Tamanna v Zattere

[2017] NSWSC 1388

Supreme Court

New South Wales

Medium Neutral Citation:

Tamanna v Zattere; Thakorlal v Zattere; Rabac Pty Ltd v Zattere [2017] NSWSC 1388

Hearing dates:

20 – 23 June 2016, 10 April, 22 and 24 August 2017

Date of orders:

12 October 2017

Decision date:

12 October 2017

Jurisdiction:

Equity

Before:

Darke J

Decision:

Purchasers entitled to loss of bargain damages following termination for vendor’s repudiation of contracts.

Catchwords:

LAND LAW – conveyancing – the contract for sale – rescission – “off the plan” purchases – vendors required to use either reasonable endeavours or best endeavours to cause plan of subdivision to be registered – plan not registered by required date – whether vendor entitled to rescind – rescissions ineffective

 

CONTRACTS – causation – principle that a party cannot exercise a right in reliance on an event that results from its own default – whether innocent party must prove that default materially contributed to the occurrence of the event or prove on balance of probabilities that default caused the event – party not able to exercise a right of rescission if it has materially contributed to the occurrence of the event that gives rise to the right

 

CONTRACTS – damages – date of assessment – where defendants repudiated contracts by invalid rescission – subject matter of contract subsequently sold by receiver – plaintiffs terminated contracts shortly before hearing – whether date of assessment is date of termination or earlier date – damages assessed at date of termination

  CONTRACTS – damages – loss of bargain damages – requirement of plaintiff to prove it was ready, willing and able to perform its obligations – standards of readiness, willingness and ability for termination for breach and proof of damages – plaintiffs ready, willing and able to complete up to time of termination

Legislation Cited:

Competition and Consumer Act 2010 (Cth), Sch 2, ss 18, 236
Conveyancing Act 1919 (NSW), ss 88B, 88K
Supreme Court Act 1970 (NSW), s 68

Cases Cited:

Abourjaily v Parkview Estate Pty Ltd [2017] NSWSC 1256
Actall Pty Ltd v Pacific Bay Development Pty Ltd [2006] ANZ ConvR 67; [2005] NSWSC 1067
Al Achrafi v Topic (2016) 18 BPR 36,517; [2016] NSWSC 1807
ASA Constructions Pty Ltd v Iwanov [1975] 1 NSWLR 512
Clark v Macourt (2013) 253 CLR 1; [2013] HCA 56
Cohen & Co v Ockerby & Co Ltd (1917) 24 CLR 288
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7
Foran v Wight (1989) 168 CLR 385
Hardy v Wardy (2001) 10 BPR 19,055; [2001] NSWSC 1141
Hawes v Cuzeno Pty Ltd (1999) 10 BPR 18,011; [1999] NSWSC 1167
Hensley v Reschke (1914) 18 CLR 452
Henville v Walker (2001) 206 CLR 459; [2001] HCA 52
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
Hunyor v Tilelli (1997) 8 BPR 15,629
Italo-Australian Club Ltd v National Australia Bank Ltd (1989) NSW ConvR 55-461
Johnson v Perez (1988) 166 CLR 351
Joseph Street Pty Ltd v Tan (2012) 38 VR 241; [2012] VSCA 113
Masters v Belpate (2001) 10 BPR 18,527; [2001] NSWSC 169
Mills v Ruthol Pty Ltd (2004) 61 NSWLR 1; [2004] NSWSC 547
Mordue v Kroone (2009) 14 BPR 26,771; [2009] NSWSC 255
Ng v Filmlock Pty Ltd (2014) 88 NSWLR 146; [2014] NSWCA 389
Nina’s Bar Bistro Pty Ltd v MBE Corporation (Sydney) Pty Ltd [1984] 3 NSWLR 613
Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235
Plumor Pty Ltd v Handley (1996) 41 NSWLR 30
Rawson v Hobbs (1961) 107 CLR 466
Ronnoc Finance Ltd v Spectrum Network Systems Ltd (1997) 45 NSWLR 624
Sanctuary Investments Pty Ltd v St Gregory’s Armenian School Incorporated (1998) 9 BPR 16,823
Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245
Suttor v Gundowda Pty Ltd (1950) 81 CLR 418
Transfield Pty Ltd v Arlo International Ltd (1980) 144 CLR 83
Wang v Kaymet Corporation [2015] NSWSC 1459
Wardy v Hardy (2002) 11 BPR 20,227; [2002] NSWCA 215
Waters Lane Pty Ltd v Sweeney (2008) Aust Contract R 90-287; [2007] NSWCA 200
Wroth v Tyler [1974] Ch 30

Category:

Principal judgment

Parties:

2015/77619
Sadia Tamanna (First Plaintiff)
Mohammed Shafiqul Islam & Nahid Sinha (Second & Third Plaintiffs)
Elizabeth Beatty & Sean Beatty (Fourth & Fifth Plaintiffs)
Nataile Rita Twyford & Ryan Twyford (Sixth & Seventh Plaintiffs)
Akm Shawkat-Ul Islam & Nishat Islam (Eighth & Ninth Plaintiffs)
Ratish Jassra & Aranya Jassra (Tenth & Eleventh Plaintiffs)
Russell Tanvir Chowdhury (Twelfth Plaintiff)
Shamin Reza Farooq & Sonia Ferdous (Thirteenth & Fourteenth Plaintiffs)
Ahmed Samim Naeblkhil (Fifteenth Plaintiff)
James Thorne & Assunta Thorne (Sixteenth & Seventeenth Plaintiffs)
Mihir Kumar Roy & Rummana Afreen (Eighteenth & Nineteenth Plaintiffs)
Md Monirul Islam & Samiya Rahim Chowdhury (Twentieth & Twenty First Plaintiffs)
Satya Prakash Upadhyaya & Maya Upadhyaya (Twenty Second & Twenty Third Plaintiffs)
Puneet Sharma & Shweta Sharma (Twenty Fourth & Twenty Fifth Plaintiffs)
Mary Paula Zattere (First Defendant)
Judy Anne Feeney (Second Defendant)
EDI Kellyville Pty Ltd (Third Defendant)

 

2015/112540
Kantilal Thakorlal (First Plaintiff)
Wanita Thakorlal (Second Plaintiff)
Mary Paula Zattere (First Defendant)
Judy Anne Feeney (Second Defendant)
EDI Kellyville Pty Ltd (Third Defendant)

  2014/358727
Rabac Pty Limited (Plaintiff)
Mary Paula Zattere (First Defendant)
Judy Anne Feeney (Second Defendant)
EDI Kellyville Pty Ltd (Third Defendant)

Representation:

Counsel:
2015/77619
Mr J Kelly SC with Mr G H Furlan (Plaintiffs)
Mr A Cheshire SC with Mr Maghami except for 10 April 2017 when Mr Maghami appeared, and 22 and 24 August 2017 when Mr GW McGrath SC appeared with Mr Maghami (First Defendant)
Mr Zeeman (Second and Third Defendant)

 

2015/112540
Mr P Afshar (Plaintiffs)
Mr A Cheshire SC with Mr Maghami except for 10 April 2017 when Mr Maghami appeared, and 22 and 24 August 2017 when Mr GW McGrath SC appeared with Mr Maghami (First Defendant)
Mr Zeeman (Second and Third Defendant)

 

2014/358727
Mr J Jobson (Plaintiff)
Mr A Cheshire SC with Mr Maghami except for 10 April 2017 when Mr Maghami appeared, and 22 and 24 August 2017 when Mr GW McGrath SC appeared with Mr Maghami (First Defendant)
Mr Zeeman (Second Defendant)

 

Solicitors:
2015/77619
Neil Lawyers (Plaintiffs)
Kings Law Group (First Defendant)

 

2015/112540
Macquarie Partnership Lawyers (Plaintiffs)
Kings Law Group (First Defendant)

  2014/358727
Andresakis & Associates (Plaintiffs)
Kings Law Group (First Defendant)

File Number(s):

2015/77619; 2015/112540; 2014/358727

Publication restriction:

None

Judgment

Introduction

1. This judgment concerns three proceedings that were heard together. The proceedings involve damages claims made by purchasers under numerous contracts for the sale of lots in a proposed 21 lot sub-division. The land the subject of the proposed sub-division is an area of about 5 acres, being Lot 17 in Deposited Plan 215650, and known as 31 Memorial Avenue, Kellyville (“the property”).

2. The vendors under the contracts are the first and second defendants, Ms Zattere (who owned 99/100 of the property) and Ms Feeney (who owned 1/100 of the property) respectively. Ms Feeney subsequently transferred her interest in the property to a company with which she was associated, namely EDI Kellyville Pty Ltd (“EDI”). EDI is the third defendant in each of the proceedings.

3. Ms Feeney was called as a witness. Otherwise, neither she nor EDI took any active part in the hearing.

4. The contracts were entered into at various times between 24 September 2013 and 27 November 2013. Most of the contracts were made in the first week of October 2013.

5. All of the contracts were expressed to be conditional upon the registration of a plan of sub-division and registration of an instrument under s 88B of the Conveyancing Act 1919 (NSW). The contracts each contained a provision to the effect that if the plan of sub-division and s 88B instrument (together referred to as “the Documents”) were not registered by the Sunset Date of 31 December 2014, then either party had the right (whilst those documents remained unregistered) to rescind the contract. The contracts also contained a provision requiring the vendors to use their best endeavours (or in some cases their reasonable endeavours) to have the Documents registered by 31 December 2014.

6. In circumstances which are more fully described below, the Documents were not registered by 31 December 2014. In January 2015, the vendors purported to rescind the contracts. The purchasers contend that the vendors were in breach of their best endeavours or reasonable endeavours obligations, and were not entitled to rescind the contracts.

7. The purchasers initially sought specific performance of the contracts. However, this became impossible following the sale of the property (by a receiver appointed by a mortgagee) in mid-January 2016. By that time, the three proceedings had already been listed for hearing to commence in June 2016. Shortly prior to the hearing, the purchasers purported to terminate the contracts on the basis that the vendors had repudiated their obligations. The purchasers thereafter claimed damages for loss of bargain.

8. The purchasers under one contract (K and W Thakorlal) make an additional claim for damages under s 236 of Schedule 2 to the Competition andConsumer Act 2010 (Cth) (“the Australian Consumer Law”). This claim is based upon alleged pre-contractual representations made on behalf of the vendors. The representations are said to have been misleading or deceptive, or likely to mislead or deceive, within the meaning of s 18 of the Australian Consumer Law.

9. Various other claims that were the subject of the pleadings were not pressed.

Summary of events concerning the development of the property

10. Ms Zattere was originally the sole registered proprietor of the property. She lived in a house on the property with some of her children. In about late 2009 or early 2010, she and her son, Mark Zattere, held discussions with Ms Feeney concerning a sub-division development of the property. Mark Zattere was a builder, and it was contemplated that he would construct homes on the property. On about 13 November 2010 Ms Zattere, Ms Feeney and EDI entered into a Deed of Agreement. By cl 2.1 of the deed, Ms Feeney agreed to facilitate and progress a development application in respect of the property, and do all things necessary (including arranging all financial assistance) to complete a sub-division of the property. By cl 2.3 it was agreed that on completion of the sub-division any profit would be shared equally between, it seems, Ms Zattere and Ms Feeney.

11. Ms Zattere later transferred a 1/100 interest in the property to Ms Feeney in order to facilitate a loan from the National Australia Bank to Ms Feeney which was secured by a mortgage over the property.

12. In about February 2011 Ms Feeney spoke to a consultant surveyor, Mr Greg Atkins, about a sub-division development of the property. Mr Atkins said that he could assist. On 28 February 2011 he sent a fee proposal to Ms Feeney for a survey of the site and for a sub-division layout. Mr Atkins told Ms Feeney that she would need an engineer, and recommended Mr Malcolm Smith for that role. In March 2011 Mr Atkins forwarded to Ms Feeney a fee proposal from Mr Smith for a conceptual engineering design. The fee proposal indicated that Mr Smith had spoken to the Baulkham Hills Shire Council (“the Council”), and that the design would need to include various details including details of “drainage easements over downstream property (either existing or being created) if required”.

13. I interpolate here that the topography of the area is such that it generally slopes downwards from the property in an easterly direction towards the adjoining property at 29 Memorial Avenue, and then over the next property at 27 Memorial Avenue.

14. In about May 2011 Ms Feeney gave instructions to Mr Atkins to proceed. By 6 July 2011 Mr Atkins had sent a draft sub-division layout and a detailed survey plan to an officer of the Council (Mr Turner), and requested that arrangements be made for a “pre-lodgement meeting”.

15. A pre-development application meeting was held on 19 July 2011. The meeting, which lasted about two hours, was attended by Ms Feeney and Mr Atkins as well as Mr Turner and Mr Hawkins from the Council. The Council prepared notes of the matters discussed and made the notes available to Ms Feeney. She examined the notes “to determine what reports the Council required”, and began contacting consultants. The meeting notes included the following:

30. A separate engineering concept design for the road and drainage works must be provided as part of the sub-division application submission.

…

32. During the meeting you raised the possibility of temporary storm water discharge over adjoining properties. You will need to obtain owners consent in respect to this matter.

16. At about this time Ms Feeney engaged Mr Rene Licata as a project manager.

17. In the latter months of 2011 reports were obtained from various consultants including an archaeologist (Aboriginal Cultural Heritage Assessment) and an environmental consultant (Contamination and Salinity Investigation). The latter report included the following:

This report presents the results of a Phase 1 – Preliminary Contamination Assessment comprising of a site history appraisal and a visual site inspection to provide preliminary comments on potential sub-surface soil contamination of the site.

…

Based on the results of this preliminary study, we are of the opinion that the site has some contamination issues relating to previous orchard activities, equipment maintenance activities and buried rubbish containing asbestos.

18. In about late 2011 Ms Feeney had a conversation with Mr Atkins during which Mr Atkins said words to the following effect:

Judy, we need storm water and drainage consent from No 29 for the development consent. You will need to go and approach them.

19. Ms Feeney spoke to Mr Licata and requested him to approach the owners of the property at 29 Memorial Avenue. The property was then owned by Mr George Schembri. It appears that in early November 2011 Mr Licata spoke to a member of the Schembri family (Mr Ray Schembri) about having a meeting to discuss the proposed sub-division. No such meeting took place until about mid-2012.

20. In the meantime, the proposed sub-division of the property was progressing. In December 2011 Ms Feeney received a fee proposal from an engineer (J. Wyndham Prince) for various services to be provided in connection with the preparation of the development application. The fee proposal referred to the notes made by the Council concerning the pre-development application meeting, and included the following:

CN 32. Requires owners consent for discharge of stormwater across adjoining land. This is often an iterative process with early dialogue being essential to limit re-work of drainage concepts. Has any approach been made to adjoining owners in this regard?

21. In about March 2012 Mr Smith was engaged by Ms Feeney to prepare conceptual engineering plans. In April 2012 Ms Feeney instructed Mr Atkins to proceed to prepare a statement of environmental effects.

22. The conceptual engineering plans and waste management plan for the proposed sub-division were completed by Mr Smith in June 2012.

23. On 20 June 2012 Mr Atkins sent an email to Ms Feeney and Mr Licata concerning the draft statement of environmental effects. The email included the following:

The applicant is to provide written consent from the owners of Lot 16 DP 215650 (No 29 Memorial Avenue) to discharge stormwater at the three temporary drainage outlets on to the adjoining lot 16. Judy, letter of consent to dispose storm water on No 29 ??? Essential !!!

Judy, a letter of consent from No 29 to the proposed lot pattern/minor variation to the planned DCP road position would help with easy passage thru Council !!!

24. On 26 June 2012 Mr Atkins sent an email to Mr Licata which included the following:

It still remains essential to get permission to dispose stormwater upon No. 29 in the three locations i.e. at the end of each road.

25. On 27 June 2012 Mr Atkins sent an email to Mr Licata and Ms Feeney attaching a plan showing the drainage outlet locations onto No 29 Memorial Avenue.

26. At about that time, Ms Feeney and Mr Licata met with Mr Schembri and two of his sons. In the course of the meeting Ms Feeney asked whether the Schembris were interested in providing consent to drainage over their property as required by the Council. Mr Ray Schembri said that Ms Feeney should contact their solicitor, Mr Henry Grech of Grech Partners. Ray Schembri also stated that they wanted to sell 29 Memorial Avenue for $7.5 million.

27. Ms Feeney spoke to Mr Grech about the matter on 11 July 2012. On 20 August 2012 she sent a letter to Mr Grech which included the following:

I have met with your clients and in the interest of both parties they have provided me your details as they would like to discuss with you what is required from them in respect of the development of the Project. I have agreed to pay their legal fees in this instance and would like an itemised estimate of your costs in this regard being to review the information attached and conference your client and complete any paper work namely the signing of the letter of Consent. For your reference I attach:

(1) Copy of the survey draft survey for both lands; and

(2) Consent.

Council requires consent from the neighbouring Property owned by your client for the water and sewer to drain on to the Property as the lay of the land is such that the Project is situated on the hill and the water will run down on to the Property by natural occurrence – notwithstanding this the Council still requires the Consent. This is a normal request of Council as you would be aware.

We advise that the benefit to your client is that all services and water and sewer connections will be brought to the boundary of your clients land adding a valued benefit to your client in the event the time approaches that a developer wishes to acquire the Property or if they wish to develop the land themselves.

It is this document that we are awaiting on for lodgement of Council and with respect require an early response.

28. I note that the Project referred to in the letter was described as the development of both 31 and 33 Memorial Avenue. There is evidence that in about mid-2012 that Ms Feeney may have been contemplating a purchase of 33 Memorial Avenue. This is referred to in an email sent to her by Mr Atkins on 20 June 2012.

29. On 21 August 2012 Mr Grech sent an email to Ms Feeney in which he requested further information including details of the proposed works and easement sought to be obtained. On 22 August 2012 a paralegal in Ms Feeney’s firm sent an email to Mr Grech which attached certain concept plans prepared by Mr Smith. On 3 October 2012 Ms Feeney sent a further letter to Mr Grech in which she requested a further response to her earlier letter as a matter of urgency. On 26 November 2012 and 12 December 2012 the paralegal in Ms Feeney’s firm sent further emails to Mr Grech’s firm seeking a response to Ms Feeney’s letters.

30. It is not clear why there was no response to Ms Feeney’s letters. I note, however, that Mr George Schembri had died on 12 August 2012. In any case, Ms Feeney had concluded, by the end of 2012, that the negotiations with the owners of 29 Memorial Avenue had broken down. She did not further pursue the matter with those owners until September 2013.

31. Little progress seems to have been made with the proposed sub-division from late 2012 until about mid-2013. This may have been related to the illness and subsequent death of Mark Zattere in May 2013. Shortly after his death, Ms Zattere and Ms Feeney agreed that they would continue with the development. It was envisaged that Mr Atkins and Mr Smith would remain involved, with the latter undertaking the role of project manager. Mr Licata was no longer involved in the project.

28. In about July 2013 a property developer, Mr Darren Pearson, acquired (or at least acquired an interest in) the neighbouring property at 33 Memorial Avenue. It seems that both Mr Smith and Mr Atkins were soon thereafter engaged by Mr Pearson to do work on his proposed development of that site.

29. In about early August 2013 Ms Feeney had conversations with both Mr Smith and Mr Atkins concerning the obtaining of consent from the owners of 29 Memorial Avenue for downstream drainage flows. She told Mr Smith that she had not been able to obtain the consent, and Mr Smith said this was a problem that could affect the lodging of a development application. In her conversation with Mr Atkins, Ms Feeney told him that the owners of 29 Memorial Avenue were not prepared to give consent. Mr Atkins said that Ms Feeney would need to try again.

30. On 2 September 2013 Ms Feeney sent an email to Mr Grech about the matter, but she received no reply.

31. On 23 September 2013 Mr Atkins informed Ms Feeney that Mr Smith expected to lodge the development application in about two weeks. The first contract for sale was entered into on 24 September 2013. Most of the lots had been sold by 6 October 2013. As noted earlier, each of the contracts contained terms requiring Ms Zattere and Ms Feeney to use their best endeavours (or their reasonable endeavours) to have the sub-division registered by 31 December 2014, about 15 months hence.

32. In early October 2013 Ms Feeney had a conversation with Mr Atkins in which she told him that she could not get any answer from the neighbours. Mr Atkins said that Mr Pearson had obtained an option over 29 Memorial Avenue and that Ms Feeney would need to contact him and ask for the consent “because you’ve got things he needs”. Mr Atkins explained that Mr Pearson would need access through 31 Memorial Avenue in order to build the roads for 29 Memorial Avenue, and would thus be willing to work with Ms Feeney.

33. On 4 October 2013 Mr Atkins sent an email to Ms Feeney which attached an estimate of development costs and fee proposal prepared by Mr Smith, and Mr Atkins’ own fee proposal for survey works. Mr Smith’s fee proposal had three components, namely, Final Engineering Design and Construction Certificate Drawings, Utility Services Provision and Project Implementation Coordination. The first item included “assist client with preparation of a Construction Certificate Application and lodge with Council for approval”. Various matters were stated to be not included within the fee proposal. One such matter was “negotiation with neighbours regarding storm water drainage disposal”.

34. Ms Feeney spoke to Mr Pearson on 4 October 2013. In the course of the conversation Ms Feeney said that she was wanting to develop 31 Memorial Avenue and understood that Mr Pearson had an option over 29 Memorial Avenue. She said that she required consent for the drainage of the property. Mr Pearson confirmed that he had an option. He also said that he had no problems providing the consent and would speak to his solicitor. Mr Pearson also asked Ms Feeney how much she would sell 31 Memorial Avenue for. Ms Feeney said that the property was not for sale. It appears from an email sent by Ms Feeney to Mr Atkins later that day that she had agreed with Mr Pearson to send him an email setting out what she wanted.

35. On 11 October 2013 Ms Feeney sent an email to Mr Pearson which included the following:

As discussed and suggested by you I have included in my email to you issues of discussion as follows:

Need to consider boundary adjustments or land swap in the upper right hand corner between 29 and 31 to our mutual benefits.

Please sign the attached consent and amend accordingly to discharge downstream drainage on to 29 or arrange the owners to sign.

We are happy to reciprocate by providing a consent for 33 to discharge downstream drainage on to 31.

40. The attached form of consent was addressed to the Council and was in the following terms:

I, Darren Pearson and ______ the registered owners of 29 Memorial Avenue Kellyville, consent for the drainage of the storm water and sewer from 31 Memorial Avenue to drain on to our land and that all services are connected to the boundary of the Land.

41. On about 21 October 2013 Ms Feeney had a conversation with Mr Atkins to the following effect:

Atkins:   Judy, the consent that we require from Darren needs to be incorporated in an MOU because there are going to be trade-offs. What I propose is that we move the condition of the drainage consent to the CC stage.

Feeney:   What does that mean?

Atkins:   It means we can get the DA now. When Darren lodges his CC for 29, what we can do is lodge our CC a day later for 31. Council can then look at it as a deemed consent.

Feeney:   Do we still need an MOU?

Atkins:      Yes as it will deal with other issues besides drainage.

42. A development application (No 525/2014) in respect of the proposed sub-division of 31 Memorial Avenue was lodged with the Council on 25 October 2013. Ms Feeney was the applicant. The proposed sub-division comprised 21 lots, being 20 residential lots each of about 700m2 in area, and 1 residue lot of 1567m2. An accompanying Waste Management Report prepared by Mr Smith referred to the findings of the Phase 1 Contamination and Salinity investigation carried out by Geo Enviro Consultancy Pty Ltd (“Geo Enviro”) including in relation to buried builder’s rubbish and quantities of asbestos sheeting. The accompanying Statement of Environmental Effects prepared by Mr Atkins included the following in relation to stormwater management:

Conceptual Engineering Plans have been prepared by Malcolm Smith Pty Ltd.

…

Stormwater design is subject to Council’s design requirement. Details are to be submitted with the Construction Certificate Application.

The proposed John Hillas Avenue aligns with the natural depression of the adjoining Lot 16 DP 215650 (No 29 Memorial Avenue) and as such provides a legal point of discharge. Lot 16 DP 215650 (No 29 Memorial Avenue) is under option for sale. The applicant is currently in negotiations with the developer who holds this option. The applicant is seeking, through this developer, a consent from the owner of Lot 16 to discharge stormwater onto the adjoining Lot 16.

43. On 14 November 2013 Mr Simon Turner of the Council (the officer responsible for evaluating the development application) sent a letter to Ms Feeney in which reference was made to contamination issues. It was stated that a Phase 2 – Detailed Site Investigation had to be prepared and submitted within 21 days for consideration. By 18 November 2013 Ms Feeney had sent an email drawing this letter to the attention of Mr Atkins and Mr Solern Liew of Geo Enviro. Ms Feeney stated in her email that “we were wanting the DA to be out by Christmas” and requested that the matter be dealt with within the timeframe nominated by the Council. On 22 November 2013 Mr Atkins suggested to Ms Feeney that the Council could be asked to make the Phase 2 report (and a Remediation Action Plan, if required) a condition of the issue of the construction certificate, rather than something to be dealt with prior to the issue of the development consent itself. Mr Atkins made such a request to Mr Turner later that day. It seems that the Council acceded to that request.

44. On 25 November 2013 the Council issued a development consent (No 453/2014) for a 17 lot sub-division on 33 Memorial Avenue. Mr Smith’s company, Malcolm Smith Pty Ltd, was the applicant for the consent.

45. On 2 December 2013 Mr Atkins sent an email to Ms Feeney concerning negotiations with Mr Pearson in relation to the development of numbers 33, 31 and 29 Memorial Avenue. Ms Feeney understood that the matters referred to in the email were to be incorporated within a Memorandum of Understanding (an MOU) to be entered into with Mr Pearson. Those matters included Mr Pearson providing a letter of consent for discharge of stormwater at three locations and, depending on the order in which the developments occurred, agreement concerning the construction of sewer works. Ms Feeney requested Mr Atkins to speak to Mr Pearson about the issues.

46. On 4 December 2013 Mr Atkins provided certain suggestions to Ms Feeney for inclusion in an email to be sent to Mr Pearson about the issues under discussion. The evidence is unclear about whether (and if so, when) any such email was sent.

47. Also on 4 December 2013 Ms Feeney gave approval to a fee proposal from Geo Enviro to undertake a Phase 2 contamination investigation which would include recommendations for remediation if contamination was encountered. Geo Enviro was ready to commence work on 6 December 2013. A Phase 2 Contamination Report and Remediation Action Plan (apparently dated March 2014) was received by Mr Atkins on 7 April 2014. However, it appears from an email Ms Feeney sent to herself on about 20 March 2014 that Mr Smith had received the report by that time. The Geo Enviro tax invoice indicates that apart from 7 hours of fieldwork, the work involved a total of 10 hours of data compilation and interpretation and reporting. It is not clear why the report was not produced at an earlier time.

48. On 10 December 2013 Mr Smith, apparently acting at the behest of Mr Pearson, sent an email to Mr Atkins in which permission was sought for “temporary foot access across No 31 Memorial Avenue to assist with the sale of land on No 29”. Mr Smith suggested that this matter be considered as part of “the other matters being considered”, and that a single agreement would cover all matters. Ms Feeney discussed the request with Mr Atkins. He told her that Mr Pearson wanted to get a development approval for No 29 as he wanted to develop it “pretty soon”. He also told her that Mr Pearson would “start the sewer process for 29 which will hook up to 31”.

49. Negotiations with Mr Pearson do not seem to have been taken any further in December 2013. Mr Atkins sent an email to Ms Feeney on 17 December 2013 concerning the sub-division of 29 Memorial Avenue. Mr Atkins requested Ms Feeney to draft and forward a response to an email on the subject, but it appears that she did not do so. Mr Atkins followed the matter up with a further email on 14 January 2014.

50. In the meantime, on 24 December 2013 the Council issued a development consent (No 525/2014) in relation to Ms Feeney’s application in respect of 31 Memorial Avenue. A number of conditions were imposed which had to be satisfied before a construction certificate would issue. Amongst those conditions were the following:

17.   Contamination Assessment & Site Remediation

Prior [to] issue of a Construction Certificate, a Phase 2 Contamination Assessment – Detailed Site Investigation shall be provided and be accompanied by a Remediation Action Plan.

The Phase 2 Contamination Assessment must give comprehensive information on issues that were raised in the preliminary report…prepared by Geo Enviro Consultancy Pty Ltd reference JE11482A, dated December 2011.

…

20.   Stormwater Discharge Acceptance

Where the engineering works included in the scope of this approval necessitate the discharge of stormwater onto adjoining land, written consent from all affected adjoining property owners must be obtained and submitted to Council before a Construction Certificate is issued.

21.   Engineering Works and Design

…The design and construction of the engineering works listed below must be provided for…

The following engineering works are required:

…

xi   Stormwater Drainage – Temporary Discharge

Tail out drains over adjoining properties are required to be provided, where necessary, of sufficient length and width to dissipate stormwater flows to an acceptable level from the end of all stormwater outlets.

51. Condition 30 provided:

30.   Service Authority Consultation – Subdivision Works

Before sub-division works commence:

…

(b)   Documentary evidence, including a notice of requirements from Sydney Water, must be submitted confirming that satisfactory arrangements have been made for the provision of water and sewerage facilities.

52. A number of conditions were imposed which had to be satisfied before a sub-division certificate could issue. Amongst those conditions were the following:

38.   Completion of Subdivision Works

A Subdivision Certificate must not be issued prior to the completion of all subdivision works covered by this consent, in accordance with this consent.

…

43. Section 73 Compliance Certificate

A Section 73 Compliance Certificate issued under the Sydney Water Act 1994 must be obtained from Sydney Water confirming satisfactory arrangements have been made for the provision of water and sewer services. Application must be made through an authorised Water Servicing Coordinator. The certificate must refer to this development consent and all of the lots created.

53. On 14 January 2014 Ms Feeney sent an email to Mr Atkins which set out the conditions upon which she and Ms Zattere would be prepared to allow access across No 31 Memorial Avenue to No 29 Memorial Avenue. Mr Atkins forwarded the email to Mr Smith later that day. In late January 2014, Ms Feeney had further discussions with Mr Atkins about the negotiations with Mr Pearson. Mr Atkins told her that Mr Pearson’s solicitor was preparing a deed that would deal with the issues, including access. Ms Feeney suggested that consent from the owners (not merely Mr Pearson) would be required. A note made by Ms Feeney on 30 January 2014 of a conversation with Mr Atkins indicates that there was some discussion about lodgement of the construction certificate application, and it was said that this would be “straight after the neighbour”.

54. On about 31 January 2014 Ms Feeney, EDI and Ms Zattere executed an MOU to record the parties’ understanding of the arrangements between them for the development of 31 Memorial Avenue. Under the terms of the MOU Ms Feeney was to arrange a construction loan “to the value of $3,000,000”. There is evidence that by January 2014 the National Australia Bank, and a valuer engaged by it, were seeking information from Ms Feeney in connection with an application for finance.

55. On 25 February 2014 Ms Feeney made an enquiry of Mr Atkins as to whether the proposed agreement with Mr Pearson had been drafted. On 26 February 2014 Mr Atkins informed Ms Feeney that he expected the agreement to be issued that week. A draft MOU, prepared by Storey and Gough Lawyers, was forwarded by Mr Atkins to Ms Feeney on 8 March 2014. The parties to the MOU were to be Ms Feeney and Ms Zattere, Chelsea on the Park Pty Ltd (said to be the purchaser of No 29) and Diversified Property Holdings Pty Ltd (said to be the purchaser of No 33). It may be inferred that these companies are associated with Mr Pearson. The draft MOU dealt with numerous matters including the purchase by Ms Feeney and Ms Zattere of a small portion of No 33 Memorial Avenue and the purchase by Chelsea on the Park Pty Ltd of a small portion of No 31 Memorial Avenue. Clauses 4 and 5 of the draft MOU provided:

4.   Chelsea may obtain consent from the current owners of 29 for 31 to discharge stormwater onto 29 at three points being the proposed locations of Half Penny Avenue, John Hillas Avenue and Thomas Boulton Circuit as shown on Attachment “A” where they intersect with the common boundary of the two properties.

5.   In the event that 29 is developed before 31, Chelsea shall provide sewer lines to the common boundary of the two properties at five (5) points to suit the proposed development of 31.

In the event that 31 is developed before 29, Chelsea is to arrange to have the owners of 25 [sic] Memorial Avenue, Kellyville and 29 sign Permission to Enter forms to permit lead-in sewer to be laid to service 31.

56. The draft MOU was sent by Ms Feeney to Ms Zattere’s daughter on 13 March 2014. Arrangements were then made for a meeting to be held at the property on 20 March 2014 to discuss the matter. During the course of that meeting Ms Zattere’s daughter asked Ms Feeney when they would have to move out of the property. Ms Feeney said she thought they would have to move out by late April or early May at the latest. There followed some discussion about where the Zatteres might move to, and about the draft MOU. Mr Smith and Mr Atkins joined the meeting after about an hour. Ms Feeney asked Mr Smith about “the time line”. He said that demolition, which could occur at any time, would take about two weeks, and then some remediation work would take about four weeks. Mr Smith said that the roads and civil works would take at least four months, and that “by the end of February you will be able to hand over title”.

57. By the end of March 2014 Ms Feeney was considering various consultants’ fee proposals that had been sent to her by Mr Atkins. These included a proposal from Qalchek for the design and coordination of water and sewerage services. On 1 April 2014 Ms Feeney forwarded the proposals to Ms Zattere’s daughter. Ms Feeney stated in her email that the fee proposals could be discussed over the weekend or the following week, and that there was “no rush”. On 16 April 2014 Mr Atkins sent an email to Ms Feeney requesting her to issue a letter of engagement for Qalchek as recommended by Mr Smith.

58. Ms Feeney met with Ms Zattere and her daughter on 17 April 2014. There was some discussion about the need for the Zatteres to vacate the home on the property. A further meeting was held a short time later in which Ms Zattere said that she did not want to rent a house but instead wanted to buy a certain house in Galston. Ms Feeney agreed to look at refinancing the 31 Memorial Avenue property to facilitate that purchase. Ultimately, in about October 2014 second mortgage finance was obtained from CEG Direct Securities Pty Ltd to enable Ms Zattere to purchase the Galston property.

59. On 23 April 2014 the Council issued a development consent (No 1061/2014) for a 21 lot sub-division on 29 Memorial Avenue. Malcolm Smith Pty Ltd was the applicant for the consent.

60. On 28 April 2014 Mr Smith sent an email to Ms Feeney in the following terms:

Could you please consider accepting the recommended fee proposals as I need to initiate utility services designs (electricity, water/sewer) ASAP to minimise future delays in provision of utility services for the project.

61. On 1 May 2014 Ms Feeney had a telephone conversation with Mr Pearson’s solicitor, Mr Gough. On the following day, he sent an email to Ms Feeney in the following terms:

I confirm I act for Chelsea and Diversified (Darren Pearson) and understand that an MOU I drafted between the above parties has been submitted to you for approval.

As I explained yesterday, my client wishes to proceed with these matters in a timely fashion. I understand you may have some comments on the draft and request you send them to me at your earliest convenience.

62. It seems that Ms Feeney later sent an email to Mr Gough, but the email itself is not in evidence. She followed the matter up on 25 May 2014, and on 26 May 2014 Mr Gough replied, stating that he was awaiting instructions.

63. Mr Atkins met with Mr Smith on 28 May 2014 to discuss the issues concerning the draft MOU. On 29 May 2014 Mr Atkins sent an email to Ms Feeney which included the following:

I met with Malcolm yesterday afternoon.

…

Darren is not in a position to indicate timeframes or make guarantees about obtaining signatures.

Nevertheless in good faith he is proceeding.

…

He has engaged Qalchek to prepare a sewer design for No 29. This instruction will include a lead-in sewer from No 27 and a lead-out sewer to provide 5 points of connection for No 31.

…

The Sewer design thru No 27 and across Memorial Avenue is well under way…

…

The document is a memorandum of understanding; it is not a deed of agreement. As with any development there is always a degree of risk. Your consent calls for written agreement of adjoining owners for discharge of stormwater; it is hoped that by lodging the road design plans for Nos 31 & 29 at the same time that Council will not impose this condition as it is unlikely that Darren can get such agreement from the owners of 29.

For all interested it would be good to get this memorandum sorted and signed as soon as possible.

64. The Zatteres were still living in the house on the property in June 2014. Ms Zattere told Ms Feeney that she was not ready to move out.

65. Ms Feeney spoke to Mr Gough on 13 June 2014. Ms Feeney’s notes of the conversation include the following:

Discussed the MOU and the land adjustments.

CG said that Darren is wanting to know if we are wanting to sell.

JAF said no – don’t know where Darren got that idea from.

…

JAF asked about the access and mentioned the last conversation with Darren that he said he would be agreeable to the access.

CG mentioned it was the owners as his client is on an option.

I asked if in the option if there was a clause that states that the owners have to provide consent and not withhold it unreasonably. He said no and that the owners are difficult to deal with.

66. On 10 June 2014 Ms Feeney sent an email to Mr Gough in relation to some suggested amendments to the draft MOU.

67. On 17 June 2014 Ms Feeney left for Europe to attend a family wedding. She returned to Australia on about 27 July 2014.

68. An application for a compliance certificate under s 73 of the Sydney Water Act 1994 (NSW) was made on 3 July 2014 in respect of the proposed development of 31 Memorial Avenue.

69. In early August 2014 Ms Feeney spoke to Mr Atkins about the position with Mr Pearson. Mr Atkins said that he had not heard anything, and that perhaps consideration should be given to an application under s 88K (of the Conveyancing Act 1919 (NSW)). Ms Feeney deposed that the conversation continued:

Feeney:   I am not familiar with that section.

Atkins:   Its where we can go through the courts and obtain consent. It should be granted because there are so many developments in the area.

Feeney:   Ok. I will find out with my solicitor as to the process and how long it will take. Court is never quick from my experience. Am I going to be able to finish the project in time?

Atkins:   I don’t know. There is another new issue if Darren isn’t proceeding and that is the sewer. You will have to get consent from Sydney Water and you will have to build the sewer as well. I will look into this and see where the sewer is up to.

Feeney:   I will check with my solicitor by I will probably have to get the consent to go through 29 from the owners and Darren as well.

70. Ms Feeney then spoke to her solicitor, Mr Bilinsky, about a s 88K application. She told him that she was not getting anywhere with her neighbours and needed their consent. Mr Bilinsky advised that if the matter was expedited “you might get a result in 3 months”, otherwise it normally takes 6 months.

71. It seems that on about 30 September 2014 Mr Atkins informed Ms Feeney that the “lead-in” for the sewer had reached 27 Memorial Avenue. According to Ms Feeney Mr Atkins said that permission was required from the owners [of 29 Memorial Avenue] “to build through 29 to connect to 27”, and also consent from Sydney Water “to gain forced entry over 29”. Those statements are difficult to reconcile.

72. On 14 October 2014 Ms Feeney sent an email to Mr Smith in which she asked him for a letter “with respect to the delay” which she required “for the purchasers”. After setting out a number of factors pertinent to delay (including delays with the sewer) the email continued:

Can you please confirm the above as I need a letter of explanation to the purchasers as their sunset clauses will be finalising on December 2014 and it is clear that this is not going to be completed.

73. On 17 October 2014 Mr Smith responded by email which included the following:

As discussed on Wednesday, the status of your project is as follows:

The Engineering Construction Certificate Plans are complete. I am unable to lodge the plans with Council for CC approval without downstream drainage rights being resolved. The rights need to be over 29 Memorial Avenue, and at this stage no such agreement is in place.

The Council’s requirement in 1 above has direct implications on your development insofar as Council not only wants written acceptance of downstream drainage from owners of 29 Memorial, but also a drainage easement created over each discharge point onto the downstream property. The owners of 29 Memorial Avenue are highly unlikely to give consent to any works on their property, let alone the creation of easements on title. I see your development is unlikely to be able to progress further until either, the development of 29 Memorial Avenue is physically commenced or the Developer purchasing that property takes ownership and grants you the necessary drainage rights and easements to Council’s satisfaction.

The sewer and water designs for your development are well advanced and are being finalised now that the final designs for the lead-in sewer (thru 27 Memorial Avenue) have been received.

The lead-in sewer thru 27 Memorial Avenue is now under construction (physically commenced 30/09/2014). The sewerage system serving your property will drain to this facility. I estimate the lead-in sewer will not be handed over to Sydney Water until mid-2015. In this regard, the sewerage lines servicing your development cannot be connected to the receiving sewer until it is taken over by Sydney Water. The Section 73 Certificate for your development (required to register your sub-division) will not be issued until final connections are made and all documents signed off by Sydney Water.

…

6.   Demolition can start upon your instruction as this work does not require CC approval. This requires 7 days’ notice to Council and to neighbours.

7.   The site remediation work (dam area and around the shed at rear of the property) can commence subject to the necessary notice given to Council.

…

74. On 20 January 2015 Mr Smith sent an email to Ms Feeney in which he stated that the sewer lead-in through 27 Memorial Avenue had now been built and should be handed over to Sydney Water within a month or two. He further stated that he understood that drainage consent from the owner of 29 Memorial Avenue “is not available”, and that the construction certificate plans cannot be approved until the consent is available.

75. On 23 January 2015 Corporate & Civil Legal, solicitors for Ms Zattere and Ms Feeney, sent Notices of Rescission to most of the purchasers of lots in the proposed sub-division. The Notices were in the following terms:

0.1 By Contract for the Sale of Land dated __________ (“the Contract”), Mary Paula Zattere and Judy Ann Feeney (“the Vendor”) sold and the Purchaser purchased the Lot upon the terms set out in the Contract.

0.2 The Sunset Date set out in Clause 30.1 of the Contract being 31 December 2014 has expired.

0.3 In accordance with special clause 33.2 of the Contract the Vendor is entitled to and hereby rescinds the Contract forthwith and clause 19 of the Contract will apply.

The obligations of the vendor under the contracts for sale

76. Claims are made by the purchasers under the contracts for the sale of each of Lots 1 to 16 in the proposed sub-division. As noted earlier, all of the contracts were expressed to be conditional upon the registration of a plan of sub-division and registration of an instrument under s 88B of the Conveyancing Act. The contracts each contained a provision to the effect that if the plan of sub-division and s 88B instrument were not registered by 31 December 2014, then either party had the right (whilst those documents remained unregistered) to rescind the contract. The contracts also contained a provision requiring the vendors to use their best endeavours (or in some cases their reasonable endeavours) to have the plan of sub-division and s 88B instrument registered by 31 December 2014. Best endeavours obligations were contained in the contracts for each of lots 1, 2, 5, 7-10, 12 and 13. Reasonable endeavours obligations were contained in the contracts for each of lots 3, 4, 6, 11 and 14-16. Aside from that variation, and other variations that may fairly be regarded as minor, the terms of each of the contracts were substantially the same. They each utilised the 2005 edition of the Law Society of NSW/Real Estate Institute of NSW standard form, augmented by various additional clauses.

77. The contract for the sale of Lot 1 will be referred to by way of example.

78. By additional cl 32.1 completion of the contract was to take place on the later of 6 weeks from the date of the contract, and 14 days after the vendor notifies the purchaser that the Plan of Subdivision has been registered. Additional cll 33.1 and 33.2 provided:

33.1 Completion of this Contract is conditional upon registration of the Documents with the Land and Property Management Authority.

33.2 Subject to clause 33.7, if the Documents are not registered by the Sunset Date then either party will have the right at any time thereafter (but only while these documents remains unregistered) by notice in writing to the other to rescind this Contract in which case clause 19 will apply. The Vendor will use its best endeavours to have the Documents registered by the Sunset Date.

‘Documents’ was defined to mean the Plan of Subdivision and the associated s 88B instrument, copies of which were annexed to the contract. ‘Sunset Date’ was defined to mean 31 December 2014.

79. Additional cl 33.7 provided:

33.7 Notwithstanding the time limit for registration of the Plan of Subdivision referred to in clause 33.2, the Vendor will be entitled to extend the Sunset Date to 14 March 2015 by each day that the Vendor or its contractors have been delayed by reason of: -

33.7.1 inclement weather or conditions resulting from inclement weather; or

33.7.2 any civil commotion, combination of workmen, or strikes or lockouts affecting the progress of the works or affecting the manufacturer or supply of materials for the refurbishment of the Property;

33.7.3 any delay in any approval required for the Development by the proper authority or authorities.

The parties agree that: -

33.7.4 the Vendor’s project manager will be sole determiner of the Vendor’s entitlements to extensions of time under this clause;

33.7.5 the Vendor’s project manager will act as an expert and not as an arbitrator and his decision will be final and binding on the parties hereto.

80. Printed cl 28, which would otherwise operate in relation to registration of a plan of sub-division, was deleted by additional cl 31.11.

81. The contracts which contained a reasonable endeavours obligation contained additional cl 33.2 in the same terms as that set out above, save that the word “reasonable” was used instead of the word “best” in the second sentence of the clause.

82. It should be noted that some of the contracts contained an additional cl 33.7 which did not limit extensions of the Sunset Date to 14 March 2015, or any other date. I note further that some of the contracts included “21 days” instead of “14 days” in cl 32.1.

83. The prices of the various lots varied from $515,000 (in the case of Lot 6) to $550,000 (in the case of Lots 10 and 16).

Applicable principles

84. The purchasers contend that Ms Zattere and Ms Feeney failed to comply with their various obligations to use their best endeavours, or their reasonable endeavours, to have the sub-division documents registered by 31 December 2014. The purchasers further contend that by reason of those breaches, the vendors were not entitled to rescind the contracts pursuant to additional cl 33.2.

85. The contracts do not expressly provide that compliance by the vendor with its best endeavours or reasonable endeavours obligation is a condition precedent to the exercise by the vendor of a right of rescission under additional cl 33.2. However, the exercise of that right remains open to challenge on the ground that a party to a contract is not entitled, as against the other party, to rely on an event that results from its own default (see Suttor v GundowdaPty Ltd (1950) 81 CLR 418 at 441; Plumor Pty Ltd v Handley (1996) 41 NSWLR 30 at 34; Actall Pty Ltd v Pacific Bay Development Pty Ltd [2006] ANZ Conv R 67; [2005] NSWSC 1067 at [8]-[10]; Mordue v Kroone (2009) 14 BPR 26,771; [2009] NSWSC 255 at [16]). The purchasers invoke that principle here. They submit that the non-registration of the sub-division documents by 31 December 2014 resulted from breaches by the vendor of the best endeavours or reasonable endeavours obligations.

86. In these circumstances, a question arises as to whether the alleged defaults of the vendor relevantly caused the non-registration of the sub-division documents by 31 December 2014. In Plumor Pty Ltd v Handley (supra) McLelland CJ in Eq stated at 34:

It is only if noncompliance with that obligation had a sufficient causal relationship with the defendant’s failure to obtain the requisite consent within the fourteen day period that the defendant would be precluded from exercising the right of rescission arising by virtue of that failure, in accordance with the principle to be later discussed. If that failure would have occurred in any event, non-compliance with the obligation would not affect the defendant’s right of rescission: see Nina’s Bar Bistro Pty Ltd (formerly Mytcoona Pty Ltd) v MBE Corporation (Sydney) Pty Ltd [1984] 3 NSWLR 613 at 614F, 620E-621F and 631G-632D; Italo-Australian Club Limited v National Australia Bank Limited (1989) NSW Conv R 55-461 at 58,336-58,337.

87. In Sanctuary Investments Pty Ltd v St Gregory’s Armenian School Incorporated (1998) 9 BPR 16,823 Young J (as his Honour then was) stated (at 16,826) that it was necessary to “look at whether the person seeking to rescind the contract materially contributed to the non-performance of the condition on which it now bases its rescission”.

88. In Masters v Belpate Pty Ltd (2001) 10 BPR 18,527; [2001] NSWSC 169 Hodgson CJ in Eq referred at [66] to the above statement of Young J and continued:

In my opinion, this means that if the time would plainly have expired, even if the breach had not occurred, the breach will not preclude the vendor relying on the condition. However, in my opinion, if one could say that, if the breach had not occurred, there was a substantial chance that the condition could have been fulfilled, that would be enough to deprive the vendor of the right to rescind. If the vendor’s breach has deprived the purchaser of such a substantial chance of this kind, in my opinion, that is enough to enable one to say that the breach has materially contributed to the non-fulfilment of the condition, so that the vendor is precluded from rescinding.

That statement of Hodgson J was followed by Hall J in Pelley v Tebran Pty Ltd [2006] NSWSC 1072 at [170].

89. In Mitchell v Pattern Holdings Pty Ltd (2002) 11 BPR 20,241; [2002] NSWCA 212 Powell JA (with whom Stein JA and Rolfe AJA agreed) expressed the view, in obiter dictum, at [56], that:

…in order for a party to be held disentitled to exercise a right of rescission, it must appear that it was his default which brought about, or at least materially contributed to, the occurrence of the relevant event.

90. The abovementioned cases were cited by Brereton J in Mordue v Kroone (supra) at [16] where his Honour stated that:

…where a vendor’s default has deprived the purchaser of a substantial chance that the condition would have been fulfilled, the vendor cannot exercise the right of rescission…

91. This statement was cited with approval by the Court of Appeal in Victoria in Joseph Street Pty Ltd v Tan (2012) 38 VR 241; [2012] VSCA 113 at [47] where the Court stated:

It is well established that a party wishing to rescind cannot take advantage of its own ineffective or inefficient measures to comply with its contractual obligations, and that where a vendor’s default has deprived the purchaser of a “substantial chance” that the condition would have been fulfilled, the vendor cannot exercise the right of rescission.

92. More recently, in Wang v Kaymet Corporation Pty Ltd [2015] NSWSC 1459 Stevenson J stated in this context at [72] that:

To show that such a breach is material, the plaintiffs must also show that, had the defendants used their reasonable endeavours, the project would have reached the stage where the Strata Documents could have been registered by the Date for Completion relevant to each plaintiff’s contract…

93. Statements can be found in other cases which suggest that it may be necessary to prove on the balance of probabilities that the breach of the obligation caused the non-fulfilment of the condition. The two Court of Appeal decisions in Nina’s Bar Bistro Pty Ltd v MBE Corporation (Sydney) Pty Ltd [1984] 3 NSWLR 613 at 614 and 620-1, and Italo-Australian Club Ltd v National Australia Bank Ltd (1989) NSW Conv R 55-461, referred to by McLelland CJ in Eq in Plumor Pty Ltd v Handley (supra) in the passage quoted above, are examples (although in the latter case the approach to the question seems to have been influenced by the manner in which the case was conducted). Another example is Egan v Geraghty [1994] QCA 8.

94. The issue does not appear to have been considered by the High Court. As I recently stated in Abourjaily v Parkview Estate Pty Ltd [2017] NSWSC 1256 at [28], it seems to me that the preferable view is that a defaulting party should not be able to exercise a right of rescission if it has materially contributed to the occurrence of the event that gives rise to the right.

95. A reasonable endeavours obligation, arising in the context of a commercial contract, was the subject of the dispute in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7. The argument in the High Court in that case proceeded on the basis that substantially similar obligations are imposed by a best endeavours obligation (see at [40]; see also, in the context of distributorship agreements, Transfield Pty Ltd v Arlo International Ltd (1980) 144 CLR 83 at 100-101 and 107, and Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 64-5, 91-2 and 143-4). A similar approach was taken in the present case, albeit that it was suggested that the best endeavours obligation might call for a slightly higher standard than the reasonable endeavours obligation. It was not submitted that if the vendors were found to be in breach of their reasonable endeavours obligations they would not also be found to have breached their best endeavours obligations.

96. I note that in Waters Lane Pty Ltd v Sweeney (2008) Aust Contract R 90-287; [2007] NSWCA 200 Tobias JA (with whom Santow and Giles JJA agreed) construed (at [106]) an “all reasonable endeavours” obligation as requiring the promisor to do all it reasonably could in the circumstances to satisfy certain conditions by a particular date. At [107], his Honour did not express a final conclusion on the question whether that meant there was no relevant difference between the standard constituted by “all reasonable endeavours” and that constituted by “best endeavours”.

97. In Foster v Hall [2012] NSWCA 122 Macfarlan JA (with whom Meagher JA and Tobias AJA agreed) said at [33]-[34]:

The addition of the word "best" to the expression "reasonable endeavours" raises the required standard to a level somewhat higher than that imposed by a simple "reasonable endeavours" obligation. However I do not consider that there is any significant difference, at least for present purposes, between the content of an obligation to use "best reasonable endeavours" and one to use "best endeavours". In Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; 156 CLR 41 Gibbs J explained the meaning of the latter expression as follows:

"[A]n obligation to use 'best endeavours' does not require the person who undertakes the obligation to go beyond the bounds of reason; he is required to do all he reasonably can in the circumstances to achieve the contractual object, but no more" (at 64).

In the same case Mason J referred to the extent of the obligation of best efforts (or endeavours) as "governed by what is reasonable in the circumstances" (at 91 - 2). Dawson J noted that the obligation does not impose a duty upon a party to disregard his or her own interests (at 143 - 4).

To those statements may be added the proposition that a party subject to the obligation is bound to take "steps which a prudent, determined and reasonable [party], acting in his own interests and desiring to achieve [the results specified in the contract] would take" (Hawkins v Pender Bros Pty Ltd [1990] 1 Qd R 135 at 151 quoting Buckley LJ in IBM United Kingdom Ltd v Rockware Glass Ltd [1980] FSR 335 at 343).

98. In Electricity Generation Corporation v Woodside Energy Ltd (supra) the High Court went on to observe at [41] that a reasonable endeavours obligation is not an absolute or unconditional obligation, and its nature and extent is necessarily conditioned by what is reasonable in the circumstances, including circumstances that may affect the obligor’s business.

99. An issue was raised by Ms Zattere concerning the extent to which any failings on the part of the consultants should be attributed to the vendor in considering whether the best endeavours or reasonable endeavours obligations had been breached. Reference was made to some divergence in views expressed by judges in this Division on that subject.

100. In Hunyor v Tilelli (1997) 8 BPR 15,629 McLelland CJ in Eq said (at 15,631):

For the purpose of considering the question of the defendant’s default, the knowledge, acts and omissions of the defendant’s solicitor or other agents, in that capacity, are to be attributed to the defendant (see CSS Investments Pty. Ltd. v. Lopiron Pty. Ltd. (1987) 76 ALR 463 at 474-5), although the knowledge, acts and omission of independent contractors otherwise than in the capacity of agents for the defendant are not to be so attributed (see Woodcock v. Parlby Investments Pty. Ltd.).

101. In Hawes v Cuzeno Pty Ltd (1999) 10 BPR 18,011; [1999] NSWSC 1167 Bryson J (as his Honour then was) stated at [28]-[29]:

It is important for appraising the events that the defendants were under a very strongly worded contractual obligation in printed cl A6.1: “The Vendor must do everything reasonably necessary to have the plan registered within the plan registration time.” Doing everything reasonably necessary included preparing the building application, and doing it within a time scale within which the plan registration time could be complied with; preparing the building application was necessary to achieve this outcome and it was a contractual obligation of the vendors to do it. Their contractual obligation was not to commission some suitable person to do it; it was a direct obligation to do it and I do not regard it as open to them to point to pressure of other work in their architect’s office, as the words used in printed cl A6 do not admit of any concession for inattention or attending to other business.

When testing contractual compliance it is not relevant whether the defendants’ relationship with their architect was an independent contractor relationship: their contractual obligations are the same irrespective of whose agency they act through. There is a test of reasonableness, but it does not relate to the time at which things are done; it relates to identifying which things have to be done; making a building application obviously is one of them, and the vendors had an unqualified contractual obligation to do every such thing so as to have the plan registered within the plan registration time. Young J’s observations in Woodcock v Parlby Investments about the architect as an independent contractor relate to the operation of the recklessness principle and were not directed to a clause such as cl A6.

102. However, in Masters v Belpate Pty Ltd (supra) Hodgson CJ in Eq. stated at [63]-[65]:

It is not clear to me whether, in those passages, Bryson J is saying that the principle expressed by McLelland CJ in Eq [in Hunyor v Tilelli] does not apply where there is an express term like condition A6 in the contract. If so, with respect I disagree. My opinion is that condition A6 should be read as a promise by the vendor, as a developer, that the vendor will, as a developer, “do everything reasonably necessary” to have the plan registered within the plan registration time. In my opinion, that means that, in relation to matters of the kind usually attended to by a developer, that is, matters not involving specialist expertise, the vendor’s obligation is unqualified. This would, in my opinion, include such things as co-ordinating the documentation necessary for the application, co-ordinating specialist contractors, and negotiating with councils and adjoining owners and the like. In relation to these matters, in my opinion the vendor/developer would be fully responsible for any deficiencies or delays in work done by its agents, if this work is left to agents.

However, there are other matters which may be considered matters of specialist expertise, which a developer would normally leave to an architect, engineer or builder: to an architect, the drawing of plans and supervision of building work; to an engineer, similar tasks; and to a builder, actual execution of the work. In those matters, in my opinion the independent contractors should not be regarded as agents of the developer in carrying out the developer’s role in obtaining registration of the strata plan. Accordingly, delays attributable to independent contractors in carrying out those tasks would not ipso facto involve a breach of the vendor’s obligation. Thus, where a builder caused delay by walking off the site because of problems the builder had which were unrelated to the job, that was not considered a breach of the vendor’s obligation: Woodcock v Parlby Investments Pty Ltd (1988) 4 BPR 9568 .

However, even where delay arises from the conduct of independent contractors in carrying out matters of specialist expertise, there may be associated breaches by the vendor/developer itself, for example in selection of the contractors, in provision of instructions and information, in monitoring progress, and/or in failing to replace the specialist expert when this should have been done.

103. In Hardy v Wardy (2001) 10 BPR 19,055; [2001] NSWSC 1141, a case concerning printed cl 28 of the 2000 Edition of the Law Society of NSW/Real Estate Institute of NSW standard form, Bryson J adhered (at [8]-[14]) to the views he earlier expressed in Hawes v Cuzeno Pty Ltd (supra). An appeal from his Honour’s decision was dismissed in Wardy v Hardy (2002) 11 BPR 20,227; [2002] NSWCA 215. At [63], Mason P (with whom Giles and Ipp JJA agreed) expressed agreement with what Bryson J had said at [14] in the Court below, and apparently agreed with his Honour’s construction of cl 28.2. However, at [66], the President found it unnecessary to resolve the differences of opinion between Bryson J and Hodgson CJ in Eq “found in obiter discussion in the three cases”.

The alleged breach of the best endeavours or reasonable endeavours obligations

104. The plaintiffs’ cases on breach focused upon the following matters:

1. At the time the contracts for sale were entered into, Ms Feeney understood that it would take about 12 months after obtaining development approval for the sub-division to be completed, and that physical work on the site would need to commence in early 2014 in order to finish the sub-division by the Sunset Date;

2. Despite that understanding, there is no evidence of Ms Feeney discussing those matters of timing with Mr Atkins or Mr Smith (at least prior to March 2014), and no evidence that Ms Feeney ever took any steps to expedite or hasten the progress of the development;

3. There was a lack of clarity about the respective roles and responsibilities of Ms Feeney, Mr Atkins and Mr Smith;

4. Ms Feeney was at all relevant times aware that stormwater drainage and sewerage would need to be discharged onto 29 Memorial Avenue, yet negotiations were not carried forward with the owners of that property; instead, negotiations were entered into with Mr Pearson, who only had an option to purchase, and those negotiations covered a range of matters extending beyond obtaining access for stormwater drainage and sewerage;

5. No application was made under s 88K of the Conveyancing Act for the imposition of easements;

6. Ms Zattere was unwilling to vacate the property as would be required in order for demolition works and sub-division works to be undertaken; and

7. No works (including demolition works) were ever undertaken on the site by the vendors prior to the Sunset Date.

105. Evidence was given by two witnesses with experience and expertise relevant to the undertaking of sub-division developments. Mr David England, a registered surveyor and civil engineer, was called by the plaintiffs in the Tamanna matter. Mr Stephen McElroy, a civil and structural engineer and development consultant, was called by Ms Zattere. Each expert prepared a report, and they jointly prepared a report in which an attempt was made to identify areas of agreement and disagreement between them.

106. Mr England prepared a preliminary development programme for the project which identified the various steps involved and the likely times for the undertaking of the steps, from the issue of development approval through to registration of the plan of sub-division. The programme assumed that development approval would issue on 20 December 2013. Registration of the plan of sub-division was assumed to occur on 1 December 2014, 49 weeks later. It was further assumed that a construction certificate would issue on 18 March 2014, and construction of civil works pursuant to the certificate would commence on 24 April 2014.

107. Mr McElroy agreed that Mr England’s programme showed that with all activities moving ahead smoothly, the sub-division plan could have been registered within the timelines provided for in the contracts of sale (i.e., by 31 December 2014). Indeed, he stated that works preliminary to the issue of the construction certificate could have started in February 2014 and registration of plans could still have occurred by 31 December 2014 provided the project was properly managed. Mr McElroy further stated that the consultants working for the defendants, knowing the timelines in the contracts of sale, should have undertaken a similar assessment of timelines to ensure that the project could be completed in accordance with the 12 month period, and should have provided the vendors with an estimate of the duration of the works. The experts agreed that a total approval and construction time from the issue of the development consent to registration of titles of 12 months “should have been adequate”.

108. Mr England described the development as small and relatively straightforward given that there was a pre-determined lot and road layout. Mr McElroy did not believe that the sub-division should be considered difficult. There was agreement that although there was clearly a constrained timeline to complete the development works, the scope of works was not challenging and was technically uncomplicated.

109. There were disagreements between the experts on the topic of stormwater drainage, including over the possibility of on-site stormwater detention, and as to whether an easement for stormwater discharge would be required. The experts agreed that waste water drainage issues should not have impeded or slowed the development, and that if agreement for access had been reached sewers could have been constructed through adjacent properties, subject to obtaining necessary approvals from Sydney Water. There was also agreement between the experts that, apart from seeking an agreement with a potential developer of the downstream property (29 Memorial Avenue), there was no evidence that the vendors explored various options concerning drainage, including the making of an application under s 88K of the Conveyancing Act.

110. There was agreement that conflicts of interest may have compromised the advice given by Messrs Atkins and Smith to Ms Feeney, and that the vendors were let down by their consultants in the proper management of the development. The experts agreed that there was an absence of an active and experienced project manager, resulting in activities taking place in an ad hoc fashion, and not according to a schedule whereby the sub-division would be registered by 31 December 2014. There was agreement that when the vendors became aware of potential problems and possible delays, they made reasonable attempts to accelerate the progress of the works.

111. Both experts were cross-examined. In relation to the issue of stormwater drainage, Mr England accepted that whichever option was adopted in that regard it would need to be resolved before the construction certificate issued. Mr England agreed that delay arising from whichever option was adopted could possibly extend the project “by a number of weeks” from what is set out in his programme.

112. Mr England also agreed that it was his evidence that if one went past the end of January 2014 “without the steps having commenced” it was too late to complete the development by the Sunset Date. (That answer is likely to be referable to the content of paragraph 4(f) of Mr England’s report – see transcript pages 152 and 153.) Mr England’s cross-examination continued:

Q:   Therefore, what I want to suggest to you is, taking into account those matters that I put to you a moment ago, so the time of year of receipt plus the inevitable delay from whichever of those three options was adopted, the fact was that this was a development then [sic], taking into account those facts alone, was never going to be completed by the sunset date. Do you accept that?

A:   I do accept that.

Q:   That is even before considering the other problems such as the competence of the contractors. Correct?

A:   Yes, that’s correct.

Q:   Even before considering the conflict of interest that the consultants had and the impact of that upon the development. Correct?

A:   Yes.

113. In re-examination Mr England said it was possible that there could be savings of time as against his programme if certain activities were commenced earlier than the date of issue of the development consent. However, he later suggested that “the section 88K would not be able to be sought” until after the development application was approved because until then the location of roads was not certain “even though there’s a pre-determined road pattern”. Mr England also said that there was no impediment to commencing negotiations with owners prior to the giving of development approval, and that this would be recommended.

114. Mr McElroy was cross-examined, inter alia, about the attempts made to reach an agreement with Mr Pearson. Mr McElroy agreed that “the last thing you would ever do” would be to pin your development prospects on Mr Pearson’s project. He said that if he was doing a development like this one “the very first thing” he would do would be to talk to adjacent owners. Mr McElroy also agreed that if you ran into difficulties with your negotiations the first thing you would think of would be the possibility of making an application under s 88K or “look at alternative ways of getting the services off the site”. Mr McElroy later said that seeking a s 88K easement would be a way of trying to progress negotiations. He said that he would try to negotiate a settlement straight away, and if that failed, he would have used the power of the courts to try to get one.

115. Mr McElroy said that if he was working on a critical time path and needed rights to run drainage or sewerage over other properties, he would seek advice from the project manager or consultants to determine the preferred course of action to meet the required deadlines. He agreed that in this case you would not wait until the development approval issued before seeking rights over the adjoining properties.

116. Ms Feeney was also called as a witness and cross-examined. In the course of her cross-examination she stated that prior to 1 October 2013 she was told by Mr Atkins that there would be plenty of time to complete the sub-division and register the titles by 31 December 2014. Ms Feeney also stated that Mr Atkins had said, in effect, that it would take about 12 months from when the development approval was given. She agreed that as at 1 October 2013 she had it in mind that in order to finish by the Sunset Date (of 31 December 2014) physical work on the site would have to start “no later than the beginning of 2014”. Ms Feeney accepted that she knew that in order to start work on a development you first needed to obtain a development approval and then a construction certificate from the Council.

117. It is clear from Ms Feeney’s affidavit that she was aware that the development would involve drainage works across 29 Memorial Avenue, and that consent to such works by the owners of that property was needed. Ms Feeney made some unsuccessful attempts in 2012 to obtain the consent of those owners. She took the matter up again in September 2013 by sending a letter to the owners’ solicitor. That letter went unanswered.

118. Ms Feeney conceded in cross-examination that she knew that there “was an opportunity to apply to the Court” for the grant of an easement in the event that neighbours declined consent. However, it seems that Ms Feeney accepted the suggestion made by Mr Atkins that she seek to obtain the consent through negotiations with Mr Pearson. Ms Feeney conceded that she knew that he was not the owner of 29 Memorial Avenue, and that he only had an option over the property. Ms Feeney agreed in cross-examination that she did not suggest to Mr Atkins that an urgent s 88K application should be considered. She stated that it did not occur to her to do so. Ms Feeney further stated that the option of making an application for an easement was not discussed between Mr Atkins and herself. Later in her cross-examination she stated that at some stage Mr Atkins referred to s 88K as a last resort.

119. Ms Feeney also gave evidence in cross-examination to the effect that she understood that if the consent could not be obtained through Mr Pearson she would defer seeking a construction certificate until a construction certificate was sought for 29 Memorial Avenue, which could be treated as an “inferred consent”.

120. As noted earlier, apart from her role as a witness, Ms Feeney did not take any active part in the hearing. No submissions were made by her. Submissions were made by Ms Zattere. She submitted that the reasonable endeavours and best endeavours obligations were satisfied in circumstances where apparently competent consultants and experts were engaged and there was no reason to doubt the advice given by them as to what was required to achieve registration of the sub-division. Reference was made to the various actions undertaken in relation to the preparation and lodgement of the development application, which included the drawing of preliminary survey plans, lot designs and engineering drawings. It was submitted that the defendants would have had every expectation that their consultants could have achieved registration of the sub-division by 31 December 2014 but for “unforeseen complexities” surrounding the stormwater drainage and other issues. In final submissions it was put that “the dealings in relation to the neighbours” was the key (or only) issue in the case.

121. Ms Zattere submitted that even if an application under s 88K had been pursued, it would have taken at least six months, so that the sub-division deadline still could not be met. It was also submitted, based upon Mr England’s evidence, that an application under s 88K would not be made until after the development consent had issued because until then there was insufficient certainty about what would be needed. Once other delays (such as difficulties in securing consultants and tradespeople in the new year) were taken into account, it was unlikely that an easement could be obtained in time to allow a construction certificate to issue by about mid- March 2014, as would be required (consistent with Mr England’s programme) in order to achieve registration of the sub-division by 31 December 2014. It was submitted, more generally, that the timeframe was tight, such that even small delays of about two weeks would cause the Sunset Date to pass without achieving registration of the sub-division.

158. The tenth and eleventh plaintiffs in the Tamanna matter entered into a contract on 6 October 2013 to purchase Lot 6 for $515,000. The evidence shows that Lot 6 was worth $820,000 in May 2016. That is $305,000 greater than the purchase price. The couple owned a property in Westmead. They deposed that it was their intention to use savings, their equity in the Westmead property, and borrowings, to complete the purchase of Lot 6. However, in about October 2015 they decided to sell their home in Westmead and move to Victoria. The Westmead property was sold in January 2016 for $618,000. The net proceeds of the sale were placed into a savings account. Between February and June 2016 the savings account held funds of between $430,000 and $460,000. Following the sale of the Westmead property, the couple moved to Victoria, where they lived in rented premises for a period. It was not until July 2016 (after the termination of the contract) that they purchased a property to live in in Victoria for $881,000. The couple obtained a bank loan of $700,000 to facilitate that purchase. The tenth plaintiff deposed that they would not have moved to Victoria if it had been possible to complete the purchase of Lot 6. The eleventh plaintiff deposed to similar effect. She further stated that she still wanted to buy Lot 6 (which she thought was worth more than the price), and even after deciding in October 2015 to sell and move to Victoria, had the developer been ready to complete the sale of Lot 6, she was willing to return to Sydney to carry out the original plan of building on Lot 6. The tenth and eleventh plaintiffs had a combined taxable income of about $120,000 in the 2015-16 financial year. It seems that their incomes were higher in the 2014-15 financial year. I accept that the tenth and eleventh plaintiffs had the ability to complete the purchase of Lot 6 as they intended using their equity in the Westmead property (or the proceeds of its sale), coupled with borrowings as required.

159. On 6 October 2013 the twelfth plaintiff in the Tamanna matter entered into a contract to purchase Lot 7 for $517,000. The evidence shows that Lot 7 was worth $820,000 in May 2016. That is $303,000 greater than the purchase price. The twelfth plaintiff deposed that it was his intention (along with his wife) to complete the purchase of Lot 7 using savings and borrowed funds. In March 2016 the twelfth plaintiff and his wife purchased a property in Greystanes for $950,000. The deposit and stamp duty for the purchase was paid out of his and his wife’s savings. The balance of the price was financed by a loan of $854,000. The twelfth plaintiff deposed that the purchase of Lot 7 was an excellent deal and he was always prepared to settle the purchase. His wife deposed that she was always willing to contribute funds to the purchase of Lot 7, including borrowed funds. She stated that even after buying the Greystanes property she was willing to use savings and borrowings to assist the purchase of Lot 7. She regarded the price as very good, and the property could either be kept as an investment or sold for a profit. The acquisition of the Greystanes property itself demonstrates an ability up to that time to complete the purchase of Lot 7. Further, I think it is likely that even after that purchase the twelfth plaintiff would have been able, with his wife’s assistance, to borrow sufficient funds to raise the purchase price for Lot 7 which by then was worth considerably more than the price. The twelfth plaintiff and his wife had a combined taxable income in the 2015-16 financial year of about $228,000, and had equity of about $100,000 in the Greystanes property.

160. On 6 October 2013 the thirteenth and fourteenth plaintiffs in the Tamanna matter entered into a contract to purchase Lot 8 for $517,000. The evidence shows that Lot 8 was worth $820,000 in May 2016. That is $303,000 greater than the purchase price. The combined taxable income of the thirteenth and fourteenth plaintiffs was about $178,000 in the 2014-15 financial year and $168,000 for the 2015-16 financial year. The couple owned an investment property in Rooty Hill. They purchased another property in Kellyville in March 2016 for $820,000 using part of their considerable savings and about $660,000 in borrowed funds. Even after this purchase they retained savings totalling at least $140,000. The thirteenth and fourteenth plaintiffs deposed that they still intended to settle on the purchase of Lot 8 which was regarded as a good bargain. The acquisition of the other Kellyville property itself demonstrates an ability up to that time to complete the purchase of Lot 8. I consider that even after that purchase, it was likely that the couple would have been able to borrow the funds which, together with some of their savings, would have been sufficient to raise the purchase price for Lot 8.

161. Mr and Mrs Thakorlal (the plaintiffs in Thakorlal v Zattere) entered into a contract on 24 September 2013 to purchase Lot 9 for $535,000. The evidence (adduced in cross-examination of Mr Wotton) shows that Lot 9 was worth $880,000 in May 2016. That is $345,000 greater than the purchase price. At all relevant times Mr and Mrs Thakorlal operated two superannuation funds. I infer that they were each beneficiaries of the funds. Mr Thakorlal was at all relevant times over the age of 65. One of the superannuation funds held cash of in excess of $900,000 in June 2016. It also owned (from at least December 2014) an unencumbered townhouse in Castle Hill. The townhouse had an estimated value of $900,000 in early 2016. Mr and Mrs Thakorlal also owned an apartment in Surfer’s Paradise and Mr Thakorlal owned the couple’s residence in Baulkham Hills. These latter two properties were mortgaged to the St George Bank to secure loans of about $1.2 million made to family members. Mr and Mrs Thakorlal held large amounts in cash. In 2015, more than $500,000 was kept in a joint account with the Commonwealth Bank of Australia. A $500,000 superannuation contribution was made out of that account on 1 December 2015. The couple thereafter kept almost $40,000 in that joint account. Mr and Mrs Thakorlal deposed that they at all times had enough cash to purchase Lot 9, and enough real property security to borrow the purchase price. I accept that evidence and further accept that Mr Thakorlal had the ability to access the assets of the superannuation funds if necessary in order to complete the purchase of Lot 9.

162. On 27 November 2013 the fifteenth plaintiff in the Tamanna matter entered into a contract to purchase Lot 10 for $550,000. The evidence shows that Lot 10 was worth $880,000 in May 2016. That is $330,000 greater than the purchase price. The fifteenth plaintiff was the owner of several properties in the period from the date of the contract to its termination in June 2016. He retained two of them, estimated to be together worth $1.95 million. The fifteenth plaintiff maintained a home loan debt of about $600,000. At least some of the properties owned by the fifteenth plaintiff were sold after dwellings were constructed upon them. One property was sold after being sub-divided into two lots. Two other sub-division lots were sold before they were built upon. Whilst there is little detail provided in the evidence, it is apparent that most if not all of these sales generated a profit. In August 2015 the fifteenth plaintiff held in excess of $1.7 million in an account with the Commonwealth Bank of Australia. His taxable income from employment was about $160,000 in the 2014-15 financial year and $137,000 in the 2015-16 financial year. He deposed that he viewed Lot 10 as a very good investment and would have done whatever was necessary to raise the funds to settle the purchase, including by contributing savings, selling other properties, and borrowing. I am satisfied that it is likely that he would have been able to do so if required.

163. The sixteenth and seventeenth plaintiffs in the Tamanna matter entered into a contract on 6 October 2013 to purchase Lot 11 for $547,000. The evidence shows that Lot 11 was worth $880,000 in May 2016. That is $333,000 greater than the purchase price. The sixteenth and seventeenth plaintiffs had a combined taxable income of about $154,000 in the 2014-15 financial year and $149,000 in the 2015-16 financial year. They deposed that they intended to complete the purchase of Lot 11 by paying cash from their savings. The sixteenth plaintiff deposed that from the date of the contract to the termination of the contract he and the seventeenth plaintiff had savings of at least $434,000, and that from December 2014 to June 2016 the savings were in excess of $475,000. The sixteenth and seventeenth plaintiffs also owned a property at Quakers Hill which was subject to a relatively small mortgage debt, and they maintained a share portfolio generally worth in the vicinity of about $70,000. I am satisfied that, had they been required to settle the purchase of Lot 11, the sixteenth and seventeenth plaintiffs would have been able to do so.

164. The eighteenth and nineteenth plaintiffs in the Tamanna matter entered into a contract on 6 October 2013 to purchase Lot 12 for $547,000. The evidence shows that Lot 12 was worth $880,000 in May 2016. That is $333,000 greater than the purchase price. The eighteenth and nineteenth plaintiffs purchased a property in Bella Vista in December 2015 for about $1.3 million. They deposed that they still intended to purchase Lot 12, which they regarded as a good deal. The couple owned two investment properties in Wentworthville and another investment property in Liverpool. Each of those properties was subject to a mortgage. The Liverpool property was purchased for $440,000 in October 2013. It was valued at $625,000 in June 2016. That property was subject to a mortgage debt of almost $400,000. The eighteenth and nineteenth plaintiffs had a combined taxable income of about $175,000 in the 2014-15 financial year. Their incomes were apparently considerably greater in the 2015-16 financial year. The couple deposed that even after they purchased the Bella Vista property they still wanted to purchase Lot 12, which was believed to be worth more than what was agreed to be paid. They deposed that they intended to hold it as an investment or else sell it for a profit. The acquisition of the Bella Vista property itself shows that the eighteenth and nineteenth plaintiffs had the ability until December 2015 to complete the purchase of Lot 12. I think it likely that even after that acquisition the eighteenth and nineteenth plaintiffs would have been able to raise funds to acquire Lot 12 by borrowing against the Lot itself and, if necessary, the equity in their investment properties.

165. The twentieth and twenty-first plaintiffs in the Tamanna matter entered into a contract on 6 October 2013 to purchase Lot 13 for $547,000. The evidence shows that Lot 13 was worth $880,000 in May 2016. That is $333,000 greater than the purchase price. The twentieth and twenty-first plaintiffs had a combined taxable income of about $195,000 in the 2014-15 financial year and about $272,000 in the 2015-16 financial year. They purchased a property in Ropes Crossing in April 2014 for $540,000. A home loan of $500,000 was taken for that purpose. The Ropes Crossing property was valued at $680,000 in June 2016. In the period from September 2015 to March 2016 a savings account held by the twentieth and twenty-first plaintiffs with the ANZ Bank had balances of between about $100,000 and $170,000. The twentieth and twenty-first plaintiffs deposed that they thought they purchased Lot 13 for a good price. I am satisfied that, had they been required to settle the purchase of Lot 13, they could have done so, using savings and borrowings. I note that in August 2016 they purchased another vacant lot in Kellyville for $680,000. 20% of the price was funded by savings and the balance was borrowed.

166. The twenty-second and twenty-third plaintiffs in the Tamanna matter entered into a contract on 1 October 2013 to purchase Lot 14 for $530,000. The evidence shows that Lot 14 was worth $880,000 in May 2016. That is $350,000 greater than the purchase price. The twenty-second and twenty-third plaintiffs had a combined taxable income of about $195,000 in the 2014-15 financial year and about $176,000 in the 2015-16 year. They owned a property at Westmead. That property was valued at $595,000 in June 2016. At that time the mortgage debt on the property was about $60,000. It seems that there were also savings of about $240,000 kept in an off-set account. In July 2016 the twenty-second and twenty-third plaintiffs purchased a residential property in Kellyville for $1.085 million. This purchase was funded by savings, together with borrowed funds of $750,000. I am satisfied that had the twenty-second and twenty-third plaintiffs been required to settle the purchase of Lot 14, they could have done so using savings augmented by borrowings.

167. The twenty-fourth and twenty-fifth plaintiffs in the Tamanna matter entered into a contract on 1 October 2013 to purchase Lot 15 for $530,000. The evidence shows that Lot 15 was worth $880,000 in May 2016. That is $350,000 greater than the purchase price. The twenty-fourth and twenty-fifth plaintiffs owned an investment property in Westmead. It was valued at $600,000 in June 2016. The amount of the loan secured over that property was then about $450,000. In April 2016 the twenty-fourth and twenty-fifth plaintiffs purchased a residential property in Kellyville for $1.15 million. $920,000 was borrowed for that purpose. That acquisition itself demonstrates an ability up to that time to complete the purchase of Lot 15. The twenty-fourth and twenty-fifth plaintiffs deposed that they still wanted to acquire Lot 15. They stated that if Lot 15 had to be settled after April 2016 the purchase would have been funded by selling the investment property and borrowing the balance of funds required. I accept that it is likely they could have done so. Their overall level of debt would be reduced, albeit that the income from the investment property would cease. There is good reason to think that finance would be available to acquire Lot 15 which had by that time significantly increased in value.

168. On 18 October 2013 Rabac Pty Ltd (the plaintiff in Rabac Pty Ltd v Zattere) entered into a contract to purchase Lot 16 for $550,000. The evidence shows that Lot 16 was worth $875,000 in May 2016. That is $325,000 greater than the purchase price. Mr Danny Kalcic is the director of Rabac Pty Ltd. He deposed that the company is a real property holding firm engaged in purchase of land for housing and general housing development. He further deposed that he and the company have been banking with St George Bank for more than 20 years and during that time finance has been provided by the Bank, including lines of credit that are used for land purchases and residential development. Mr Kalcic deposed that at around the time of entering into the contract to purchase Lot 16 he had a line of credit available from the Bank to enable such purchases. It appears from a document annexed to his affidavit that in July 2014 he and Claudia Kalcic had a Portfolio Loan with the St George Bank which had an approved credit limit of $1 million. The available credit as at July 2014 was approximately $780,000. Mr Kalcic further deposed that at about the time Rabac Pty Ltd entered into the contract to purchase Lot 16 it also purchased another property in Kellyville and a property in Castle Hill. It is true, as pointed out by Senior Counsel for Ms Zattere, that the documentary evidence concerning the line of credit is confined to July 2014 and is in the name of Claudia and Danny Kalcic, not Rabac Pty Ltd. However, that evidence must be considered in the light of Mr Kalcic’s evidence as a whole. He deposed (in July 2016) that the line of credit in place in July 2014 was available to facilitate purchases of land for residential development. He further deposed that Rabac Pty Ltd and he had banked with St George for more than 20 years and during that period the Bank had provided finance, including by lines of credit, for purchases of land and development of land. Having regard to that unchallenged evidence of a long established record of obtaining finance for the purpose of conducting land acquisition and development, together with the evidence of the particular finance facility in place in July 2014 and the appreciation in value of Lot 16 after the contract was entered into, I am prepared to accept that had Rabac Pty Ltd been required to settle the purchase of Lot 16 at any time up to the date of termination of the contract it is more likely than not that the company would have been able to borrow the necessary funds.

169. It follows from the above that each of the plaintiffs, having satisfied the requirements to show readiness, willingness and ability to perform, have established an entitlement to loss of bargain damages against the vendor (Ms Zattere and Ms Feeney) assessed as the difference between the value of the relevant Lot as at May 2016 and the contract price.

170. The final matter to consider is the additional claim made by Mr and Mrs Thakorlal for damages against the vendor under s 236 of the Australian Consumer Law. It is alleged that the vendor engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law. The contravening conduct is alleged to be the making of certain representations to Mr Thakorlal by Mr John Feeney on behalf of the vendor in September 2013, prior to the making of the contract in respect of Lot 9.

171. Mr Thakorlal deposed that in early September 2013 he saw a “land for sale” sign on a block of land next to 31 Memorial Avenue. This is likely to be the land at 33 Memorial Avenue. Mr Thakorlal further deposed that he paid a holding deposit of $1,000 in respect of a lot on that land which was for sale at a price of $570,000.

172. Mr Thakorlal deposed that a few days later he went to Memorial Avenue and saw a sign advertising land for sale at 31 Memorial Avenue. He states that he spoke to Mr Feeney, who told him that the price of the lots was $550,000 but the best price he could do was $535,000. Mr Thakorlal then deposed:

Mr Feeney then showed me on a plan the lots that were available for sale. I pointed to lot 9 and said, “That’s the one I want to buy”. I selected lot 9, because it was right next to the lot, for which I had already paid a holding deposit. Then, Mr Feeney and I had the following conversation:

Mr Feeney:   But it will take almost one year to develop and register the plans. You will have to pay a 5% deposit when we exchange. The rest of the deposit you can pay within a year.

I:      Ok, we will buy lot 9.

Mr Feeney:   I will call you to come over one evening and sign the contract. You will then have to pay the balance of the 5% deposit.

195. Mr and Mrs Thakorlal signed the contract to purchase Lot 9 on 24 September 2013. It seems that Mr Thakorlal did not receive a copy of the contract signed by the vendor until about 26 November 2013. He states that, around that time, he arranged for a refund of the holding deposit he had paid on the lot on 33 Memorial Avenue.

196. Mr Thakorlal was not required for cross-examination. No evidence was given by Mr Feeney.

197. It is alleged in paragraph 5 of the Amended Statement of Claim that Mr Feeney represented that:

1. the vendor would develop the land at 31 Memorial Avenue and register the plans for its sub-division by September 2014; and

2. the vendor had the expertise or capability to develop the land and register the plans by September 2014.

198. In paragraph 20 of the Amended Statement of Claim it is alleged that the making of the representation contravened s 18 of the Australian Consumer Law because, contrary to the representation, the vendor was never able to develop the land and register the plans by September 2014, and did not have the expertise or capability to do so. It is further alleged that the representation was one made with respect to a future matter within the meaning of s 4 of the Australian Consumer Law. Finally, it is alleged that the plaintiffs relied upon the representation in entering into the contract, and that had the representation not been made Mr and Mrs Thakorlal would have instead proceeded to purchase the lot on 33 Memorial Avenue. It is alleged that Mr and Mrs Thakorlal thereby lost a bargain in relation to the lot on 33 Memorial Avenue, or alternatively lost a bargain in relation to Lot 9.

198. The case based upon loss of bargain in relation to the lot on 33 Memorial Avenue was not pressed in final submissions, on the basis that no evidence was adduced concerning the value of that lot.

199. I accept that Mr Thakorlal had a conversation with Mr Feeney in about mid-September 2013 which included words to the effect of those which appear in his affidavit. I think that a statement was made by Mr Feeney to the effect that it would take about a year to develop the land and register the sub-division plans. I further accept that the statement was made by Mr Feeney in the course of acting as an agent for the vendor, and that this occurred in trade or commerce within the meaning of s 18 of the Australian Consumer Law. Ms Feeney gave evidence in cross-examination to the effect that Mr Feeney had a real estate licence at the time, and it was agreed that he would sell the lots.

200. However, I am not persuaded that the making of the statement conveyed a representation or representations as alleged. As pointed out by Senior Counsel for Ms Zattere, there is no express statement that the postulated year was to commence immediately or imminently, so that the statement would convey that development and registration would take place by about September 2014. A statement of that kind might be found to be implicit in what was said, but this would need to arise from the context or circumstances in which the words were spoken.

201. The immediate context is not clearly identified in Mr Thakorlal’s affidavit. That is not an insignificant omission given that Mr Feeney’s statement, commencing with “But”, was evidently uttered in response to something said by Mr Thakorlal. Moreover, it is noteworthy that later in his affidavit (at paragraph 27) Mr Thakorlal refers to Mr Feeney telling him that “the works to sub-divide the Land” were going to take one year. That tends to suggest that Mr Feeney had spoken of how long the work to achieve the sub-division would take, but not necessarily about when the work would commence, let alone that work was to commence immediately or imminently. That seems likely, given that the development application had not even been lodged by mid-September 2013, and it appears that Mr Atkins told Ms Feeney around that time that it would take about 12 months from when the development approval was given to complete the sub-division.

202. Even if, contrary to my view, the making of representations as pleaded was established and those representations, as representations with respect to a future matter were taken to be misleading (or the conduct was otherwise found to be misleading or deceptive), I do not think that the lost bargain in relation to Lot 9 is a loss sustained “because of” the contravening conduct within the meaning of s 18 of the Australian Consumer Law.

203. Assuming, in the plaintiffs’ favour, that had the representations not been made by Mr Feeney they would not have entered into the contract to purchase Lot 9, I would nonetheless not accept that the loss of the bargain ought be regarded, on a common sense view of the matter, to have occurred “because of” the making of the representations. The entry into the contract itself did not bring about a loss. Even if it was able to be inferred from the evidence that the lot on 33 Memorial Avenue was worth about the same as Lot 9, the price of that other lot was $35,000 more. The plaintiffs were thus in no worse position for agreeing to purchase Lot 9 instead of that lot. Subsequent increases in the value of Lot 9 demonstrate that the contract was indeed a bargain for the plaintiffs.

204. The loss of the bargain was brought about by the conduct of the vendor in repudiation of the contract. That conduct occurred later than, and is distinct from, the conduct involved in making the representations. Had it become necessary to do so, I would have concluded that the contravening conduct did not materially contribute to the loss of the bargain, and was thus not a cause of that loss (see Henville v Walker (2001) 206 CLR 459; [2001] HCA 52 at [106] per McHugh J).

205. For the above reasons, Mr and Mrs Thakorlal’s claim for damages under the Australian Consumer Law has not been made out.

Conclusion

207. Each of the plaintiffs has succeeded in establishing an entitlement to damages for loss of bargain. In each case the damages have been assessed as the difference between the value of the relevant lot as at May 2016 and the contract price. Judgments should be entered for those amounts together with interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW). Costs should follow the event.

208. I direct the parties to confer and attempt to seek agreement as to the appropriate orders to be made to give effect to these reasons. I direct that Short Minutes of Order be brought in within 7 days. If there is no agreement as to the orders, the Court will consider either re-listing the matter or directing that further written submissions be provided.

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Decision last updated: 12 October 2017