency by the plaintiffs' solicitors to that effect. The cheque was returned. The plaintiffs did not maintain the essential element of performance on time and needed to do a further act to again make time of the essence: Mehmet v Benson (1965) 113 CLR 295, 303.
That the plaintiffs had the right to affirm the contract is made clear, not only by the general law, but also by cl 24 of the General Conditions: cl 24.14 and cl 24.15. The plaintiffs did not pursue remedies under those provisions, but they are consistent with the plaintiffs' retention of their right to affirm the contract and insist upon its performance. This case is actually concerned with the provisions of cl 13 in relation to the process of subdivision.

The contract construed - the conditions concerning subdivision

I have set out the terms of cl 13.2. It effectively repeats the terms of s 20B of the Town Planning Act. I have mentioned that negotiations for purchase were going on since some time in 2003, but in respect of a larger subdivision lot. An application for approval of the subdivision was made in October 2004, and on 20 December 2004, by letter bearing that date, addressed to Neale, the WAPC notified its conditional approval of the plan of subdivision which had been received on 6 October 2004. The body of the letter, a standard form, is as follows:
The Commission has considered the application relating to the above described land and is prepared to approve a Diagram or Plan of Survey (Deposited Plan) in accordance with the plan submitted once the conditions set out below have been fulfilled. This decision is valid for three years from the date of this advice, which includes the lodgement of the Diagram or Plan of Survey (Deposited Plan) within this period.
In accordance with established procedures, all conditions must be complied with before submission of survey documents for endorsement. Surveyors should attach certificates clearing conditions to the survey documents when they are submitted.
The abbreviations in brackets identify the authority or agency responsible for advising the Commission on clearance of conditions. If there are no abbreviations, the Commission will clear the condition. Prior to the commencement on site of any works or the implementation of any condition in any other way the subdivider should liaise with the nominated authority on the requirements it considers necessary to satisfy the condition. Advice should be obtained from the relevant authorities that the conditions have been met and a copy of that advice should be submitted with the Plan or Diagram of Survey (Deposited Plan) (exhibit 17).
The letter went on to advise that an applicant could ask the WAPC to reconsider the conditions and the applicant was advised of the right of appeal provided by s 26 of the Town Planning Act.
The body of the letter reflects the operation of s 24 of the Town Planning Act which requires the WAPC to forward a copy of a plan the subject of an application to it, to any local government or government agency which it thinks may be affected by the application. That local government or government agency is to notify the WAPC of its requirements or objections. It is all part of the process of the imposition of conditions operating upon the approval.
In this case there were five conditions imposed and, in respect of two of them, further advice was given to the defendants. That part of the letter was as follows:
CONDITIONS
1.Certification from the Water Corporation that arrangements have been made with that body so that connection to a water supply service will be available to the lot/s proposed by this application. (WC)
2.Arrangements being made for the provision of underground electricity to the lots approved under this application to the satisfaction of the Western Australian Planning Commission. (Western Power)
3.The transfer free of cost of transformer and high voltage switchgear sites to the Western Power Corporation, with the locations of the sites being to the satisfaction of the Western Australian Planning Commission on the advice of the local government and Western Power Corporation. (Western Power) (Local Government)
4. All buildings and effluent disposal systems, having the necessary clearance from the new boundaries as required under the relevant legislation. (LG)
5.Development on the proposed lots to comply with Town of Kwinana Town Planning Scheme No.2. (LG)
ADVICE TO APPLICANT:
1.With regard to Condition 2, any existing overhead service must be converted to underground.
2.With regard to Condition 5, the Town of Kwinana requires each proposed lot to have:
a)suitable vehicular access; and.
b)appropriate landscaping.
Having regard to what follows, and the issues raised by the pleadings, I would draw particular attention to condition 5 and the second item of advice to the defendants concerning that condition, providing a general description of the requirements of the Town of Kwinana in respect of vehicular access and landscaping of both the retained lot and the subdivision lot.
The process of the defendants attempting to clear those conditions with the assistance of their surveyor seems to have occupied most of 2005. It seems to me that the principal difficulties were with Western Power and the costs associated with the provision of electricity to the two lots as required, and with the Town of Kwinana. Agreement was reached with the Water Corporation relatively early in 2005 and somewhat later with Western Power. In May 2005, Neale wrote to the various authorities requesting clearance of the condition or conditions pertaining to them.
The matter does not seem to have been much progressed until, on 7 September 2005, the Town of Kwinana wrote to Neale, copying the letter to Debin, advising that there were outstanding matters in relation to conditions 4 and 5 which prevented them being cleared. The premises were to be kept in a neat and tidy condition. Carparking and trafficked areas were to be sealed and drained, and some landscaping was to be done.
The manager of planning and building services for the Town of Kwinana asked the defendants to advise how these issues would be dealt with before the conditions could be cleared. That was the position when this contract was entered into on 18 November 2005, involving a different subdivision. And so it was clear that a fresh application for approval of the subdivision would need to be made to the WAPC in whatever form was appropriate. It was against the background of that mutual understanding that the contract was written.
At [37] ‑ [38] I have referred to Mr Elpitelli's efforts on behalf of the defendants to have this fresh application made. As cl 13 is written, the obligation to lodge the application within 3 months after the contract date, a contingent condition which might be satisfied by either party under cl 13.2(a) is overtaken by the specific obligation upon the seller, under cl 13.4(a), to lodge the application within 15 business days after the contract date, ie, by 9 December 2005. I have mentioned that the application was not lodged with the WAPC until 19 January 2006. Clause 13.4(a) was breached.
However, it was of no moment because the contract remained on foot and the defendants remained obliged under cl 13.4(b) to use their best endeavours to obtain the approval of the WAPC for the subdivision so that the subdivision plan could be lodged at DOLA and endorsed as in order for dealing as soon as practicable.
As I read the contract, particularly having regard to the terms of cl 13.2 and 13.3, the approval of the WAPC had to be obtained within 6 months after 18 November 2005, ie, by 18 May 2006. If that approval was unconditional, because by then any applicable conditions had been cleared, that would be all to the good. But to the extent necessary, the conditions had to be cleared and the WAPC had to be able to endorse its approval on the revised plan of subdivision, at the latest 6 months after approval had been given, ie, by 18 November 2006.
Following that, the subdivision plan had to be put in order for dealing by DOLA, at the latest within a further 3 months, ie, by 18 February 2007, there being no extension of those periods provided either by the contract or any subsequent written agreement between the parties: cl 13.3.
It is important to note, however, that the defendants' obligation after the lodgement of the application on 19 January 2006 to use their best endeavours to obtain those approvals and endorsements as soon as practicable, operated independently as a condition if, as in this case, the defendants did not repudiate the contract upon their failure to meet the term which required settlement, at the latest, on 21 February 2006. The affirmation of the contract by the plaintiffs left the defendants obliged to perform and comply with the conditions provided in cl 13.4.
As I understand the position, the WAPC having referred the application, newly made, to the various agencies involved in establishing the conditions for approval on 20 January 2006, the day after the application was received, responses from agencies such as the Water Authority and Western Power were promptly received. They affirmed that, so far as they were concerned, the conditions formerly applicable to approval of the subdivision continued to apply to the new application in the light of the modification of the proposed subdivision by the shift of the internal boundary. That was hardly surprising.
I will not now go into dealings with the Town of Kwinana by the defendants or, more strictly, by Mr Elpitelli on their behalf, but the Town did not immediately notify the WAPC of its position. It appears that after a reminder about that, the Town finally did so by a letter dated 2 May 2006 (exhibit 98A). The Town advised that it had no objection to the proposed modifications, subject to the conditions notified in the WAPC approval of 20 December 2004.
Having received that letter on 9 May 2006, the WAPC wrote to Neale on 26 May 2006 (exhibit 99), providing its approval conditioned in the same way as was notified on 20 December 2004, that approval having been given by the delegate of the WAPC on 24 May 2006.
Given that the final date for the grant of approval was, under cl 13.2(b), 18 May 2006, there was, technically, a failure to comply with cl 13.2(b). But it is of no moment. Neither party was concerned, on that basis, to act to terminate the contract by the process provided by cl 13.7. Subject to cl 13.4(b) and the use of best endeavours to obtain the unconditional approval of the WAPC, to arrange for the lodgement of the approved plan of subdivision at DOLA, and to have it endorsed as in order for dealing as soon as practicable, the contract was conditional upon the WAPC endorsing its approval (in unconditional terms) upon the subdivision plan within 6 months after the conditional approval, ie, by 26 November 2006, and having it endorsed as being in order for dealing within 3 months after the endorsement of approval, if that had occurred: cl 13.3.
Unconditional approval was not obtained. It was therefore not endorsed on the subdivision plan. Nor was the subdivision plan put to DOLA to be endorsed as in order for dealing, pursuant to the provisions of cl 13 and s 20AA of the Town Planning Act. In fact, the conditional approval having been granted on 26 May 2006, it ceased to be effective on 26 May 2009: s 20AA(1). That is immaterial in the context of this litigation, initiated by writ on 1 June 2007, and the plaintiff's claim formulated in par 10 of the statement of claim, essentially relying upon the alleged failure of the defendants to use their best endeavours to obtain the necessary approvals as soon as practicable, pursuant to cl 13.4(b).
I have agreed with counsel in their description of the obligations arising out of cl 13 as contingent conditions. They are conditions precedent to the final performance of the contract of sale. They are not, of themselves, promissory terms. There are very useful discussions of such contractual provisions, their meaning and effect, in the High Court decision of Perri and in the earlier decision of Gange, to which I have referred.
It emerges from those cases that contravention of such a condition does not, of itself, constitute a breach of contract. If the contract is to be terminated because of the non‑fulfilment of a contingent condition, it will be because of the nature of the agreement of the parties. Clause 13.7 expresses the agreement of the parties in that respect. It follows that the party, if one is identifiable, who has the benefit of the condition may waive its performance, commonly where matters of time are involved.
However, the presence of the obligation upon the defendants to use their 'best endeavours', under cl 13.4(b), adds a different dimension to the conditions provided in cl 13. Breach of that duty by the defendants will constitute a breach of the contract and entitle the plaintiffs to terminate the contract or insist upon its performance and, failing that, entitles the plaintiffs to sue for specific performance of the agreement or for damages for the defendants' failure to do so, assuming, for the moment, in a case such as this where specific performance is sought, that the plaintiffs may qualify for the grant of that equitable relief by being themselves ready, willing and able to perform their part on settlement. See generally cl 24.14 to 24.16.
I have found that the conditions requiring the various approvals of the WAPC were contravened. The question then is whether that contravention constitutes a breach of the contract on the part of the defendants by reason of their failure to use 'best endeavours' as required. In considering that question, I will not overlook that, as was the clear decision of the majority, Buss JA and Heenan AJA, in Casella, it was the conditions attaching to the approval by the WAPC which had to be satisfied.
The specific content of the obligation to satisfy those conditions were, as the conditional approval was formulated, the province of the advice and requirements of the relevant government agency, the Water Authority and Western Power in particular, and the Town of Kwinana, but the condition to be satisfied before unconditional approval by the WAPC was obtained was the condition in the terms imposed by the WAPC.
I have referred at [115] ‑ [118] to the terms of the letter of 20 December 2004. An important example of the point being made here was condition 5, requiring development on the proposed lots to comply with the Town of Kwinana Town Planning Scheme No 2, incorporating the advice that the Town would require 'suitable vehicle access' and 'appropriate landscaping'. What precisely would be required to be done to satisfy the condition in the terms imposed by the WAPC would be a matter for the Town of Kwinana.
A necessary part of the use of best endeavours to obtain the approvals required as soon as practicable would therefore be prompt liaison between the defendants and the Town of Kwinana to determine what was to be done if the Town's requirements, and therefore the WAPC condition of approval, was to be satisfied. The work would then need to be performed or, if it was permissible to do so, the Town would need to be satisfied that it would be performed.

In the circumstances, I need not discuss the process of cross‑examination in any detail. Suffice it to say that I would conclude that Mr Hagon provided useful evidence in support of the plaintiffs' alternative claim for damages and I would, were it necessary, be prepared to rely upon his opinions.
He was asked to provide a valuation as at the end of April 2006. I gather that date was selected to provide a valuation contemporaneous with the plaintiffs' views on the question when (broadly speaking) the defendants might be regarded as having breached the contract by their failure to use their best endeavours to obtain the WAPC approvals necessary to enable the land to be subdivided and the subdivision lot to be sold pursuant to the contract of 18 November 2005.
Mr Hagon was also asked to provide a valuation as at the date of his initial report, 17 October 2008. I will not trouble further with that because, ultimately, he updated that valuation to the time of trial and, as I have held, that, in my view, is the relevant date.
Mr Hagon was assessing the market value of the land. I have said that that value, less what, under the contract, the plaintiffs would pay for the land, would fairly represent their loss and compensate them by way of expectation damages if the contract was not to be performed.
As at 30 April 2006, on the direct comparison approach using comparable sales evidence, Mr Hagon valued the property at $1.3M. Checking that on the capitalisation of income approach produced a value of $1.25M. Using the summation approach, Mr Hagon came up with a figure of $1.525M. A fair outcome is the $1.3M value produced by the direct comparison approach.
Mr Hagon said that, in his view, following 2006 there was a rather remarkable increase in the value of the land, but it peaked, and since his October 2008 valuation, he was satisfied that there had been a diminution in value of in the order of 15 ‑ 20%. That led him to conclude that, as at the time of trial, by the use of a direct comparison approach relying upon comparable sales, the value of the subdivision lot was $2.75M to $3M. Using the summation approach as a check gave a valuation in the range $2.725M to $2.775M.
Having regard to that evidence, as at the time of trial, in my view, a fair value would be the sum of $2.75M. I would assess the damages at $1.5M, including the $20,000 paid to and now retained by the defendants. However, as I say, in my opinion, the appropriate order is by way of specific performance of the contract for the sale of the land.

Conclusion

The plaintiffs should have judgment. I will make orders in the nature of specific performance to require the defendants to undertake the process of subdivision so that the subdivision lot is created and settlement of the contract may take place upon the payment of the price, by the provision of a transfer of the subdivision lot from the defendants to the plaintiffs as tenants in common. It follows, of course, that the defendants' counterclaim is dismissed. I invite the parties to prepare a minute of final orders to give effect to these reasons. If there is agreement upon the terms of those orders, I will make them on the submission of the minute without the need for a further appearance.
The plaintiffs should have their costs of the action. If they are agreed, or if it is agreed that they should be taxed in the ordinary way, orders in relation to costs should be included in the minute. If special costs orders are sought and agreed, they may be included in those terms. If there is to be a debate about costs, I will hear that debate, but in the first instance, at least, I would require the provision of written submissions in relation to any special costs orders. The matter may be relisted for necessary programming orders to be made, if the parties are unable to agree on a program for the exchange of any affidavit evidence and submissions.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: REHINS PTY LTD -v- DEBIN NOMINEES PTY LTD [No 2] [2011] WASC 168 (S)

CORAM: MURRAY J

HEARD: ON THE PAPERS

DELIVERED : 8 JULY 2011

SUPPLEMENTARY
DECISION :7 DECEMBER 2011

FILE NO/S: CIV 1562 of 2007

BETWEEN: REHINS PTY LTD (ACN 116 998 095)
First Plaintiff
GOLDBEACH NOMINEES PTY LTD (ACN 068 766 496)
Second Plaintiff
AND
DEBIN NOMINEES PTY LTD (ACN 008 810 688)
First Defendant
FIORE CONSTRUCTIONS PTY LTD
Second Defendant

Catchwords:

Contract - Sale of unsubdivided land by offer and acceptance - Award of relief in the nature of specific performance - Terms of final orders

Costs - Application for indemnity costs - Application for special costs order - Turns on own facts

Legislation:

Nil

Result:

Final orders made

Category: B

Representation:

Counsel:

First Plaintiff                :     No appearance (on the papers)
Second Plaintiff            :     No appearance (on the papers)
First Defendant             :     No appearance (on the papers)
Second Defendant         :     No appearance (on the papers)

Solicitors:

First Plaintiff                :     Park Linfoot Legal Solutions
Second Plaintiff            :     Park Linfoot Legal Solutions
First Defendant             :     J D Finlay & Co
Second Defendant         :     J D Finlay & Co

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

Collins v Westralian Sands Ltd (1993) 9 WAR 56
Esther Investments Pty Ltd v Markalinga Pty Ltd (1992) 8 WAR 400
Flotilla Nominees Pty Ltd [2003] WASC 122 (S); (2003) 28 WAR 95
Heartlink Ltd v Jones [2007] WASC 254 (S)
Rehins Pty Ltd v Debin Nominees Pty Ltd [No 2] [2011] WASC 168
Schmidt v Gilmour [1988] WAR 219
Whittaker v Paxad Pty Ltd [2009] WASC 47

MURRAY J: In my judgment determining this litigation I held that I would make orders and decrees in the nature of specific performance designed to secure the performance of the contract at issue in this case by the defendants, who are obliged to use their best endeavours to obtain the approval of the Western Australian Planning Commission (WAPC), in final unconditional form, to the necessary subdivision.
That having been done, of course the final performance of the contract for the sale of the subdivisional lot will involve the performance of obligations under the contract involving the payment for the land and its transfer from the defendants to the plaintiffs at settlement in the ordinary way: Rehins Pty Ltd v Debin Nominees Pty Ltd [No 2] [2011] WASC 168 [222] ‑ [235] and [254]. These reasons should be read with that principal judgment.
As to the making of final orders, there was only limited agreement between the parties and I have received and considered the submissions of counsel on both sides. I attach the final orders which may now be extracted in their settled form.
I would make only the following brief comments. The declarations in pars 2 and 3 are, in my view, convenient expressions of the general conclusion to which I have come and are appropriate to give effect to the award of specific performance in this case, involving, as it does, the need for the defendants to complete the process of obtaining unconditional approval of the proposed subdivision from the WAPC, a process finding its final expression by the orders made in pars 4 and 5.
I accept that the order made by par 6 will be helpful to ensure that the plaintiffs have the capacity to monitor the due performance of the clearance of conditions and obtaining final approval from the WAPC. I have replaced the plaintiffs' proposed par 7, which I think to be unnecessary, with that suggested by the defendants in par 8 of their minute. The provision of general liberty to apply in a case of this kind requires no comment.

Indemnity costs

The plaintiffs seek to have the court exercise its discretion with respect to costs by making an order that the defendants pay the plaintiffs' costs on an indemnity basis or, alternatively, that a special costs order should be made, removing the limits applicable under the relevant Legal Practitioners (Supreme Court) Contentious Business Determinations in relation to the plaintiffs' pleadings, discovery, getting the case up for trial and counsel fees.
Again, as I have mentioned, I invited agreement in relation to the question of costs, failing which I asked the parties to provide written submissions in support of and opposing any special orders for costs which might be sought. That process of the exchange of submissions concluded on 18 November.
During that process, a number of affidavits were filed by which the plaintiffs, particularly, sought to support their claim for indemnity costs. On 5 October, the plaintiffs filed an affidavit sworn on 9 September by Mr Greaney. A supporting affidavit sworn on 15 September by Dr Franklin was filed on the same day. Mr Taylor, a partner in the firm of the plaintiffs' solicitors, swore and filed an affidavit on 5 October. It traced the development of changes made to the pleadings of the defendants which, it was said, necessitated changes to the statement of claim and the plaintiffs' reply.
Mr Finlay, the defendants' solicitor, filed a largely responsive affidavit sworn on 11 November. Again, it sought to trace the history of exchanges between the lawyers for the plaintiffs and the defendants, with a view to putting before the court the way in which various issues at trial had arisen in the course of the litigation.
There was, finally, a further affidavit by Mr Greaney, dated 18 November 2011, concerned to set out, at some length, the plaintiffs' views about the development of various issues of fact and law which were litigated at trial and, generally, to support the proposition that the defendants should properly be considered to have conducted themselves in such a way as to create delay and to create a multiplicity of issues found ultimately to be without merit and which were productive of expense.
That was said to be so in respect of the obtaining and tendering of expert and other evidence which, at trial, was led upon a number of issues: the process of application for WAPC approvals and the time which might be taken to complete that process, the cost and the work required to clear the conditions of the Town of Kwinana in respect of the sealing of parts of the land and the work required, evidence in respect of the value of the land concerned with the possible award of damages and factual evidence about the financial capacity of the plaintiffs to perform their part of the contract.
I have read all the affidavits and considered carefully the arguments raised on both sides, before coming to the conclusion that the question of costs, as in the case of the terms of the final orders made, could be conveniently dealt with on the papers.
Against that background I turn first to the question of indemnity costs. Such an order is only made as an exercise of the discretion as to costs, so as to take the taxation process out of the limitations in a relevant costs determination, in exceptional circumstances.
In Flotilla Nominees Pty Ltd [2003] WASC 122 (S); (2003) 28 WAR 95, 101 [25], Pullin J succinctly summarised the position adopted by the courts in relation to indemnity costs orders. His Honour said that they:
will be appropriate in cases where there has been improper or unreasonable conduct on the part of a party or his legal advisors. An order for indemnity costs is a mark of disapproval on the part of the Court about the improper or unreasonable conduct of litigation, even though there should not be much difference in the costs recovered under such an order compared with recovery under a properly formulated special costs order.
In Whittaker v Paxad Pty Ltd [2009] WASC 47, Blaxell J usefully made the point that in determining whether improper or unreasonable conduct of a kind which might justify an order for indemnity costs had occurred, the court ought to be careful not to approach the matter with the benefit of the hindsight gained as a result of the outcome of the trial. Such matters as were raised ought to be dealt with in the circumstances applicable when they occurred during the course of the preparation for, or the conduct of, the trial.
I do not propose to rehearse the multiplicity of matters raised in the plaintiffs' submissions. They are set out in 47, sometimes repetitious, paragraphs in part 4 of the plaintiffs' outline. The matters raised are concerned with issues introduced by the defendants, particularly during the course of the amendment of the proceedings, which then had to be addressed by the plaintiffs, or they are matters concerned with the stance adopted by the defendants and their legal advisers in relation to the contest offered in the trial of issues necessarily raised by the plaintiffs' claim.
The argument presented of those matters says that the conduct of the defendants by their legal advisers caused loss of time and added expense in the trial process and the need for the court to deal with a multiplicity of issues of fact and law. The plaintiffs assert that the defendants may be seen to have commenced or continued with proceedings in disregard of known facts or clearly established law.
As I have said, I do not propose to canvass in detail the matters raised. There were, in this litigation, as is often the case, issues raised which seemed to be plainly without merit. The plaintiffs' estoppel argument is perhaps a good example. The defendants raised initially, and then abandoned at trial, reliance upon frustration of the contract and unconscionability. The fact that that occurred does not of itself, of course, raise the prospect of an indemnity costs order in respect of the claim and counterclaim.
There were, apparently, efforts to reduce the issues between expert witnesses consulted on both sides which were ultimately unsuccessful. It would not be appropriate, in my view, for me to consider, in relation to the possible making of an indemnity costs order, whether, on either or both sides, that process might have been better handled, with the result that the time taken at trial in leading and testing expert witnesses might have been reduced. I do think, however, that there is no prospect that the issues which required expert evidence to be led would have fallen away as a result of a process of consultation between experts.
In view of the number of issues of fact and law which needed to be litigated, the process of trial was, I think, to the credit particularly of counsel, conducted with relative expedition. The parties readily complied with my directions and wishes in relation to the presentation of evidence and the order of witnesses. Certainly no criticism of the defendants can be advanced in relation to their participation in the trial.
In short, although, in some respects, the conduct of the defendants through their solicitors might be criticised upon the ground of the multiplicity of issues raised, nothing in that regard in any way approaches the sort of impropriety which, in my view, would justify the court expressing its disapproval of the defendants' conduct generally in their defence of the claim and pursuit of the counterclaim by making an order for indemnity costs.
The plaintiffs do not advance the proposition that their claim was unanswerable in the sense that it should not have been defended. They place their reliance upon particular matters which they say, to the extent that they may be made out, have the cumulative effect that I should express my disapproval by an order for indemnity costs. I decline to exercise my discretion in that way.

Special costs orders

As I have said, the other aspect of the submissions advanced by the plaintiffs is a claim for special costs orders modifying the application of the relevant costs determinations. As I understand the position, this aspect of the application is advanced under s 215(2) of the Legal Practice Act 2003 (WA). Section 215(1) provides that the taxation of costs is regulated by the relevant legal costs determination in force from time to time under s 210. Section 215(2) provides:
(2)Despite subsection (1), if a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a legal costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following -
(a)order the payment of costs above those fixed by the determination;
(b)fix higher limits of costs than those fixed in the determination;
(c)remove limits on costs fixed in the determination;
(d)make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or taxed.
Section 280(2) of the Legal Profession Act 2008 (WA) is in precisely the same terms.
Of course, the Legal Profession Act was proclaimed to come into operation on 1 March 2009, before this matter went to trial (Government Gazette, 27 February 2009, page 511). By s 616(1) of the 2008 Act, the current provisions in relation to costs which are contained in Pt 10 of the Act only apply where the client first instructs the law practice on or after the commencement day. Otherwise, as in this case, Pt 13 of the 2003 Act continues to apply, as will the provisions of the relevant legal costs determinations made from time to time under that Act.
I know this action was commenced by a writ issued on 1 June 2007, and so I will presume that the relevant determinations are the 2006 determination which operated from 1 July 2006 to 30 June 2008, and the 2008 determination operating after that date.
They are similarly constructed. They fix maximum hourly and daily rates of remuneration for senior practitioners of more than 5 years standing, junior practitioners, counsel and senior counsel. A table is provided which sets out various items of work. Generally speaking, no distinction is made between solicitor/client costs and party/party costs. Maximum allowances are fixed. They combine a period of time, supposed to be the maximum required to perform the particular task, multiplied by the rate applicable to the particular fee earner hypothetically involved in the performance of the work.
Otherwise, of course, the fixing of reasonable costs will be a matter for the taxing officer, and I do not need to enter into that process in any way for the purposes of determining the application before me.
As to that application, there are self‑evidently two stages in the application of s 215(2). The first is that I must arrive at an opinion that the amount of costs allowable in respect of a matter under a legal costs determination is inadequate. I do that by having regard to what is put before me in relation to the work required to be done and its likely remuneration. As I have said, I do that without entering into the realm of the taxing officer: Esther Investments Pty Ltd v Markalinga Pty Ltd (1992) 8 WAR 400, 404; Collins v Westralian Sands Ltd (1993) 9 WAR 56, 64, 68.
I am therefore concerned with a broad‑brush approach which must cause me to be of the opinion that the reasonable allowance of costs in relation to particular items or under a particular determination might lead to costs being fixed, so as to provide reasonable compensation to the successful party, in a sum above the relevant maximum sum under the determination.
If I arrive at that view, I must then go on to the second stage of the inquiry. I must find that the likely inadequacy of taxation under the relevant legal costs determination is caused by, 'the unusual difficulty, complexity or importance of the matter'. In this case, it is not contended that the matter presented 'unusual difficulty'. Reliance is placed upon its complexity and importance.
The complexity of which the subsection speaks may be legal and/or factual complexity. The court making the essentially preliminary and provisional assessment of the adequacy of the costs determination may find, having regard to the amount of work required to be done and the seniority of the practitioner who may be reasonably required to do it, measured against the limits provided by the costs determination, not only inadequacy in terms of s 215(2), but also that the inadequacy is caused by the complexity of the matter: Schmidt v Gilmour [1988] WAR 219, 220, a case concerned with this question as it arose under the scale of costs laid down under O 66 of the Rules of the Supreme Court, prior to the introduction of the process of making costs determinations.

For myself, I always have more difficulty with the establishment of a link between the inadequacy under a determination to make an award of costs which will properly compensate the successful party, and the importance of the case. In relation to this aspect of the matter, I accept that the importance of the matter may be established by showing some aspect of general importance to the law, or the community, beyond the interests of the parties. Such a consideration may reasonably justify more work being done by more senior practitioners than might otherwise be reasonably required, and the causal link may be demonstrated.
On the other hand, I accept that the court may have regard, in relation to the importance of the matter, to the parties involved: Heartlink Ltd v Jones [2007] WASC 254 (S), per Martin CJ [19].
In this case, the plaintiffs rely upon the complexity of the matter and its importance to them. They adduce evidence by affidavit that the acquisition of the subdivided lot was regarded by the people behind the plaintiffs, Mr Greaney and Dr Franklin and their families, as an important investment opportunity which had a synergy, in relation to this particular land, with their business activities. I accept that evidence, but do not think that, on that ground, it is demonstrated that the outcome of taxation under the relevant costs determinations would be likely to be inadequate to properly compensate the plaintiffs for their costs incurred in pursuit of their claim.
On the other hand, as the matter went to trial and, therefore, as it had to be got up for trial, there was undoubtedly a multiplicity of issues of fact and law which required determination. That circumstance created a considerable element of complexity and, having regard to my involvement in the trial and what I know of the case in that way, I am satisfied that the complexity of the matter was considerable, so as to require the employment of one or more senior practitioners in getting the case up and considerable work by counsel in its preparation and presentation at trial.
The question then is, should I be of the opinion that the complexity of the matter in those ways leads to the result that the amount of costs allowable, under the relevant determinations, is inadequate in the sense that it may be insufficient upon taxation to enable the taxing officer to provide the plaintiffs with reasonable compensation by way of an award of legal costs and reasonably allowed disbursements.
The plaintiffs place before me the costs agreements which they have entered into with their solicitors and with counsel. They place before me a table providing a summary of costs incurred to solicitors and counsel which also refers to the disbursements paid to expert witnesses.
Taking a broad‑brush approach to the provisional assessment I am to make, I am satisfied that the costs determinations are inadequate, in the relevant sense, in that in relation to getting the matter up for trial and the work of counsel, a reasonable allowance on taxation may require the fixing of amounts greater than the maximum amounts allowable under the determinations.
I am therefore prepared to make an award of costs which would involve the special order that the limits on the costs fixed in the determination in respect of getting the case up for trial and counsel's fees should be removed in the exercise of the power under s 215(2)(c).
Otherwise, including in respect of the costs incurred in the preparation and presentation of the submissions and evidence as to costs and the making of final orders, the relevant scales are to continue to have their effect at taxation.
The defendants sought the costs of the present applications. But, of course, that application now falls away. They also sought express provision for the costs of transcript and reasonable witness costs. The taxing officer has power to allow such costs reasonably incurred, and these days no particular certification for the payment of those amounts is required.
Finally, the defendants sought an order that the costs recoverable by the plaintiffs should be reduced by 10% because of their introduction of the estoppel plea which, as has been seen, I concluded was without merit and, in so concluding, I observed that I could not understand the plea: judgment [53] ‑ [59].
However, in terms of leading evidence and the time taken to debate the matter at trial, the disposition of this plea occupied a relatively minor expenditure of effort by the parties. It would be inappropriate, in my view, to deny the plaintiffs' part of their properly determined costs on this ground.
Having regard to those matters I add, to the attached minute of orders, orders that the defendants shall pay the plaintiffs' costs of the action and the counterclaim, including reserved costs, to be taxed as one bill if not agreed, and that in the taxation, the limits fixed by any relevant determination upon the costs recoverable in respect of getting up for trial and the fees of counsel are removed.

Minute of proposed orders

1.There be judgment for the Plaintiffs in the action.
2.There be a declaration that the contract of sale between the Plaintiffs and the Defendants of 18 November 2005 for the purchase and sale on conditions of an unsubdivided lot, being part of the land situated at 31 Office Road, Kwinana and being part of the land in Certificate of Title Volume 1937 Folio 616, remains in force and effect and has not been terminated by the Defendants.
3.There be a declaration that the Defendants remain bound by their contractual obligation to use their best endeavours to secure subdivisional approval from the Western Australian Planning Commission so as to create a new subdivided lot to accord with the dimensions specified in the diagram accompanying the contract of sale and as submitted to the Western Australian Planning Commission on 19 January 2006 and upon the approval being obtained to proceed to settlement of the sale.
4.The Defendants shall do all that is necessary on their part to be performed to obtain the aforesaid approval of the Western Australian Planning Commission and the subdivision of the land and upon the approval being obtained and upon the payment of the purchase monies to settle the performance of the contract of sale.
5.The Defendants shall apply for the subdivision of the land pursuant to the preceding Order by lodging such application with the Western Australian Planning Commission within fourteen days of service of this Order.
6.The Defendants shall provide to the solicitors of the Plaintiffs, within fourteen days of service of this order, a written authority for the Plaintiffs to enable them to obtain information as to the progress of the subdivision application from all government departments which are involved in the process, including the Town of Kwinana.
7.The contract be otherwise performed according to its terms.
8.General liberty to apply is reserved to both parties upon seven days notice.
9.The Defendants' Counterclaim is dismissed.
10.The Defendants shall pay the Plaintiffs' costs of the claim and counterclaim, including any reserved costs, to be taxed as one bill, if not agreed.
11.The limits of the costs fixed in a relevant Costs Determination in respect of getting up for trial and counsel's fees are removed.

[2011] WASC 168

8 JULY 2011

Key Legal Topics

Areas of Law

Contract Law

Legal Concepts

Contract Formation

Breach of Contract

Specific Performance

Compensatory Damages