Riddle v White Constructions Pty Ltd

Case •

[2018] NSWSC 384

•

27 March 2018

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Riddle v White Constructions Pty Ltd [2018] NSWSC 384
Hearing dates: 15 March 2018
Date of orders: 27 March 2018
Decision date: 27 March 2018
Jurisdiction:Equity
Before: Darke J
Decision:

Plaintiffs entitled to refund of deposit.

Catchwords:

LAND LAW – conveyancing – the Contract for Sale – subject matter of the contract – purchase “off the plan” – vendor required to acquire additional land adjoining purchaser’s proposed lot in order to achieve registration of subdivision – whether vendor entitled to require purchaser to acquire additional land as part of purchase

  LAND LAW – conveyancing – the Contract for Sale – recovery of deposit – vendor incorrectly asserts that sale included additional lot – vendor serves Notice to Complete calling upon purchaser to acquire additional lot – vendor terminates contract following purchaser’s failure to complete – termination a wrongful repudiation of contract – purchaser entitled to refund of deposit
Category:Principal judgment
Parties: Kevin Riddle (First Plaintiff)
Naniwati Siridhata-Riddle (Second Plaintiff)
White Constructions Pty Ltd (Defendant)
Representation:

Counsel:
Mr P Afshar (Plaintiffs)
Mr M Galvin (Defendant)

  Solicitors:
Blackman Legal (Plaintiffs)
RMB Lawyers (Defendant)
File Number(s): 2017/316164
Publication restriction: None

Judgment

Introduction

  1. These proceedings were commenced by Summons filed on 19 October 2017. The plaintiffs are the purchasers under a contract for the sale of land entered into with the defendant as vendor. The plaintiffs claim that the defendant wrongfully terminated the contract and they are thus entitled to the return of the deposit they paid in the sum of $48,500, together with any interest earned thereon. The plaintiffs have not sought specific performance of the contract, and bring no claim for damages.

  2. The defendant, which has filed a Cross Summons against the plaintiffs, maintains that it validly terminated the contract. The defendant contends that it was entitled to terminate the contract because the plaintiffs failed to complete in accordance with the requirements of a valid Notice to Complete. It therefore claims that it is entitled to the deposit.

  3. The contract was entered into on 30 March 2015. The land the subject of the contract was Lot 14 in an unregistered plan of subdivision of certain land in Deposited Plans 758563 and 797732 in Kiama. The purchase price was $485,000, with a deposit of $48,500 payable on exchange. The contract employed the 2014 edition of the standard Law Society/Real Estate Institute form, together with various Additional Provisions that were expressed to prevail over printed clauses 1 to 29 of the standard form.

  4. A “Preliminary Plan Showing Proposed Subdivision” was attached to the contract. Lot 14 was depicted on the plan as an area of 1,260m2 in a shape that approximates a trapezium. It was one of 101 lots shown on the plan.

  5. By Additional Provision 39 “completion date” was defined to mean the later of the 35th day after the date of the contract or the 14th day after the date on which the Vendor serves notice on the Purchaser that the Subdivision Plan has been registered.

  6. Additional Provision 32, which lies at the heart of the dispute, is in the following terms:

32   Subdivision

32.1   This contract cannot be completed unless a plan of subdivision (the Subdivision Plan) is registered as a deposited plan so as to give separate entity to the land.

32.2   The Vendor will do everything reasonably necessary to complete the subdivision by complying with the development consent from Kiama Municipal Council (the Council) and obtaining a subdivision certificate from the Council and obtaining and complying with other consents, approvals and certificates necessary from other relevant public authorities and service providers, including paying fees and contributions, so as to have the Subdivision Plan registered.

32.3   Either party may serve a notice rescinding the contract if the Subdivision Plan is not registered by 31 October 2016 (the Sunset Date). A party cannot rescind after the Subdivision Plan is registered.

32.4   In addition to clause 31.3 the Vendor may extend the Sunset Date by each day (but no later than 6 months after the Sunset Date) that the vendor or its builders or contractors have been delayed by reason of:

32.4.1   inclement weather or conditions resulting from inclement weather;

32.4.2   any civil commotion, combination of workmen strikes or lock-outs affecting the progress of the building works or affecting the manufacture or supply of materials for the construction of the property;

32.4.3   any delay in any approval required for development activities necessary or desirable for completion of the building works or completion of this contract; or

32.4.4   any matter or thing beyond the control of the Vendor.

32.5   The Vendor is the sole determinator of the Vendor’s entitlement to extensions of time under clause 31.4.

32.6   A certificate by the Vendor in relation to extensions of time under clause 31.5 is final, conclusive and binding on the parties.

32.7   The vendor may make all alterations to the measurements and lot numbers shown on the Unregistered Plan as are needed to obtain the necessary certificate, consents and approvals and the registration of the Subdivision Plan.

32.8   The Purchaser cannot make a claim, objection or requisition, delay completion or rescind or terminate in respect of:

32.8.1   any alternation of lot number;

32.8.2   any minor reduction in the boundary dimensions or area of the land or minor variation in the position of the land as shown on the Unregistered Plan and as shown on the Subdivision Plan when registered;

32.8.3   any alterations to or omission of any of the other lots shown on the Unregistered Plan; or

32.8.4   the Vendor implementing its proposed subdivision of Lot 1, 2, 3 & 4 758563 in stages; or

32.8.5   any changes to the names of the roads shown on the Unregistered Plan.

32.9   If any reduction or variation is other than minor the purchaser within 14 days of being served by the Vendor with notice of the reduction or variation must elect either:

32.9.1   to complete without making a claim, objection or requisition and notwithstanding the reduction or variation and otherwise on the terms set out in the contract; or

32.9.2   to rescind,

and if the Purchaser does not elect to rescind within the period of 14 days (being an essential period) he will be taken to have waived his right of rescission and to have accepted the Subdivision Plan with the reduction or variation.

32.10   A reduction in a boundary dimension or area is taken to be other than minor if it is a reduction of greater than five percent (5%).

32.11   Clauses 28 and 29 do not apply to the registration of the Subdivision Plan.

32.12   This clause is included in the contract because the Subdivision Plan when registered may differ in boundary dimensions, areas and location as a result of construction of works and final survey. Taking into account that this contract is an off-the-plan contract, the parties agree that this clause protects the legitimate interests of both parties, acting reasonably.

  1. There is no dispute that the Vendor validly extended the Sunset Date from 31 October 2016 to 30 April 2017. The Subdivision Plan was in fact registered as Deposited Plan 1206414 on 7 April 2017. Notice of that fact was given by the Vendor’s solicitor (“RMB”) to the Purchaser’s solicitor (“Blackman”) on 7 April 2017. Accordingly, the completion date (or date for completion for the purposes of cl 15) thus became 21 April 2017.

  2. The dispute centres upon those parts of Additional Provision 32 which concern changes to the Unregistered Plan, in particular Additional Provisions 32.7 to 32.10.

  3. As will be seen, it appears that various changes were made to the subdivision plans, including as a result of a need to establish an Asset Protection Zone (“APZ”) for bushfire protection purposes in an area adjacent to Lot 14 as depicted on the plan attached to the contract.

  4. The defendant submitted that it was entitled under Additional Provision 32.7 to make such changes, and that if the plaintiffs had any right of rescission as a consequence of the changes, they waived the right as envisaged by Additional Provision 32.9.

  5. The plaintiffs submitted that Additional Provision 32.9 was not engaged in the circumstances, and in any event the defendant failed to serve any notice in accordance with Additional Provision 32.9. The plaintiffs further submitted that the defendant has acted wrongfully by insisting (including by its Notice to Complete) that the plaintiffs were bound to accept not only a transfer of Lot 14 in the registered subdivision, but also the adjoining Lot 1 in Deposited Plan 1221171 which was intended to serve as an APZ.

Summary of salient facts

  1. It is necessary to set out a narrative of the events, as disclosed in the evidence, that occurred in the period from the date the contract was made (30 March 2015) to the date the contract was terminated by the defendant (22 May 2017).

  2. On 5 February 2016 the Vendor’s Agent (Belle Property, Kiama) sent an email to the plaintiffs in the following terms:

We hope you are doing well.

I have attached a new subdivision plan showing a change to Lot 14. The developer has been forced, as a statutory requirement to purchase a parcel of land adjoining your lot.

This has been forced upon him at significant expense to create an asset protection zone (see attached).

This additional land is now attached to your lot as shown. Lot 14 as such is the beneficiary of the additional holding however the extra land needs to be maintained and only has limited uses.

The lot now includes a heritage stone wall. Water, sewerage and power services will run under. These do not affect your original building envelope.

Your options are to accept this change as shown or as per the contract you have the right to rescind without penalty.

Please let me know your thoughts.

  1. The attached plan of subdivision depicted Lot 14 as an area that now extended further to the east, and had an area almost twice the size of the Lot 14 depicted on the plan attached to the contract.

  2. On 9 February 2016 RMB sent a letter to Blackman in the following terms:

We refer to the above matter and now enclose the following for your client’s reference:

Updated Draft Plan of Subdivision noting the amended dimensions of Lot 14.

Asset Protection Zone Correspondence. We have been advised part of the land in proposed Lot 14 is now within such zone.

Please advise us of your client’s instructions (if any).

  1. The attached plan of subdivision again depicted Lot 14 as an area that now extended further to the east, and had an area almost twice the size of the Lot 14 depicted on the plan attached to the contract. The letter was also accompanied by some general information from the NSW Rural Fire Service concerning APZs.

  2. There is evidence that on 29 August 2016 an environmental consultant retained by the defendant sent a letter to the defendant which attached a plan described as “the latest site plan including the proposed alterations to the subdivision”. This plan showed Lot 14 in approximately the position it was shown in the plan attached to the contract, with an area of 1,260m2. The plan described the area to the east that had in February 2016 been shown on plans as part of Lot 14 as Lot 1 in Deposited Plan 1221171. This area is at the northern end of an unformed road known as Dido Street. The environmental consultant’s letter included the following:

There are four (4) proposed alterations to the approved subdivision layout and these are summarised below, along with an assessment of each proposed alteration against the relevant requirements of ‘Planning for Bush Fire Protection 2006’ (PBP).

…

Alteration 3

A subdivision of proposed lot 13 into lots 13 & 14 with the closed portion of Dido Street (Lot 1 DP 1221171) being used as the Asset Protection Zone for Lot 14. The amended layout is shown in Figure 1.

Proposed Lots 13 and 14 were proposed as part of the original subdivision; however, these two allotments were amalgamated because Kiama Council would not accept maintenance responsibility for the APZ on the adjoining unformed road (known as Dido Street) and Council also did not accept the proposal to dedicate the northern portion as a public road.

The northern portion of Dido Street adjoining approved Lot 13 has subsequently been closed by, and purchased from, the Department of Lands by the proponent. Consequently, given that proposed Lot 14 and the northern closed end of Dido Street are now in the possession of the same owner, the APZ can be managed by the owner of proposed Lot 14 with 5m being located within Lot 14 and the remaining 20m located within the former Dido Street road reserve.

  1. On 9 November 2016 RMB sent an updated draft subdivision plan, and draft s 88B instrument, to Blackman. On sheet No 5 of the plan, Lot 14 was shown with an area of 1,260m2, in approximately the position it was shown in the plan attached to the contract. The plan described the area to the east that had in February 2016 been shown on plans as part of Lot 14 as Lot 1 in Deposited Plan 1221171. The plan, together with the draft s 88B instrument, indicated that Lot 14 was to be burdened by a positive covenant 5m wide for “Asset Protection Zone”. This seems to be consistent with the advice earlier given by the environmental consultant. The covenant would require the owner or occupier of the lot to manage the burdened area as an “Inner Protection Area”. The plan and draft s 88B instrument also revealed that an easement (to drain water, 1.2m wide) over Lot 14 was proposed.

  2. On 1 February 2017 RMB sent an email to Blackman which attached a draft s 88B instrument, and an updated plan of subdivision. This plan showed (on sheet No 5) Lot 14 with an area of 1,260m2, again in approximately the position it was shown in the plan attached to the contract. The plan, together with the draft s 88B instrument, also indicated that Lot 14 was to be burdened by a positive covenant 5m wide for “Asset Protection Zone”. The covenant would require the owner or occupier of Lot 14 to manage the burdened area as an “Inner Protection Area”. The plan and draft s 88B instrument also revealed that it was proposed that there would be an easement (to drain water, 2m wide) over Lot 14.

  3. On 3 March 2017 RMB sent a letter to Blackman in which it was stated that “the Plan of Subdivision and Section 88B Instrument were lodged at Land and Property Information on 2 March 2017 as DP 1206414”. On 7 April 2017 RMB sent a letter to Blackman in the following terms:

The Plan in this matter was registered on 7 April 2017 as DP1206414. Completion is due on 21 April 2017 and will take place in Kiama.

Particulars of title are as follows:

Registered proprietor:   White Constructions Pty Ltd.

Reference to title:      Folio Identifier 14/1206414.

If you have not already done so, please forward transfer and make arrangements for completion.

  1. As noted earlier, the giving of this notice had the effect of setting 21 April 2017 as the date for completion under the contract.

  2. On 11 April 2017 Blackman sent a form of transfer, in respect of Lot 14 in Deposited Plan 1206414, to RMB. On 12 April 2017 RMB provided settlement figures in anticipation of settlement to occur on 21 April 2017.

  3. However, on 18 April 2017 RMB sent a letter to Blackman in the following terms:

We refer to the above matter and have been instructed by our client that Lot 1 in Deposited Plan 1221171 will also be transferred to your client at settlement. We have been further instructed that your client is aware of this. We were only made aware of this on Thursday, 13 April 2017. Our client has forwarded the certificate of title to us in anticipation of settlement. We are in [sic] today in receipt of your stamped transfer.

Please obtain your client’s instructions as to whether the additional title reference is to be added to the current transfer or whether you will submit a separate transfer for Lot 1/1221171. In order to assist you we enclose a copy of Folio Identifier 1/1221171.

  1. On 19 April 2017 Blackman sent an email to RMB in the following terms:

We have now obtained instructions from our client and they confirm that they agree to Lot 1 being transferred to them.

Our lender has advised that they will need to include Lot 1 on the loan approval so they need to re-approve the loan and re-issue loan documents.

We will need additional time for this to occur. Please confirm that liquidated damages pursuant to clause 41 will not be levied as we will not be in a position to complete this matter on 21 April, 2017.

Also, as Lot 1 will be included in the Contract price of $485,000.00, will you prepare a deed of variation to vary the Contract dated 30 March, 2015?

  1. RMB responded by email on 20 April 2017 in the following terms:

I have been instructed our client will allow an extension to the settlement date until 28 April 2017 after which date the vendor will rely on the terms of Additional Provision 41.2 of the contract.

  1. On 24 April 2017 Blackman sent an email to RMB which referred to certain easements over Lot 1 in Deposited Plan 1221171 and then continued in the following terms:

The extension for completion to 28 April, 2017 is not sufficient time. Upon receiving the advice that the Vendor wants to transfer Lot 1 to our clients they needed to go and inspect the land and carry out due diligence on Lot 1. Their lender also needs to re-approve the loan and re-issue the loan documents.

Please confirm that the Vendor will agree to extend the date for completion until Friday 12 May, 2017 to allow our clients time to finalise their due diligence on Lot 1 and for the lender to be ready for settlement.

  1. RMB responded by email later on 24 April 2017 in terms which included the following:

Our client’s instructions of 20 April 2017 remain unchanged. The purchaser has been aware since February 2016 of the additional land. We are further instructed if settlement is not effected on 28 April, 2017 the vendor reserves its right to issue a Notice to Complete under Additional Provision 40 of the contract.

  1. Blackman sent a further email to RMB on 27 April 2017 in the following terms:

I advise that we have received instructions from our clients that they do not wish to acquire Lot 1 in DP 1221171.

I will confirm settlement arrangements once our Mortgagee is ready to book settlement.

  1. RMB responded by letter dated 1 May 2017 in the following terms:

We refer to the above matter and your email dated 27 April 2017.

We are instructed to respond as follows:

Additional Provision 32.7 of the contract permits the Vendor to make all alterations to the measurements and lot numbers shown on the Unregistered Plan as are needed to obtain the necessary certificate consents, approvals and the registration of the Subdivision Plan;

The Vendor was required to acquire additional land in which an Asset Protection Zone was located relating to Lot 14;

The Purchaser was advised on 9 February 2016 of the amendment and a copy of the draft Subdivision Plan and Asset Protection Zone correspondence was forwarded to yourselves;

Under Additional Provision 32.9 the Purchaser had 14 days from notification of the variation to elect to rescind the Contract. There was no such election made;

The Purchaser cannot now elect to not accept the land in 1/1221171; and

The Purchaser must complete and accept both titles 14/1206414 and 1/1221171.

  1. On 2 May 2017 RMB served a Notice to Complete. The notice was in the following terms:

WHEREAS:

1.   By a contract for sale made on 30 March 2015 (“the contract”), White Constructions Pty Limited (ACN 008 413 232) of Level 2, Suite 4, 201 Miller Street, North Sydney NSW 2060 (“the vendor”) of the one part agreed to sell and Kevin Riddle and Naniwati Siridhata-Riddle of 15/28-32 Kiora Road MIRANDA NSW 2228 (“the purchaser”) agreed to purchase Lot 14, Stage 2, Cedar Grove Estate, Kiama being proposed Lot 14 in an unregistered plan which is part of Lots 1, 2, 3 and 4, Section 67 in Deposited Plan 758563 and Lots 1 and 2 in Deposited Plan 797732 (now being Lot 14 in Deposited Plan 1206414 and Lot 1 in Deposited Plan 1221171 and known as 84 Merrick Circuit, Kiama) for four hundred and eighty five thousand dollars ($485,000.00) and on a deposit of $48,500.00 and otherwise on the terms and conditions contained in the contract.

2.   The completion date in the contract is the 14th day after the date of service of notice on the purchaser that the Subdivision Plan has been registered.

3.   The purchaser was served notice that the Subdivision Plan had been registered on 7 April 2017.

4.   The due date for completion was 21 April 2017.

5.   The purchaser has failed to complete the contract. The vendor has performed the contract on his part up to the present and is ready willing and able to complete it.

TAKE NOTICE AS FOLLOWS:

(a)   The vendor requires you to remedy your breach of your obligations under the contract and to pay the balance of purchase moneys and to complete the contract at the offices of RMB Lawyers, Kiama, at 3.00pm on Tuesday, 16 May 2017 and in this respect time is of the essence and the vendor further requires you to pay the balance of the purchase money in accordance with the contract to RMB Lawyers or as they may direct in writing.

(b)   If you do not comply with the provisions of this notice the vendor terminate [sic] the contract and forfeit the deposit and will be at liberty to exercise all other rights given to him by the contract and the general law in respect of the breach of an essential condition of the contract.

  1. Blackman disputed the validity of the notice. Later on 2 May 2017 they sent a letter to RMB which included the following:

We refer to your letter of 18 April, 2017 whereupon you advised us that lot 1 in DP 1221171 ‘will also be transferred’ to our client at settlement. At no stage previous to this correspondence had we or our client been advised that the vendor wished to vary the contract by including lot 1 in another DP and seeking the purchaser’s consent for this.

We advised you of our client’s instructions, subsequent to carrying out their due diligence, that they do not want this additional lot and we are of the view that our client has no legal or contractual obligation to be forced to accept it.

The contract executed by the parties and entered into on 30 March, 2015 (the contract) clearly states that our client is purchasing lot 14 in an unregistered plan and the contract has not been varied to state otherwise. Nor have the parties agreed to vary it.

Accordingly, we fail to see upon what legal basis your client now claims that our client must accept a transfer from the vendor to them of lot 1 in DP 1221171 or how your reasons for this can in any way be supported by any reference to or interpretation of the contract. Furthermore, you have no authority to make any amendment to the transfer forwarded to you by us on 11 April, 2017.

The contract and transfer, which have both been stamped, reflect the agreement between the parties for the transfer of lot 14 in what is now DP 1206414.

  1. On 5 May 2017 RMB sent an email to Blackman which included the following:

In reference to our telephone conversation this morning, I can confirm I spoke at length wit [sic] the vendor regarding this matter in relation to the purchaser accepting two titles at settlement. Notwithstanding the vendor having issued a Notice to Complete, it is prepared to work with the Purchaser to achieve a successful outcome for the matter and will allow an extension of time to allow the Purchaser’s finance to be put in to place to settle on two titles. If agreed to, the Purchaser would not be subject to interest payments under the contract while the Lender’s requirements are being finalised.

  1. On 9 May 2017 Blackman sent a replacement form of transfer to RMB which corrected an omission from the first plaintiff’s name.

  2. On 11 May 2017 Blackman responded to RMB’s email of 5 May 2017. Blackman stated that:

Our clients have now provided us with instructions and I advise that they wish to complete the purchase in accordance with the Contract dated 30 March, 2015.

I have booked settlement with our Mortgagee to take place at your office on Monday 15 May, 2017 at 2pm.

Please confirm settlement figures and advise cheque details.

  1. Blackman sent a follow up email on the morning of 12 May 2017. Also on 12 May 2017 RMB sent a letter to Blackman in the following terms:

We refer to your email of 10 [sic] May 2017. We are instructed that at settlement of this matter, the purchaser must accept two certificates of title (14/1206414 and 1/1221171) as both make up the property your client is purchasing. The alteration to the title description was a result of the Planning Authority’s requirement of the Developer acquiring the additional land, which was achieved through a Section 96 Application. Prior to that, Lot 14 had been withdrawn from the proposed subdivision by direction of the Planning Authority and was only reinstated (with the additional land) through the Section 96 Modification of Consent. We are further instructed that your client was advised of this via the Agent on 5 February 2016 (copy enclosed) and given the opportunity to accept the additional land or rescind the contract.

Completion of this matter is to take place by Friday, 19 May 2017 and the following accepted at settlement by the purchaser:

Certificate of Title Folio Identifier 14/1206414

Discharge of Mortgage AJ752170

Certificate of Title Folio Identifier 1/1221171

Transfer noting 14/1206414 and 1/1221171

The vendor is able to provide a Deed of Variation to assist the purchaser.

We look forward to your return advice of the above.

  1. On 17 May 2017 RMB sent another letter to Blackman, in which it was advised that completion was scheduled for 19 May 2017. The letter also included updated settlement figures.

  2. On 18 May 2017 Blackman sent another letter to RMB in which the validity of the Notice to Complete was disputed. It was stated that the purchasers were ready, willing and able to complete their purchase of Lot 14 in Deposited Plan 1206414 in accordance with the contract. It was further stated that “At no stage has Lot 1 in DP 1221171 formed part of the Contract”.

  3. On 22 May 2017 RMB served a Notice of Termination in the following terms:

1.   By a contract for sale made on 30 March 2015 (“the contract”), White Constructions Pty Limited ACN 008 413 232 of Suite 2, Level 4, 201 Miller Street, North Sydney 2060 (“the vendor”) of the one part agreed to sell and Kevin Riddle and Naniwati Siridhata-Riddle of 15/28-32 Kiora Road, Miranda 2228 (“the purchaser”) agree to purchase 86 Merrick Circuit, Kiama 2533 being now comprised of Lot 14 DP1206414 and 1/1221171 for the sum of four hundred and eighty five thousand dollars ($485,000.00) and on a deposit of $48,500.00 and otherwise on the terms and conditions contained in the contract.

2.   On 2 May 2017 the vendor served notice on the purchaser calling on the purchaser to complete the contract at 3.00pm on 16 May 2017 and time was of the essence of the notice.

3.   On 12 May 2017 the vendor agreed to extend the date for completion under the Notice to Complete to 19 May 2017.

4.   The purchaser has failed to complete the contract.

5.   In accordance with clause 9 of the contract:-

(a)   the vendor by its solicitor RMB Lawyers terminates the contract,

(b)   the purchaser forfeits the deposit (to a maximum of 10% of the price), and

(c)   the vendor reserves all other rights contained in clause 9.

  1. On 20 June 2017 Deposited Plan 1232499 was registered. Lot 1 in that deposited plan was a consolidation of Lot 1 in Deposited Plan 1221171 and Lot 14 in Deposited Plan 1206414. The defendant is the registered proprietor of the consolidated lot.

  2. The plaintiffs subsequently lodged a caveat on the title to the consolidated lot. For some reason, the plaintiffs claimed an interest in fee simple based on the contract for sale dated 30 March 2015. Counsel for the plaintiffs informed the Court that the caveat was intended to protect the plaintiffs in relation to their claim that the deposit be repaid to them. By its Cross Summons the defendant seeks an order for the removal of the caveat.

Determination

  1. It will be apparent from the above narrative of events that the central issue between the parties is whether the plaintiffs were bound under the terms of the contract to acquire only Lot 14 in Deposited Plan 1206414, or bound to acquire that lot together with Lot 1 in Deposited Plan 1221171. The issue is one of identification of the subject matter of the sale, in accordance with the proper construction of the contract, ascertained by the application of the well recognised principles of contractual interpretation. There was no dispute between the parties as to these principles.

  2. The contract concerned the sale of a lot in a proposed subdivision. The land to be sold is described on the front page of the contract as “Lot 14, Stage 2, Cedar Grove Estate, Kiama” and further as “Lot 14 in an unregistered plan which is part of Lots 1, 2, 3 and 4 Section 67 in Deposited Plan 758563 and Lots 1 and 2 in Deposited Plan 797732”.

  3. The expression “unregistered plan” (or “Unregistered Plan” as referred to in Additional Provision 32) is not defined in the contract, but in my view it may be taken to be the “Preliminary Plan Showing Proposed Subdivision” that was attached to the contract. That plan clearly identifies Lot 14 as an area of 1,260m2 located in the north-eastern corner of the proposed subdivision. The plan also shows that immediately to the east of Lot 14 is an unformed road called Dido Street. That road does not appear to form part of the land proposed to be subdivided.

  4. It is clear that completion of the contract is not to occur until the Subdivision Plan has been registered (see Additional Provisions 32.1 and 39). The Vendor is obliged to do everything reasonably necessary to complete the subdivision so as to have the Subdivision Plan registered (see Additional Provision 32.2). It is expressly recognised that the Vendor may have to make alterations to the measurements and lot numbers shown on the Unregistered Plan in order to obtain necessary certificates, consents or approvals, and achieve registration of the Subdivision Plan (see Additional Provision 32.7).

  5. Additional Provision 32.8 and Additional Provision 32.9 are concerned with the Purchaser’s rights in relation to changes to the subdivision from that depicted in the Unregistered Plan.

  6. The Purchaser’s rights, including any rights to rescind, are excluded in respect of any changes that fall within Additional Provision 32.8.1 to 32.8.5. Amongst those changes are minor reductions in the boundary dimensions or area of the land and minor variations in the position of the land as shown on the Unregistered Plan and as shown on the Subdivision Plan when registered (see Additional Provision 32.8.2). In my opinion, Additional Provision 32.8.2 should be construed so that the closing words “as shown on the Unregistered Plan and as shown on the Subdivision Plan when registered” apply to reductions in boundary dimensions or area of the land as well as to variations in the position of the land. That is, in all such cases a comparison is called for between that which is shown on the Unregistered Plan and that which is shown on the Subdivision Plan when registered.

  7. It is clear in my view that the references in Additional Provision 32.9 to “reduction” and “variation” are to be read as references to reductions or variations that would fall within Additional Provision 32.8.2 save for the fact that they are “other than minor”. Accordingly, where there are changes of that kind that are “other than minor”, Additional Provision 32.9 operates to regulate the Purchaser’s rights. If the Vendor serves upon the Purchaser notice of the relevant reduction (in boundary dimensions or area of the land) or variation (in the position of the land), the Purchaser must within 14 days make an election between completion of the contract (without making any claim or objection notwithstanding the reduction or variation) or rescission of the contract. If the Purchaser does not elect to rescind within the 14 day period (which is treated as an essential time period), the Purchaser is taken to have waived its right of rescission and accepted the Subdivision Plan with the reduction or variation.

  8. The defendant contends:

  1. that there was a change to the land the subject of the contract from that which is shown on the Unregistered Plan;

  2. that the change falls within Additional Provision 32.9 as a variation in the position of the land which is other than minor;

  3. that notice of the variation was served upon the plaintiffs in accordance with Additional Provision 32.9; and

  4. that because the plaintiffs failed to rescind the contract within the 14 day period stipulated in Additional Provision 32.9, they are taken to have waived their right of rescission and accepted the Subdivision Plan with the variation.

  1. The evidence establishes that it became necessary, in the course of obtaining registration of the Subdivision Plan, for the defendant to acquire an area of land to the east of Lot 14 (as that lot was shown on the Unregistered Plan). It seems that the area had to be acquired so that it could serve as an APZ in relation to the subdivision, including Lot 14. It appears, from the limited evidence adduced in relation to this acquisition, that the defendant purchased the land from the Department of Lands. The land, which formed part of the unformed road known as Dido Street, was Lot 1 in Deposited Plan 1221171. There is no evidence to suggest that the land ever formed part of either Deposited Plan 758563 or Deposited Plan 797732, the two deposited plans referred to in the description of the land on the front page of the contract.

  2. The evidence also establishes that the proposed subdivision plan underwent numerous changes, including in relation to Lot 14. In February 2016, Lot 14 was proposed to include an area of land to the east, so that the area of Lot 14 was almost doubled. This was made known to the plaintiffs. The environmental consultant’s letter of 29 August 2016 indicates that at some stage it was proposed that Lot 14 be amalgamated with Lot 13. There is no evidence that this was made known to the plaintiffs. By November 2016, it was proposed that Lot 14 would have the same area and be in approximately the same position as shown on the plan attached to the contract. This was made known to the plaintiffs. It was not stated at that time that the adjoining Lot 1 in Deposited Plan 1221171 was to be included in the purchase. Finally, the updated plan of subdivision sent to the plaintiffs’ solicitors on 1 February 2017 again showed Lot 14 to have the same area and be in approximately the same position as shown on the plan attached to the contract. There was again no statement made that the adjoining Lot 1 in Deposited Plan 1221171 was to be included in the purchase.

  3. It is common ground that the plan of subdivision sent on 1 February 2017 (which contained 99 lots) was in the same form as that which was registered on 7 April 2017 as Deposited Plan 1206414.

  4. In my opinion, Deposited Plan 1206414 constitutes the Subdivision Plan for the purposes of Additional Provision 32 of the contract. It is the deposited plan that, upon registration, embodied the subdivision of certain parts of Deposited Plan 758563 and Deposited Plan 797732. Lot 1 in Deposited Plan 1221171 does not form part of that subdivision, even if its acquisition by the defendant was required in order to achieve registration of the Subdivision Plan. It is noteworthy that this conclusion is consistent with the position taken by the defendant’s solicitors in their letter of 7 April 2017. That letter referred to Deposited Plan 1206414 as “The Plan”, and the particulars of title given refer only to Folio Identifier 14/1206414; there is no mention of Lot 1 in Deposited Plan 1221171.

  5. It therefore seems to me that the comparison called for in the application of Additional Provision 32.8.2 and Additional Provision 32.9 is between the land (that is, Lot 14) shown on the Unregistered Plan and the land (that is, Lot 14) shown on the Subdivision Plan when registered. That comparison reveals that there has been no reduction in the area of the land. It is difficult to read all of the boundary dimensions shown on the plan attached to the contract. Nevertheless, if the two plans are compared it appears that if there has been any reduction in the boundary dimensions of the land, or any variation in the position of the land, it is a minor reduction or variation (see Additional Provision 32.10 in relation to boundary dimensions). I therefore agree with the submission made by the plaintiffs to the effect that Additional Provision 32.9 was not engaged in this case.

  6. I do not accept the defendant’s submission that there has been a variation in the position of the land that is other than minor. That submission rests upon the fact that it became necessary for the defendant to acquire the adjoining Lot 1 in Deposited Plan 1221171. As I understand the submission, it is put that this entitled the defendant to include that area in the land to be purchased by the plaintiffs, and this inclusion had the result that there was a variation in the position of the land that was other than minor for the purposes of Additional Provision 32.9.

  7. It may be accepted that the acquisition of Lot 1 in Deposited Plan 1221171 was necessary in order to achieve registration of the subdivision. It may have been a step that was reasonably necessary in order to achieve registration. If so, the defendant would have been bound to acquire the lot (see Additional Provision 32.2). Whether that is so or not, the contract expressly contemplated that the defendant may make alterations to the measurements shown on the Unregistered Plan if necessary in order to achieve registration of the Subdivision Plan (see Additional Provision 32.7). However, as it turned out, the Subdivision Plan was able to be registered without making any changes that were “other than minor” to Lot 14. Lot 14 in the Subdivision Plan has the same area and the same, or approximately the same, dimensions as Lot 14 as shown in the Unregistered Plan, and it is in approximately the position Lot 14 was shown in the Unregistered Plan. Accordingly, subject to the terms of the contract (including Additional Provision 33 concerning easements, covenants and restrictions affecting the land), upon registration of the Subdivision Plan the land the defendant was bound to convey and the plaintiffs were bound to accept was Lot 14 in Deposited Plan 1206414.

  8. That the adjoining Lot 1 in Deposited Plan 1221171 had to be acquired by the defendant in order to achieve registration of the Subdivision Plan, and that the lot was intended to serve as an APZ for the subdivision, including Lot 14, does not in my view entitle the defendant to add Lot 1 in Deposited Plan 1221171 to the sale to the plaintiffs.

  9. It follows from the above conclusions that no question arises concerning the giving of notice pursuant to Additional Provision 32.9. However, in case my conclusions are not correct, I will address the defendant’s submission that it gave such notice to the plaintiffs.

  10. The defendant ultimately seemed to accept, correctly in my view, that a notice under Additional Provision 32.9 could not be given until the Subdivision Plan had been registered. However, the defendant submitted that the letters sent by RMB to Blackman on 7 April 2017 and 18 April 2017 amount to notice under Additional Provision 32.9 of an other than minor variation in the position of the land.

  11. I do not see how the 7 April 2017 letter could constitute such notice. As mentioned earlier, it makes no mention of Lot 1 in Deposited Plan 1221171 or of any variation that might form the basis of a notice under Additional Provision 32.9.

  12. The letter of 18 April 2017 does refer to Lot 1 in Deposited Plan 1221171. That letter states, in effect, that the lot will be transferred to the plaintiffs at settlement along with Lot 14 in Deposited Plan 1206414, and further states that the plaintiffs are aware of that position. The latter statement might be intended as a reference to the February 2016 communications in which Lot 14 was shown as extending further to the east and having an area almost twice that shown on the plan attached to the contract. In any event, the letter indicates that what is to be conveyed under the contract is Lot 14 in Deposited Plan 1206414 together with Lot 1 in Deposited Plan 1221171. However, even assuming in the defendant’s favour that such change amounts to a variation in the position of the land that is other than minor for the purposes of Additional Provision 32.9, I do not think that the 18 April 2017 letter should be regarded as a notice under that clause. Accepting that no form of notice is prescribed for the purposes of Additional Provision 32.9, the 18 April 2017 letter nonetheless makes no reference to Additional Provision 32.9 and, more importantly, does not state that the plaintiffs are required to make an election within 14 days as stipulated in Additional Provision 32.9. In those circumstances, a reasonable recipient of the 18 April 2017 letter would not in my view see it as a notice under Additional Provision 32.9. Rather than stating that the plaintiffs had a contractual choice to make, the letter presents the matter as a fait accompli.

  1. Accordingly, even if I am wrong in concluding that the defendant was not entitled to include Lot 1 in Deposited Plan 1221171 in the sale, the defendant did not serve a notice under Additional Provision 32.9 in respect of that variation. The plaintiffs were not called upon to make any election pursuant to Additional Provision 32.9, and thus cannot be taken to have accepted the Subdivision Plan with an other than minor variation in the position of the land.

  2. The defendant did not suggest that the plaintiffs in some other way became bound to accept the additional lot. It was not submitted, for example, that the plaintiffs’ initial acceptance of the notion that they would acquire the additional lot amounted to a variation of the contract. The defendant was correct to take that stance. The plaintiffs’ acceptance on 19 April 2017 was not unconditional, and the negotiations which followed, as recorded in the correspondence between 20 April 2017 and 24 April 2017, did not lead to agreement.

  3. In summary, the plaintiffs were entitled to decline to acquire Lot 1 in Deposited Plan 1221171 and insist upon a conveyance to them of only Lot 14 in Deposited Plan 1206414. The defendant was thus not acting in accordance with the terms of the contract when it insisted that the plaintiffs were obliged to accept both lots, including by serving a Notice to Complete to that effect. Finally, the defendant’s termination of the contract, based upon the plaintiffs’ failure to complete in accordance with the Notice to Complete (by the extended date of 19 May 2017), was a wrongful termination of the contract that in my view amounted to a repudiation of the contract as it evinced an intention not to perform the contract in accordance with its terms.

  4. In these circumstances the defendant is not entitled to the deposit paid under the contract. The deposit should be refunded to the plaintiffs. As mentioned earlier, the plaintiffs do not seek specific performance of the contract, and bring no claim for damages.

  5. The Court was informed that the deposit had been released to the defendant after its termination of the contract. The Court will therefore order that the defendant pay the sum of $48,500 to the plaintiffs, together with any interest earned on the deposit (see Additional Provision 36.3).

  6. It is not necessary to consider the plaintiffs’ alternative claim for repayment of the deposit pursuant to s 55(2A) of the Conveyancing Act 1919 (NSW). I would observe, however, that if the defendant was correct in its assertion that the plaintiffs were bound to accept the two lots, it is difficult to see why it would be unjust or inequitable for the defendant to retain the deposit following its termination of the contract due to the plaintiffs’ failure to complete.

  7. The defendant’s Cross Summons will be dismissed, save that an order will be made for the removal of the caveat lodged by the plaintiff over the consolidated lot created in June 2017, namely, Lot 1 in Deposited Plan 1232499. There is no basis for that caveat (cf a caveat that asserted an equitable lien or charge to secure repayment of the deposit) to remain on the title.

  8. The plaintiffs have succeeded on the central issue in the proceedings. The Court will also order that the defendant pay the plaintiffs’ costs of the proceedings.

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Decision last updated: 27 March 2018

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