Wallace v Hermans

[1974] HCA 42

HIGH COURT OF AUSTRALIA

McTiernan A.C.J., Stephen and Mason JJ.

WALLACE v. HERMANS

(1974) 131 CLR 672

25 October 1974

Contract—Vendor and Purchaser

Contract—Rescission—Right to rescind conferred by contract—Election—Affirmation of contract—Whether exercise of right to rescind precluded. Vendor and Purchaser—Contract of sale—Term conferring right to rescind if it were established that at date of contract property affected by planning scheme otherwise than as stated—Statement that property affected as annexed certificate—No certificate annexed—Right to rescind—Election—Affirmation—Imputation of knowledge of solicitor to client.

Decisions

Oct. 25.
The following written judgments were delivered:-
McTIERNAN A.C.J. I would dismiss this appeal and would do so for the reasons prepared by my brother Stephen. (at p674)

STEPHEN J. This is the third of three appeals from the New South Wales Supreme Court concerned with the failure to annex to standard form contracts of sale planning certificates disclosing how the subject land may be affected by town planning provisions. (at p674)

2. However it is to be distinguished from the earlier appeals, the A.S.L. Developments appeals (1974) 131 CLR 660 at p 634 and that of Turner v. Labafox International Pty. Ltd. (1974) 131 CLR 660 at p 660 , in that here it is not the would-be rescinding party which is the appellant, the learned primary judge, Helsham J., declared the vendor's rescission to be effective in law and it is from that decision that the purchasers now appeal. The correctness of the decision in Wolczyk v. Barr (1970) 92 WN (NSW) 518 is again challenged, on this occasion by the appellants, while the respondent seeks to rely upon it and also to uphold the conclusion of Helsham J. that she did not by her conduct lose the right of rescission which it conferred upon her. (at p674)

3. Once again I am fortunate in being able to adopt as my own the statement of facts by my brother Mason. In this appeal, as in the A.S.L. Developments appeals (1974) 131 CLR 660 at p 634 , it is the 1965 edition of the standard form of contract of sale that is in issue; the meaning and effect given to it by the judgment in Wolczyk v. Barr (1970) 92 WN (NSW) 518 I regard as correct and my reasons for so holding are those expressed in my judgment in the A.S.L. Developments appeals (1974) 131 CLR 660 at p 634 . It follows that, since the property the subject of this contract of sale was affected by an interim development order, the vendor acquired a right to rescind the contract pursuant to cl. 16. The only question is whether she lost that right by acts of affirmation during the period from date of contract, 10th January 1969, until date of rescission, 12th July 1973. The answer to that question in turn depends exclusively upon whether or not there was on the vendor's part such knowledge of the facts giving rise to the right to rescind as to confer upon acts of affirmation the effect of an irrevocable election. The existence of acts of affirmation is not in doubt but the existence of relevant knowledge is. (at p675)

4. The learned primary judge accepted the vendor's evidence, tested in cross-examination, that she was not at any material time aware of the existence of any planning scheme or interim development order affecting the land. This finding of fact should not be disturbed and the only way in which the appellants can succeed in this appeal is to establish that the vendor's solicitor had the requisite knowledge and that his possession of that knowledge suffices to establish an irrevocable election to affirm the contract. (at p675)

5. In my view such an argument must fail for want of evidence that the vendor's solicitor had any knowledge whatever relating to town planning provisions affecting the subject property. (at p675)

6. I accept the appellants' submission that, contrary to the view of the learned trial judge, it would suffice if there were knowledge that in some unspecified way the property was affected by a "town and country planning scheme or interim development"; that knowledge not necessarily extending to the manner in which the property was so affected. Now the subject land was country land situated at some distance from the town of Coffs Harbour where the vendor's solicitors were in practice and although a solicitor in practice in a country town might be thought to be well aware of the fact, if that be the case, that town planning provisions are applicable to the town in which he practices he cannot necessarily be assumed to know the precise geographic reach of such provisions; much will no doubt depend upon the particular facts, how long the provisions have been in force and whether they cover the whole of the municipal area or are limited to portions only of it. The relevant interim development order in this instance apparently covered the whole of the Shire of Coffs Harbour save for certain excepted lands described in a particular schedule to the order and the extent of which is not disclosed in the material before us. But even if the solicitors be taken to know the boundaries of the Shire and the identity of the excepted lands there remains the question whether they knew that the land described in the contract of sale fell within the municipal area of the Shire of Coffs Harbour. (at p675)

7. The evidence discloses that as recently as 1954 the subject property was not within that Shire; a certificate of title to part of the land issued in that year describes it, as did the earlier certificate of title to the remainder of the land, issued in 1946, as within the Shire of Bellingen. It seems that the member of the vendor's firm of solicitors who was acting on her behalf in 1973 believed as late as 18th May 1973 that the property was within the Shire of Bellingen; he on that date wrote to the council of that Shire seeking information as to the zoning of the subject land, only to be told that the land was at that date in fact within the Shire of Coffs Harbour. (at p676)

8. There is no evidence whatever that in the Shire of Bellingen there exists or ever existed any town planning scheme and if, as would appear to be the case, the solicitor acting for the vendor believed until May 1973 that the subject land was in that Shire there would be no occasion to impute to him any knowledge that the land was affected by planning provisions. (at p676)

9. The relevant acts of affirmation upon which the appellants must rely occurred earlier than May 1973 and the knowledge that he and, through him, his client acquired in or after that month cannot avail the appellants. (at p676)

10. It follows that the appellants have failed to establish the existence of that knowledge on the part of the vendor which is necessary to make out a case of election. If the appellants cannot rely upon an election by the vendor to affirm the contract there is no other ground upon which the vendor's right to rescind may be challenged and their appeal necessarily must fail. (at p676)

11. I would dismiss this appeal accordingly. (at p676)

MASON J. This is another appeal arising out of the rescission by the vendor of a contract for the sale of real property on the ground that the property was zoned otherwise than as stated in the contract of sale. In this instance the Supreme Court of New South Wales (Helsham J.), on a summons issued by the respondent vendor, declared that the contract has been duly rescinded. (at p676)

2. The contract was in the usual form of contract approved by the Law Soci ety of New South Wales and the Real Estate Institute (1965 edition). The case turns on the provisions of cl. 16 of the 4th Sch. the terms of which are set out in Sargent v. A.S.L. Developments Ltd. (1974) 131 CLR 660 at p 634 . Here again no s. 342AS certificate was annexed to the contract or its counterpart when exchange took place on or about 10th January 1969, the date which the contract bears. (at p676)

3. The property was a farming property situtated some eight miles from Coffs Harbour within the Shire of Coffs Harbour. The Coffs Harbour Shire was subject to zoning provisions under the Interim Development Order No. 6 made and gazetted in October 1967. It applied to all land within the Shire excepting certain land described in sch. 5 to the Coffs Harbour Planning Scheme Ordinance. The land was zoned in at least four ways under the Interim Development Order but it is unnecessary to set out the details of the zoning. (at p676)

4. By the contract the respondent as vendor agreed to sell to the appellants as purchasers her right; title and interest as tenant in common in the property of the sum of $9,000 which was payable as to the sum of $800 by way of deposit on the signing of the contract and as to the balance of $8,200 by cash on completion. Time was not made of the essence. Special condition I acknowledged that the respondent was making application for a grant of administration of her late husband's estate, the tenancy in common being as asset in the estate. The contract was expressed to be conditional upon the respondent obtaining the grant and it provided that no requisition or objection should be made in the event of her failure to secure a grant or in the event of delay. (at p677)

5. It should be mentioned that the appellants and the respondent's husband, one Smith; had originally bought the property in 1964, Smith; acquiring title as tenant in common as to one half and the appellants as to the other half. Smith had died on 25th May 1967 intestate and in that year an oral agrreement has been reached between the respondent and the appellants by which it was agreed that the respondent would sell the deceased's share of the property to the appellants for $8,000 and that they would permit her to sell off the stock and equipment on the property, the proceeds of that sale to be retained by the estate.. The stock and equipment was sold and the proceeds held by the estate. After the oral agreement was made the appellants went to live on the property. Since then they have run the property and increased its value by making improvements. (at p677)

6. After the written contracts were exchanged early in 1969 nothing occurred for some considerable time. In August 1972, by which time letters of administration had been granted, and subsequently, the appellants' solicitors pressed for completion, but there was no response. (at p677)

7. In response to an inquiry by the respondent's solicitor by letter dated 19th June 1973 the Shire Council stated that the land on 10th January 1969 was situted in a "Non-urban 1(a) zone under Interim Development Order No. 6 and there has been no change in zoning since the Interim Development Order was gazetted in October, 1967". On receipt of this information the solicitors for the respondent sought counsel's advice which came to hand on 6th July 1973. Six days later on 12th July 1973, the solicitors for the respondent rescinded the contract. (at p677)

8. For the reasons which I have given in Sargent v. A.S.L. Development Ltd. (1974) 131 CLR 660 at p 634 , I consider that cl. 16 conferred a right on the respondent to rescind the contract on the ground that the property was affected by interim development otherwise than as stated in the 4th Sch. to the contract. The question which then arises is whether the respondent was precluded from exercising the right of rescission which the clause conferred by reason of an election to affirm the contract. (at p678)

9. The case made in this respect for the appellants is that the respondent elected to affirm the contract in correspondence from her solicitors to the appellants' solicitors. Two letters are relied upon: first, a letter dated 21st January 1969 furnishing particulars of title in accordance with a provision in the contract: secondly, a letter of 16th March 1973 stating "We shall notify you when transmission has been effected" at a time when the appellants were in possession. Although the respondent had no actual knowledge of the planning scheme or the order it is submitted that there should be imputed to the respondent at all material times from the making of the contract a knowledge that the land was zoned under the Interim Development Order. The submission is based on the circumstance that her solicitors were a long-established firm in Coffs Harbour and that they should therefore be presumed to know of the existence of the Interim Development Order and that the land fell within the purview of the scheme. His Honour was prepared to draw that inference but declined to infer that any member of the firm was aware of the actual zoning applicable to the property. (at p678)

10. In my view the knowledge of the actual zoning under the Order is immaterial. All that need be established under cl. 16 is that the property was "affected . . . interim development . . . otherwise than as stated in the Fourth Schedule ". To bring the clause into operation it is not necessary to show that the property is subject to a particular zoning unless the statement made in the 4th Sch. makes that circumstance relevant. (at p678)

11. However, I can see no basis for inferring that the respondent's solicitors had knowledge that the property was affected by the Interim Development Order before they ascertained this fact from the Shire Council in June 1973. The order did not apply to all land in the Shire and there is nothing to identify the land which was exempt or to demonstrate that the respondent's solicitors probably knew that the property was situated in that part of the Shire which was not exempt. Moreover, there are some indications that the solicitors until June 1973 thought that the property was in the neighbouring Shire of Bellingen. The contract described the property as being situate within the latter Shire and on 18th May 1973 the respondent's solicitors, when seeking information as to the Interim Development Order, wrote to the Shire of Bellingen which advised them that they should make inquiry from the Shire of Coffs Harbour. Accordingly, the evidence does not establish that the solicitors knew that the Interim Development Order applied to the property. (at p678)

12. An alternative submission of waiver or election was made, based on the respondent's delay in rescinding the contract after the solicitors received the letter from the Coffs Harbour Shire Council advising of the existance of the Interim Development Order on 25th June 1973. It is clear that the time which elapsed after 25th June was taken up in obtaining counsel's advice. Rescission took place promptly after that advice was furnished. There is therefore no foundation for the suggestion that there was a waiver or election by the respondent after receiving the advice from the Shire Council. (at p679)

13. For these reason I would dismiss the appeal. (at p679)

Orders

Appeal dismissed with costs.