Wang v Kaymet Corporation Pty Ltd

[2015] NSWSC 1459

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Wang v Kaymet Corporation Pty Ltd [2015] NSWSC 1459
Hearing dates:	20 – 28 July, 30 July and 3 September 2015; further written submissions received 16 and 22 September 2015
Decision date:	06 October 2015
Jurisdiction:	Equity - Technology and Construction List
Before:	Stevenson J
Decision:	Proceedings to be dismissed
Catchwords:	CONTRACT – contracts for the purchase of units “off the plan” – completion subject to registration of draft strata documents – contractual obligation that before completion vendor must procure construction of building in a proper and workmanlike manner and generally in accordance with the development consent – further contractual provision that the defendants must use “reasonable endeavours” to register draft strata documents by a specified date for registration – proper construction of the contract – whether defendants’ failure to construct the building generally in accordance with terms of development consent necessarily constitutes a breach of their obligation to use “reasonable endeavours” – nature of the obligation to use “reasonable endeavours”; VENDOR and PURCHASER – whether defendants purported rescission of the contracts on the basis that strata documents were not registered by the specified dates for registration was valid – whether the defendants failed to use “reasonable endeavours” to register the draft strata documents by the relevant dates – whether the strata documents could have been registered by the relevant dates had the defendants used reasonable endeavours; EVIDENCE – whether Ferrcom inference should be drawn in circumstances where a matter was not addressed in affidavit material or evidence-in-chief, but witness was taken to the matter in cross-examination
Legislation Cited:	Environmental Planning and Assessment Act 1979 (NSW)
Cases Cited:	Adderley v Dixon (1824) 1 Sim & St 607; 57 ER 239 AJDJ Pty Ltd v Pacific West Developments Pty Ltd [2001] NSWSC 1174 Apollo Shower Screens Pty Ltd v Building and Construction Industry Long Service Payments Corporation (1985) 1 NSWLR 561 Blatch v Archer (1774) 1 Cowp 63; 98 ER 969 Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Coulls v Bagot’s Executor & Trustee Company Ltd (1967) 119 CLR 460 Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640 Gauld v Obsidian Holdings Pty Ltd [2009] NSWSC 924 Hardy v Wardy [2001] NSWSC 1141 Hart v MacDonald (1910) 10 CLR 417 Hawes v Cuzeno Pty Ltd [1999] NSWSC 1167 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Hunyor v Tilelli (1997) 8 BPR 15,629 Jolley v Carmel Ltd [2000] 2 EGLR 153 Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; 243 CLR 361 Mackay v Dick (1881) 6 App Cas 251 Masters v Belpate Pty Ltd [2001] NSWSC 169 Munro v Bodrex Pty Ltd [2002] NSWSC 122 Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; 205 CLR 126 Pianta v National Finance & Trustees Ltd [1964] HCA 61; 180 CLR 146 Plumor Pty Ltd v Handley (1996) 41 NSWLR 30 Rhodia International Holdings Ltd v Huntsman International LLC [2007] EWHC 292 Schenk v ACN 081 123 140 Pty Ltd [2002] NSWSC 123 Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 Stepping Stones Child Care Centre (ACT) Pty Ltd v Early Learning Services Ltd [2013] ACTSC 173 Terrell v Mabie Todd & Co Ltd (1952) 69 RPC 234 The Owners Corporation of Strata Plan 62254 v Rockdale City Council [2008] NSWSC 392 The Owners – Strata Plan No 69312 v Rockdale City Council; Owners of SP 69312 v Allianz Aust Insurance [2012] NSWSC 1244 Transfield Pty Ltd v Arlo International Ltd (1980) 144 CLR 83 Wardy v Hardy [2002] NSWCA 215 Williamson & McGillivray v JIA Holdings Pty Ltd [2011] QCA 346
Texts Cited:	J W Carter, The Construction of Commercial Contracts, (2013, Hart Publishing) K Lewison and D Hughes, The Interpretation of Contracts in Australia, (2012, Lawbook Co.) I C F Spry, The Principles of Equitable Remedies: Specific Performance, Injunctions, Rectification and Equitable Damages, (9th ed 2014, Lawbook Co.)
Category:	Principal judgment
Parties:	Qi Wang (First Plaintiff) Jue Li (Second Plaintiff) Xiaoyan Xi (Third Plaintiff) Bin Wang (Fourth Plaintiff) Xiaozheng Lao (Fifth Plaintiff) Siping Xia (Sixth Plaintiff) Meng Shi (Seventh Plaintiff) Yijie Wang (Eighth Plaintiff) Yu Di Xi (Ninth Plaintiff) Qian Li Yan (Tenth Plaintiff) Kai Jie Gu (Eleventh Plaintiff) Li Ye (Twelfth Plaintiff) Jia Jia Ye (Thirteenth Plaintiff) Yanchong Wei (Fourteenth Plaintiff) Zhen Jiang Li (Fifteenth Plaintiff) Lisa Chan (Sixteenth Plaintiff) Peter Ray (Seventeenth Plaintiff) Hai Xu (Eighteenth Plaintiff) Chao Lu Ye (Nineteenth Plaintiff) Na Lu (Twentieth Plaintiff) Liang Qiao (Twenty-first Plaintiff) Jiannan Zhang (Twenty-second Plaintiff)) Jie Ma (Twenty-third Plaintiff) Qian Lan (Twenty-fourth Plaintiff) Ling Xu (Twenty-fifth Plaintiff) Ahmed Nizamuddin (Twenty-sixth Plaintiff) Alexander Lissaman (Twenty-seventh Plaintiff) Yingqi Wang (Twenty-eighth Plaintiff) Liu Qing Xu (Twenty-ninth Plaintiff) Junfeng Wang (Thirtieth Plaintiff) Wen Shi (Thirty-first Plaintiff) Shaocong Zhou (Thirty-second Plaintiff) Yibing Zhou (Thirty-third Plaintiff) Boying Gu (Thirty-fourth Plaintiff) Yonglan Shen (Thirty-fifth Plaintiff) Lili Gu (Thirty-sixth Plaintiff) Weidong Li (Thirty-seventh Plaintiff) Wei Huang (Thirty-eighth Plaintiff) Can Zhao (Thirty-ninth Plaintiff) Helen Hoi Peng Fong (Fortieth Plaintiff) Huey Ling Liew (Forty-first Plaintiff) Jian Zhong Wu (Forty-second Plaintiff) Tianjiao Liu (Forty-third Plaintiff) Kaymet Corporation Pty Limited (First Defendant) Toufic Bachara Kayrouz (Second Defendant) Lichah Kayrouz (Third Defendant) William Joseph Metlej (Fourth Defendant)
Representation:	Counsel: A J McInerney SC with S Jacobs (Plaintiffs) F C Corsaro SC (from 23 July 2015) with P J Bambagiotti and M Auld (Defendants)   Solicitors: Carneys Lawyers (Plaintiffs) Alphonse & Associates (Defendants)
File Number(s):	SC 2013/196153

Judgment

Introduction

1. Between 23 November 2009 and 1 April 2010, the plaintiffs exchanged contracts with the defendants for the purchase "off the plan" of a total of 34 of 94 residential apartments proposed to be constructed on a site at Lusty Street, Wolli Creek ("the Site"). Each contract was, relevantly, in the same terms.

2. The Site is level and roughly rectangular. On the northern boundary, immediately adjacent to the Site, is the East Hills railway line. Immediately beyond the railway line is Wolli Creek. The Site has a high water table. Prior to construction, ground water was located at depths ranging from 1.1 metres to 1.2 metres below existing surface levels. The Site is roughly the lowest point in the surrounding area.

3. Each of the contracts contained a clause requiring completion 21 days after the date on which the defendants served on the purchaser’s solicitors notice that the relevant strata plan had been registered. The contracts also contained a condition that the defendants use their "reasonable endeavours" to register "draft Strata Documents" by the “Date for Registration”.

4. The contracts further provided that if “for any reason” the draft Strata Documents were not registered by the Date for Registration, either party could rescind.

5. The draft Strata Documents were not registered by the Date for Registration, or at all. The defendants have now purported to rescind each of the contracts.

6. The question for determination in these proceedings is whether the defendants were entitled to take this step.

7. It is common ground that the apartments are now worth more than the contract price. However, it is no longer any part of the plaintiffs’ case that the defendants deliberately delayed work on the project so as to be in a position to rescind the contracts and sell into the rising market. That submission was foreshadowed in opening and repeated in the first iteration of written closing submissions. However, Mr McInerney SC, who appeared with Mr Jacobs for the plaintiffs, did not put that proposition to any of the defendants’ witnesses. He accepted that, accordingly, the submission could not be maintained.

The key contractual provisions

8. Clause 41 of the contracts provided that, relevantly, completion was to take place 21 days after the “Service Date”, which was defined in cl 30 to mean “the date on which the purchaser’s solicitor is served with notice of the registration of the Strata Plan”.

9. Clause 50 was headed “Schedule of Finishes” and provided, relevantly:

“50.1   …before completion, the vendor must:

(a) cause the Property and Common Property to be finished as specified in the Schedule of Finishes”.

10. Clause 51 was headed “Construction” and was in the following terms:

"51.1   Before completion, the vendor must construct or procure the construction of the Building in a proper and workmanlike manner, generally in accordance with the Development Consent.

51.2   The parties agree that the issue of an Occupation Certificate and the registration of the Strata Plan shall be conclusive evidence that the vendor has complied with its obligations under this clause.”

11. Clause 52 was headed “Registration of Strata Documents” and was, relevantly, in the following terms:

“52.1   Completion of this contract is subject to and conditional on the registration of the Strata Documents at Land & Property Information, NSW on or before the Date for Registration. The vendor will use its reasonable endeavours to register the draft Strata Documents by the Date for Registration. If the Strata Documents are not registered by the Date for Registration or any extension granted under clause 52.2, the vendor is not in breach of this contract and the purchaser's only right is to rescind this contract under the provisions of the following sub-clause.

52.2   Subject to clause 52.3 the vendor can serve a notice or notices extending the Date of Registration if construction of the building or registration of the Strata Documents is delayed in whole or part because of any cause, matter or thing beyond the control of the vendor.

52.3   The Date of Registration specified in any vendor's notice cannot extend the original Date of Registration beyond a period of 6 months after that original date.

52.4   If the draft Strata Documents are not registered by the Date for Registration or any extension granted under clause 52.2 for any reason, either party may rescind this contract by serving written notice on the other party at any time before the Strata Plan is registered."

12. In each contract, the Date for Registration was 30 months from the date of exchange. Under cll 52.2 and 52.3, the defendants were entitled to extend the Date for Registration by a further six months. There is no evidence that the defendants took this step.

13. The dates on which each of the plaintiffs exchanged contracts, the relevant Dates for Registration and the dates on which the defendants purported to rescind the contracts are summarised in the following table:

UNIT NO.	NAME OF PURCHASER	EXCHANGE DATE	DATE FOR REGISTRATION	RESCISSION OF CONTRACT
7	Xiaoyan Xi and Bin Wang	23/11/2009	23/05/2012	10/04/2014
23	Yu Di Xi and Qian Li Yan	24/11/2009	24/05/2012	10/04/2014
24	Kai Jie Gu and Liw Ye Lin	30/11/2009	30/05/2012	10/04/2014
26	Yanchong Wei	30/11/2009	30/05/2012	15/05/2013
29	Zhen Jiang Li	30/11/2009	30/05/2012	10/04/2014
38	Liang Qiao	30/11/2009	30/05/2012	22/03/2013
20	Meng Shi	01/12/2009	01/06/2012	18/03/2013
40	Jie Ma and Qian Lan	01/12/2009	01/06/2012	18/03/2013
14	Xiaozheng Lao	07/12/2009	07/06/2012	10/04/2014
33	Lisa Chan and Peter Ray	07/12/2009	07/06/2012	10/04/2014
27	Qi Wang (Seven) and Jue Li	23/12/2009	23/06/2012	18/03/2013
25	Jia Jia Ye	24/12/2009	24/06/2012	20/03/2013
35	Chao Lu Ye	24/12/2009	24/06/2012	10/04/2014
37	Na Lu	24/12/2009	24/06/2012	10/04/2014
71	Yingqi Wang	24/12/2009	24/06/2012	10/04/2014
78	Boying Gu and Yonglan Shen	24/12/2009	24/06/2012	10/04/2014
79	Lili Gu and Weidong Li	24/12/2009	24/06/2012	18/03/2013
15	Siping Xia	29/12/2009	29/06/2012	18/03/2013
91	Siping Xia	29/12/2009	29/06/2012	18/03/2013
34	Hai Xu	21/01/2010	21/07/2012	10/04/2014
39	Jiannan Zhang	21/01/2010	21/01/2012	10/04/2014
90	Tianjiao Liu	21/01/2010	21/07/2012	10/04/2014
77	Shaocong Zhou	03/02/2010	03/08/2012	10/04/2014
85	Boying Gu	08/02/2010	08/08/2012	18/03/2013
80	Wei Huang and Can Zhao	10/02/2010	10/08/2012	18/03/2013
51	Xiaoyan Xi and Bin Wang	24/02/2010	24/08/2012	20/03/2013
22	Yijie Wang	08/03/2010	08/09/2012	10/04/2014
82	Helen Hoi Peng Fong	17/03/2010	17/09/2012	20/03/2013
76	Junfeng Wang and Wen Shi	18/03/2010	18/09/2012	18/03/2013
65	Ling Xu	01/04/2010	01/10/2012	10/04/2014
68	Ahmed Nizamuddin	01/04/2010	01/10/2012	18/03/2013
70	Alexander Lissaman	01/04/2010	01/10/2012	10/04/2014
73	Liu Qing Xu (Lisa)	01/04/2010	01/10/2012	20/03/2013
84	Jian Zhong Wu	01/04/2010	01/10/2012	10/04/2014

14. Clause 34.1 is an "entire agreement" clause in the following terms:

"The purchaser acknowledges and agrees that as at the date of this contract, the terms and conditions set out in this contract contain the entire agreement between the parties in relation to the Property notwithstanding any negotiations or discussions held or documents signed or brochures produced or statements made prior to the purchaser's execution of this contract".

15. Clause 35.5(b) is also relevant and provides:

"The vendor may, at any time prior to the completion of construction of the Building, make application to [Rockdale City Council]…to vary the terms of the Development Consent in such manner as the vendor deems appropriate".

The proper construction of the contracts

16. There was debate before me as to the proper construction of the contracts.

17. The question of when completion was to take place was governed by the clauses I have set out at [8] above; completion was to take place within 21 days of the vendor serving on the purchasers’ solicitors notice that the strata plan had been registered.

18. In that regard, the second sentence of cl 52.1 imposed on the defendants an obligation to use “reasonable endeavours” to register the draft Strata Documents by the Date for Registration.

19. The effect of this sentence was that the defendants were obliged to use their reasonable endeavours to do whatever was necessary to enable the draft Strata Documents to be registered by the relevant date. That may well have included causing the “Property” and “Common Property” to be finished (as required by cl 50.1) and the construction of the building to be completed (as required by cl 51.1) in a proper and workmanlike manner. However, in my opinion, neither cll 50.1 nor 51.1 is directed to the question of when completion was to take place. Those clauses merely set out what state of affairs must exist “before completion”.

20. Mr McInerney argued that the defendants were in breach of cl 51.1 of the contracts, and that it followed that they had not used their reasonable endeavours for the purposes of the second sentence of cl 52.1.

21. I do not agree.

22. First, the evidence does not establish that the defendants did not construct the building in a proper and workmanlike manner. That obligation was directed to the quality of the building. The plaintiffs do not complain about the quality of the building as constructed; this is not a “defects” case.

23. The plaintiffs did establish that the building was not constructed in accordance with the relevant development consent (as required by cl 51.1). Mr William Metlej, the fourth defendant and a director of the first defendant, Kaymet Corporation Pty Ltd, admitted that the defendants did not adhere to a “Dewatering Management Plan” devised by Civil Foundations Pty Ltd (discussed below). This was a requirement of RailCorp’s conditions of consent to the project, and thus a condition of the development consent granted by Rockdale City Council on 20 August 2008 (“the Development Consent”). Mr Metlej also admitted other departures from the Development Consent.

24. However, it does not, in my opinion, necessarily follow from this that the defendants failed to use reasonable endeavours to have the Strata Documents registered by the Date for Registration.

25. If the failure to construct the building generally in accordance with the Development Consent caused a delay in progress of the works, or itself prevented or delayed registration of the Strata Documents, that may show a causative want of reasonable endeavours. That involves a question of fact, and examination of the progress of the works. For example, the plaintiffs do contend that the defendants’ failure to adhere to Civil Foundations’ Dewatering Management Plan caused delay; I consider that argument below.

26. However, I do not accept the plaintiffs’ contention that the fact that the defendants constructed the building otherwise than strictly in accordance with the Development Consent (assuming that this constituted a breach of the defendants’ obligations under cl 51.1), without more, bespeaks a breach of the defendants’ “reasonable endeavours” obligation under cl 52.1.

27. Mr McInerney submitted that, nonetheless, by reason of the defendants’ admitted breach of cl 51.1, the plaintiffs are now entitled to a decree of specific performance. But any such decree would be limited to compelling the defendants to perform their obligation to construct the building “generally in accordance with the Development Consent”. It would be futile to so order, as the building is now complete and no complaint is made about its quality. The plaintiffs have not established, or even alleged, that the departure by the defendants from the terms of the Development Consent caused the building to be constructed defectively. As I have said, this is not a defects case.

28. For the reasons I set out below, in my opinion, on the proper construction of the contracts, the sole matter relevant for me to consider is whether, as a matter of fact, the defendants used their reasonable endeavours to register the draft Strata Documents by the Date for Registration, as required by the second sentence of cl 52.1.

29. If they did not, the question arises as to the nature of the plaintiffs’ remedies. That question directs attention to the proper construction of the third sentence of cl 52.1, and of cl 52.4.

30. Before turning to those issues of construction, I should make two further points.

31. The first is that, as Mr McInerney accepted, it was for the plaintiffs to prove that the defendants did not use their reasonable endeavours to register the draft Strata Documents by the Date for Registration.

32. However, as McLelland CJ in Eq said in Hunyor v Tilelli (1997) 8 BPR 15,629 (referring to the familiar statement in Blatch v Archer (1774) 1 Cowp 63; 98 ER 969):

“It is necessary however to bear in mind that all evidence is to be weighed according to the proof which it was reasonably within the means of one party to produce or of the other to contradict. This has particular significance in respect of evidentiary facts which are peculiarly within the knowledge of one party rather than the other (see eg Apollo Shower Screens [Pty Ltd] v Building & Construction Industry Long Service Payments Corporation (1985) 1 NSWLR 561…).”

33. The second is that Mr McInerney drew my attention to the decision of the Queensland Court of Appeal in Williamson & McGillivray v JIA Holdings Pty Ltd [2011] QCA 346, which, Mr McInerney submitted, was authority for the contentions set out at [20] and [26] above.

33. In that case, Chesterman JA (with whom Fraser JA and Wilson AJA agreed) considered a case similar to this and, in particular, a clause similar to cl 51.1 (although the words in that clause were “by the Completion Date” rather than “before completion”). In the circumstances of that case, Chesterman JA concluded that the failure by the builder to cause the building to be constructed “by the completion date” was an anticipatory breach of the contracts, entitling the purchasers to damages. However, as Chesterman JA emphasised at several points in his judgment (see for example [28], [30], [39] and [40]), the builder in that case did not purport to terminate the contracts under the clause equivalent to cl 52.4 of the contracts in this case. In the paragraphs to which I have referred, his Honour made clear that his decision as to the significance of the builder’s failure to construct the building “by the completion date” may have been different had the builder purported to terminate. Accordingly, I do not see this decision as casting any light on the correctness, or otherwise, of the plaintiffs’ contention set out at [20] and [26].

Clause 52 of the contracts

The second sentence

35. As I have said, the second sentence of cl 52.1 of the contracts imposed upon the defendants an express obligation to use their "reasonable endeavours" to register the draft Strata Documents by the relevant date.

36. For that reason, it was not necessary, in my opinion, for the plaintiffs to have resort to any implied obligation of the defendants to cooperate (for example see Mackay v Dick (1881) 6 App Cas 251 at 263; Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607-8), do all things necessary to enable the plaintiffs to have the contracted benefit or not hinder or prevent the fulfilment of the purpose of the express promises in the agreement (for example see Peters (WA) Ltd v Petersville Limited [2001] HCA 45; 205 CLR 126 at [36]). Had there been no express promise of the kind set forth in the second sentence of cl 52.1, a clause to that effect may well have been implied. However, the question does not arise.

37. For that reason, it was also not necessary to consider the defendants’ submission that any such implied term would be excluded by reason of the “entire agreement” clause in cl 34.1 of the contracts (see [14] above). Had it been necessary for me to consider that question, I would have rejected the defendants’ submission. Appropriately drafted, “entire agreement” clauses are capable of excluding terms which would otherwise be implied into a contract. However, in my opinion, the language of cl 34.1 does not have this effect; for example see Hart v MacDonald (1910) 10 CLR 417 per Isaacs J at 430; see generally K Lewison and D Hughes, The Interpretation of Contracts in Australia, (2012, Lawbook Co.) at 3.13 and J W Carter, The Construction of Commercial Contracts, (2013, Hart Publishing) at [10-28].

38. It has been observed that "[c]hallenges to rescissions of 'Off-the-Plan' contracts for the sale of residential units which are yet to be constructed frequently come before the Equity Division" (per Bryson J (as his Honour then was) in Schenk v ACN 081 123 140 Pty Ltd [2002] NSWSC 123 at [20]).

39. Of course, each case must be considered in light of the particular terms of the relevant contract. Many cases have been decided on the basis of the Court’s conclusion that, in a rising market, the defendant vendor’s object in purporting to rescind was to sell into that rising market (for example see Schenk at [34]; Munro v Bodrex Pty Ltd [2002] NSWSC 122 at [69]). As I have explained at [7] above, that argument is not available to the plaintiffs in this case.

40. Here, the obligation of the defendants was to use "reasonable endeavours" to register the Strata Documents by the Date for Registration; rather than "everything reasonably necessary" (Hawes v Cuzeno Pty Ltd [1999] NSWSC 1167; Masters v Belpate Pty Ltd [2001] NSWSC 169), "everything reasonable" (Hardy v Wardy [2001] NSWSC 1141, affirmed on appeal in Wardy v Hardy [2002] NSWCA 215; AJDJ Pty Ltd v Pacific West Developments Pty Ltd [2001] NSWSC 1174), "with reasonable expedition" (Schenk), "all reasonable endeavours" (Gauld v Obsidian Holdings Pty Ltd [2009] NSWSC 924), or "best endeavours" (Transfield Pty Ltd v Arlo International Ltd (1980) 144 CLR 83, although in an admittedly different context).

41. There is some authority to the effect that an obligation to use "reasonable endeavours" or "reasonable efforts" is less onerous than an obligation to use "all reasonable endeavours", "all reasonable efforts" or "best endeavours" (for example see Jolley v Carmel Ltd [2000] 2 EGLR 153 Lewison QC (as his Lordship then was) sitting as a Deputy High Court Judge, at 159; cited with approval in Rhodia International Holdings Ltd v Huntsman International LLC [2007] EWHC 292 per Flaux QC (as his Lordship then was), also sitting as a Deputy High Court Judge, at [34]).

42. Refshauge J considered the matter in some detail in Stepping Stones Child Care Centre (ACT) Pty Ltd v Early Learning Services Ltd [2013] ACTSC 173 at [274] to [300]. His Honour expressed the view that “an obligation to use ‘reasonable endeavours’ is not as onerous as one to use ‘best endeavours’ or ‘all reasonable endeavours’” (at [283]).

43. I doubt, especially in the context of the facts in this case, that there is any distinction of substance to be drawn between these expressions. Ultimately, neither Mr McInerney nor Mr Corsaro SC, who appeared with Mr Bambagiotti and Mr Auld for the defendants, suggested there was.

44. In the recent case of Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640, the High Court considered the expression "reasonable endeavours". Argument proceeded upon the basis that substantially similar obligations were imposed by the terms "reasonable endeavours" or "best endeavours (or efforts)" (at [40]).

45. In relation to an obligation to use "reasonable endeavours", the High Court said at [41] to [43]:

"Three general observations can be made about obligations to use reasonable endeavours to achieve a contractual object. First, an obligation expressed thus is not an absolute or unconditional obligation. Secondly, the nature and extent of an obligation imposed in such terms is necessarily conditioned by what is reasonable in the circumstances, which can include circumstances that may affect an obligor’s business. This was explained by Mason J in Hospital Products Ltd v United States Surgical Corporation [(1984) 156 CLR 41], which concerned a sole distributor’s obligation to use ‘best efforts’ to promote the sale of a manufacturer’s products. His Honour said:

‘The qualification [of reasonableness] itself is aimed at situations in which there would be a conflict between the obligation to use best efforts and the independent business interests of the distributor and has the object of resolving those conflicts by the standard of reasonableness…It therefore involves a recognition that the interests of [the manufacturer] could not be paramount in every case and that in some cases the interests of the distributor would prevail.’

As Sellers J observed of a corporate obligor in Terrell v Mabie Todd & Co Ltd [(1952) 69 RPC 234], an obligation to use reasonable endeavours would not oblige the achievement of a contractual object ‘to the certain ruin of the Company or to the utter disregard of the interests of the shareholders’. An obligor’s freedom to act in its own business interests, in matters to which the agreement relates, is not necessarily foreclosed, or to be sacrificed, by an obligation to use reasonable endeavours to achieve a contractual object.

Thirdly, some contracts containing an obligation to use or make reasonable endeavours to achieve a contractual object contain their own internal standard of what is reasonable, by some express reference relevant to the business interests of an obligee."

46. In this case, the defendants’ obligation under cl 52.1 to use "reasonable endeavours" must also be read in light of cl 35.5(b), which permitted the defendants to make an application to the Council to vary the terms of the Development Consent "at any time prior to the completion of construction of the Building".

The third sentence

47. Mr Corsaro submitted that the third sentence of cl 52.1 was a “complete answer” to the plaintiffs’ claim.

48. The third sentence reads, relevantly:

“If the Strata Documents are not registered by the Date for Registration…the vendor is not in breach of this contract and the purchaser’s only right is to rescind this contract under the provisions of the following sub-clause.”

49. Mr Corsaro submitted that the effect of this clause is that “whatever the reason for not registering the Strata Documents, the Defendants are not in breach of the contract, and the purchaser’s only right is to rescind”. In other words, even if the reason the Strata Documents were not registered by the Date for Completion was that the defendants failed to use their reasonable endeavours to do so, and even if this was deliberate, the defendants would not thereby be in breach of the contracts and the plaintiffs’ only right would be to rescind.

50. I do not accept that submission. Such a construction would attribute to the parties an intention that performance by the defendants of their obligations under the contracts was, for all practical purposes, optional. It would attribute to the parties an intention that the defendants could (for example, in a rising market) simply down tools, ignore their obligation to use reasonable endeavours to finish the project by the time agreed, and walk away from the contracts with impunity. To adopt the words of Bryson J in Hardy v Wardy, it would result in a situation where “the vendor could escape his obligations so easily that only the purchaser’s obligations would have any real meaning and the contract would only have a bilateral character only in appearance” (at [11]). His Honour was speaking in the context of implied contractual terms, rather than construction of express terms. However, his Honour’s words are nonetheless apposite.

51. This would be a commercially irrational and highly unreasonable result. It would permit the defendants to take advantage of a breach of their express, and vital, obligations under the contracts (see, generally, Lewison and Hughes, The Interpretation of Contracts in Australia, at [2.06], [7.09] and [7.16]).

52. I would not attribute such an intention to the parties unless their words compelled such a conclusion. In my opinion, they do not.

53. The third sentence of cl 52.1 is in my opinion directed only to the circumstances assumed, indeed mandated, by the preceding sentence, which imposed on the defendants an obligation to use reasonable endeavours to register the Strata Documents by the relevant date. Thus, the effect of the third sentence of cl 52.1 is that, assuming that the defendants did use reasonable endeavours to register the Strata Documents by the relevant date, but that nonetheless they were unable to do so, then the defendants would not be in breach of the contracts. In those circumstances the purchasers’ only right would be to rescind. The effect of the third sentence is thus that the mere fact that the Strata Documents were not registered by the Date for Registration does not, without more, render the defendants in breach of the contracts or give the plaintiffs an entitlement to do more than rescind.

54. In my opinion, the third sentence of cl 52.1 is not directed to, and says nothing about, the plaintiffs’ rights in circumstances where the defendants have not complied with their obligation to use reasonable endeavours.

Clause 52.4

55. In that context, a question arises as to the proper construction of cl 52.4 and its relationship with the third sentence of cl 52.1.

56. Clause 52.4 provided that either party could rescind the contract:

“If the draft Strata Documents are not registered by the Date for Registration or any extension granted under cl 52.2 for any reason”.

57. Mr McInerney submitted that the word “or” in the third sentence of cl 52.1 and in cl 52.4 should be construed as “and” (that is, conjunctively and not disjunctively). Mr McInerney developed a complicated argument that those clauses, so read, should be construed so as only to entitle either party to rescind in circumstances where the defendant vendors had given a notice under cl 52.2 extending the Date for Registration.

58. I see no reason to so construe those clauses. In my opinion, this aspect of the contracts is clear. Clause 52.4 is addressed to two possible circumstances. The first is that the Strata Documents are not registered by the Date for Registration. The second is that the defendants have extended the Date for Registration under cl 52.2, and that the Strata Documents are not registered by that extended date. The clause provides that if “for any reason” either of those states of affairs exists, either party can rescind. I do not agree that the entitlement to rescind depends upon whether the defendants exercised their right to extend the Date for Registration under cl 52.2.

“For any reason”

59. Read literally, cl 52.4 entitled either party to rescind the contracts if for “any” reason the Strata Documents were not registered by the Date for Registration; that is, even if the Strata Documents were not so registered because the defendants failed to use reasonable endeavours.

60. Thus, Mr Corsaro submitted, alternatively to his argument set out at [49] above, that “where the Defendants have not registered the Strata Documents in time, and have not used reasonable endeavours, then either party may rescind and the purchaser can sue for damages”.

61. That submission is not attractive. Its effect is that cl 52.4 should be construed so as to entitle the defendants to rescind and relegate the plaintiffs to an action in damages, even if the defendants deliberately delayed progress of the project so as to ensure that the Date for Registration passed without registration of the Strata Documents.

62. For the same reasons that I did not accept Mr Corsaro’s submission concerning the third sentence of cl 52.1, I do not accept this submission. Mr Corsaro’s construction would attribute to the parties, and particularly the plaintiffs, the intention that the defendants could choose whether or not to use reasonable endeavours to progress works so that the Strata Documents could be registered by the Date for Registration.

63. These are contracts for the purchase by the plaintiffs of land. The plaintiffs did not contract for a right to sue the defendants in damages; they contracted to buy particular lots in the development.

64. In that regard, Mr McInerney drew my attention to the observations of Dr I C F Spry in The Principles of Equitable Remedies: Specific Performance, Injunctions, Rectification and Equitable Damages, (9th ed 2014, Lawbook Co.) at p 63:

“But land is property that has a fixed location and a special value, and ordinarily at least damages are not to be regarded as an adequate substitute for the right either to acquire or dispose of an interest in it. Even indeed if the purchaser intends to purchase the land in question merely in order to be able to sell it later at a profit, damages are not regarded as an adequate remedy for him.” [Citing, relevantly, Adderley v Dixon (1824) 1 Sim & St 607; 57 ER 239 and Pianta v National Finance & Trustees Limited [1964] HCA 61; 180 CLR 146 at 151 per Barwick CJ]

65. Mr McInerney also drew my attention to the observations of Windeyer J in Coulls v Bagot’s Executor & Trustee Company Ltd (1967) 119 CLR 460 at 504:

“The primary obligation of a party to a contract is to perform it, to keep his promise. That is what the law requires of him. If he fails to do so, he incurs a liability to pay damages. That however is the ancillary remedy for his violation of the other party's primary right to have him carry out his promise. It is, I think, a faulty analysis of legal obligations to say that the law treats a promisor as having a right to elect either to perform his promise or to pay damages. Rather…the promisee has ‘a legal right to the performance of the contract’.” [Citations omitted]

66. Further, it is well established in “off the plan” cases such as this that a vendor’s right to rescind by reason of the development not being completed by the nominated date may be lost when the reason that the development has not completed is the vendor’s breach of a causally related obligation under the contract. Those cases include those I have mentioned at [40], as well as the seminal decisions of McLelland CJ in Eq in Plumor Pty Ltd v Handley (1996) 41 NSWLR 30 and Hunyor.

67. Bryson J summarised the position in Schenk as follows:

“Each of many decisions in this field is a decision on the particular contract in question, but some recurringly important general principles, which are applicable in the present case, were stated in Plumor Pty Ltd v Handley…at 34 and 35 by McLelland CJ in Eq. The principles there stated and now relevant are to the effect that a party to a contract is not entitled, as against the other party, to rely on an event resulting from the first party's wrongful act; that if the failure by the rescinding party to obtain some relevant consent or registration within the contractual period resulted from any default by him in the performance of express or implied obligations, that party is not entitled to exercise a right of rescission otherwise available; and that causation of the failure to obtain consent or registration by the wrongful act must be proved unless the terms of the contract make obtaining the consent or registration a condition for the exercise of the right of rescission.”

68. In those circumstances, I cannot accept that the parties intended the result that would follow from Mr Corsaro’s suggested construction. I would construe the words “for any reason” to mean “for any reason not attributable to the default of the party seeking to rescind”. There could be many such reasons.

69. So construed, cl 52.4 does duplicate the third sentence of cl 52.1 (as I have construed it) to some extent, insofar as it restates the plaintiff purchasers’ rights. But it also makes clear that if, despite using their best endeavours, the defendant vendors cannot procure registration of the Strata Documents by the Date for Registration, they too can rescind.

70. Clause 52.4 should not, in my opinion, be construed so as to allow the defendants to rescind the contracts if the reason the Strata Documents have not been registered by the Date for Registration is their own failure to use reasonable endeavours to achieve that result.

Conclusions on construction

71. For those reasons, my opinion is that for the plaintiffs to succeed, they must establish that the defendants failed to use their reasonable endeavours to cause the Strata Documents to be registered by the Date for Completion.

72. 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: that is, by 23 May 2012 at the earliest (in the case of the purchasers first to exchange contracts; Xiaoyan Xi and Bin Wang in respect of Unit 7) and 1 October 2012 at the latest (in the case of the purchaser last to exchange contracts; Jian Zhong Wu in respect of Unit 84).

73. If any of the plaintiffs can establish these matters, it would follow that the defendants were not entitled to rescind the contracts, that the contract or contracts in question remain on foot, and that the particular plaintiff or plaintiffs is or are entitled to specific performance.

74. Determination of the actual date on which the defendants could have caused the Strata Documents to be registered is complicated. Although I asked counsel several times for guidance as to precisely what was necessary for the defendants to achieve in order to register the Strata Documents, I was provided with no clear answer. The fact is that the Strata Documents are still not registered.

71. However, there is no suggestion in the evidence that the Strata Documents could have been registered by 1 October 2012 (the last of the Dates for Completion). Indeed, the evidence suggests that the project was nowhere near that stage on 1 October 2012. On 9 October 2012, Washington Brown (quantity surveyors engaged by Westpac Banking Corporation, the defendants’ financier) reported that work was only 69 per cent complete and that the then forecast completion date was 21 March 2013. On 28 June 2013, Washington Brown reported to Westpac that work was then 98 per cent complete and that the forecast completion date was 26 July 2013. An interim Occupation Certificate was issued on 19 July 2013 and a final Occupation Certificate on 2 July 2014.

72. As best I can make out, it would not have been possible for the defendants to cause the Strata Documents to be registered until, at least, around this time; that is, some 14 months after the earliest Date for Registration and some 9 months after the latest Date for Registration. Thus, the plaintiffs must show that the delay caused by the defendants’ failure to use reasonable endeavours was in that order.

The defendants

77. The defendants purchased the Site in around 2008. The Site was acquired and owned by the following as tenants in common:

1. the first defendant, Kaymet, as to 50 per cent;

2. the second, third and fourth defendants, Mr Toufic (also known as Terry) Kayrouz, Mr Lichah Kayrouz and Mr William Metlej, together with the late Mr Youssef Metlej, as trustees for the Kaymet Unit Trust as to 50 per cent.

78. Mr Terry Kayrouz and Mr Lichah Kayrouz are brothers. The late Mr Youssef Metlej was Mr William Metlej’s father.

79. Kaymet was incorporated in 2007. The development of the Site was its first project. Mr Terry Kayrouz and Mr William Metlej are now the sole directors of Kaymet. Mr Lichah Kayrouz and Mr Youssef Metlej were also directors of Kaymet at the time the Site was acquired.

80. Mr Terry Kayrouz is a builder and has held a builders licence since approximately 1973. Mr Kayrouz has been involved in property development since then; and since the mid 1990s with Messrs Metlej.

81. Mr William Metlej holds a Bachelor of Economics and is a certificated practising accountant. He has held a builders licence for approximately 25 years. He began property development in approximately 1986 with his father, who had himself been a property developer for some 26 years before that. Between 1994 and 1998, Mr Metlej worked as a site foreman for the Meriton Group, and thereafter returned to property development with his father.

82. As, for the most part, only Mr William Metlej and Mr Terry Kayrouz feature in what follows, I will refer to them simply by their surnames.

83. The commercial arrangements between the Kayrouz and Metlej families were informal.

84. In relation to the commercial arrangements, Mr Kayrouz said:

"I generally only develop with people that I know well and that I can trust. This extends to the people that I develop projects with, as well as the contractors and suppliers that I engage. Most of the administration of these projects is on the basis of personal relationships, as I find that with a strong personal relationship, less time is wasted with procedure and formality, but the work is better than with people I don't know well.”

85. Of developments undertaken by the Kayrouz and Metlej families, Mr Metlej said:

"Often, other members of our respective families participated in the developments.

Generally we didn't have any formal job titles or responsibilities: all activities and jobs were shared and we had a collaborative approach. However, some tasks were split based on the experience and relationships we each had, for example, Mr Terry Kayrouz generally dealt with the finance providers when we needed them, Mr Donny Kayrouz [Mr Lichah Kayrouz’s son and Mr Terry Kayrouz's nephew] would generally deal with the day to day requirements of getting any approvals we needed (including Development Application approvals and relevant licences) and I would generally work on site and sort out operations issues."

86. The defendants acted as both developers and builders. Mr Kayrouz and Mr Metlej were primarily responsible for the project, with Mr Metlej having responsibility for day to day management of the Site.

87. There was no building contract or formal program for the works. Mr Metlej said:

"I didn't formally prepare a program for the works, and it is now my usual practice not to, as I have sufficient experience in managing and sequencing the works on a site I don't need to rely on one anymore.”

88. The defendants did not maintain an extensive documentary record of the works.

89. In cross-examination, Mr Metlej said:

“…all the stuff on site was destroyed on site and we don’t keep papers. Once they’re in the computer, that’s it.”

90. It was submitted on behalf of the defendants:

“The effect on the progress of the work by events such as late delivery, congestion, wind, and rain, [was] not documented or memorialised, or therefore analysed and justified. The principal, Mr Metlej, knew of the problems, and merely adapted the building strategy to cope with them as best he could.

For example, there was no documentary obligation to ask for or justify extensions of time. The builder/developer knew of them already. Therefore, it is not surprising that the kind of documentary trail that one might expect in some other kind of project (with a remote principal and third party participants) was not generated and did not emerge in this case.

This is the way that the Defendants’ business model obviously worked, and obviously has worked over time.”

91. I accept that submission as a fair summary of the position revealed by the evidence.

92. Both Mr Kayrouz and Mr Metlej gave evidence before me and were cross-examined.

93. Both impressed me as straightforward, honest witnesses. I have no hesitation in accepting their evidence.

Background

94. The defendants purchased the Site with knowledge of geotechnical reports prepared in 2004 by Geotechnique Pty Ltd. Those reports identified the ground water levels to which I have referred, and said that "groundwater inflow can be anticipated during excavation". The reports recommended various "dewatering methods".

95. One of the Geotechnique reports stated that:

"Dewatering may be carried out using Spear Points, large diameter wells or sump and pump methods. The sump and pump method is generally preferable from an economic point of view."

96. The defendants sought development approval from the Council. Because of the Site's proximity to the railway line, the Council sought RailCorp’s concurrence for the development.

97. In a letter from RailCorp to the Council dated 24 April 2008, RailCorp observed that the Geotechnique reports did not relate to the development proposed by the defendants and called for preparation of a revised geotechnical report.

98. Thus, Brink & Associates Pty Ltd, and a related company, Aargus Pty Ltd (together "Brink"), carried out further geotechnical analysis and groundwater modelling.

99. In a report dated 2 June 2008, Brink echoed Geotechnique's recommendation of dewatering "by using a sump and pump system or Spear Points connected to a pump of adequate capacity".

100. Brink also made other recommendations, including the use of "cut-off walls along the boundaries of the excavation" to prevent water ingress.

101. In an Addendum Geotechnical Report dated 3 June 2008, Brink said, concerning dewatering:

"Basement excavation dewatering would involve the installation of cut-off walls along the boundaries of the excavation. The cut-off walls are to be founded at [8.4 metres depth]. Excavation dewatering could be carried out using spear points connected to pumps of adequate capacity."

102. On 20 August 2008, the Council granted the Development Consent. The Council stipulated that this consent "shall not operate until you satisfy Council about" a wide range of matters. One of those was “a final Geotechnical and Structural report that meets RailCorp’s requirements”.

103. In December 2008, Civil Foundations submitted to Mr Kayrouz a "tender price for design, supply and installation for the complete package of basement works" for the Site.

104. Civil Foundations suggested that Mr Kayrouz consider, as an option for the construction of the cut-off wall recommended by Brink, a "CSM Retaining Wall".

105. The “CSM”, or Cutter Soil Mix technology was then relatively new in Australia. Civil Foundations was the only contractor offering to construct CSM walls at that time.

106. In an affidavit sworn in the proceedings, Mr Anthony Derham, a director of Civil Foundations, explained that:

"The CSM system involves cutting sections of wall with a special cutter and mixing the spoil produced with cement or grout and with bentonite which is then reinserted into the cut to set and form the wall."

107. As I explain below, between March and May 2010 the first step that was taken in the development was the installation by Civil Foundations of the CSM wall, being a "cut-off wall" of the kind recommended by Geotechnique and Brink.

108. On 16 July 2009, Civil Foundations provided the defendants and RailCorp with a suggested "Dewatering Management Plan" for the Site.

109. In that document, under the heading "Cut-Off Wall Details", Civil Foundations stated:

"Civil Foundations are proposing to install a cut-off wall to [8.4 metres depth]. This wall will be installed in a series of 2.8m width interlocking panels, using a Cutter Soil Mixing (CSM) tool. The finished product will be a permanent, impermeable wall of 600mm width."

110. Under the heading "Dewatering Method", Civil Foundations stated:

"The dewatering of the site will be carried out using a series of spear points, which will be located along the southern boundary of the site."

111. As I set out below, the defendants did not use spear points to dewater the Site. Indeed, although they engaged Civil Foundations to construct the CSM wall (and also to install “dead-man anchors” and piling on the Site; see below), they did not adopt Civil Foundations’ Dewatering Management Plan. Rather than use spear points, the defendants adopted a sump and pump method, which one of Geotechnique’s reports described as “preferable from an economic point of view” to the use of spear points (see [95] above).

112. On 9 September 2009, RailCorp wrote to the defendants' architect, Mr Theodore Loucas, as follows:

"…I confirm herewith that RailCorp is satisfied following our correspondences and negotiations that agreement has been reached in relation to satisfying the requirements of RailCorp as detailed in these conditions of the [development application].

In relation to this agreement you are reminded that you will be required to adhere to the comments and recommendations of:

1.   The various Geotechnical Reports prepared for this development.

2.   The Dewatering Management Plan prepared by Civil Foundations Pty Ltd dated 16/7/09. …

RailCorp will also require that an experienced geotechnical engineer be on site to supervise and monitor the works to ensure that all the recommendations stipulated in the developer's consultant's reports are met".

113. On 21 January and 5 February 2009, Civil Foundations submitted to the defendants quotations for, amongst other things, construction of the CSM wall and dewatering of the Site.

114. However, the quotation that the defendants ultimately accepted was that of 19 February 2010, which did not include any provision for dewatering. Civil Foundations' quotation noted that dewatering was "not included" but stated that "Civil Foundations will assist in determining the most effective system during excavation". As I set out below, Civil Foundations played an active role in the development.

115. Construction commenced in March 2010. By that time, almost all of the plaintiffs had exchanged contracts to purchase units “off the plan” (see [13]). The remaining contracts were executed on 1 April 2010.

Have the plaintiffs established that the defendants failed to use reasonable endeavours?

116. As refined in final submission, the plaintiffs complained of a want of reasonable endeavours in respect of 10 specified periods. I shall deal with each in turn.

117. The first stage of construction was installation of the CSM wall. Civil Foundations installed the CSM wall between 15 March and 17 May 2010. The plaintiffs make no complaint about the time taken for this work.

First period – between 17 May and 2 August 2010 – dead-man anchors

118. Following construction of the CSM wall, the next stages of construction were the installation of dead-man anchors and a capping beam to the top of the CSM wall.

119. The function of dead-man anchors was to restrain the CSM wall. Installation of dead-man anchors involves sinking sheets of metal into the ground in a cement base, and welding rods between them and the CSM wall. It was necessary to install dead-man anchors because RailCorp would not permit any intrusion onto its property. The dead-man anchors and the steel rods were attached to I-beams protruding through the top of the CSM wall, and had to be installed before the capping beams were added.

120. Mr Metlej explained in cross-examination:

“You had to install the dead-man anchor and you had to weld the steel that went in the CSM walls to the dead-man anchor before you started excavation, otherwise, the wall would fall over”.

121. Mr Metlej agreed that installation of the dead-man anchors could occur immediately following completion of the CSM wall.

122. Mr Metlej gave this evidence in cross-examination:

“Q.   The installation of the capping beams, that takes about, what, a week or so. Is that correct?

A.   More than a week.

Q.   About how long?

A.   About a month.”

123. Later in cross-examination, Mr Metlej agreed that installation of the dead-man anchors would take “about a week”.

124. Mr Metlej also agreed that installation of the capping beams commenced on about 2 August 2010 and that the dead-man anchors must have been installed by then. He gave this evidence:

“Q.   And do [you] agree that a competent builder could have caused the installation of the capping beams to have occurred much earlier than 2 August 2010?

A.   No, I don’t agree.

Q.   Do you agree that there’s a significant gap in time between when the CSM wall was installed, which was mid-May 2010, until when the capping beam first commenced to be installed on 2 August 2010?

A.   Yes. But in that period we had to wait for Civil Foundations to bring another machine in, put the sheet piles down, weld the rods and then put concrete in front of the sheet piles.”

125. Mr Metlej explained that the machine that Civil Foundations used to install the dead-man anchors was a “specialised rig that only does sheet piling” and that it was a different type of rig from that used to install the displacement piles, to which I refer below.

126. Mr Metlej agreed that there was a gap in time between when Civil Foundations completed the installation of the CSM wall in May 2010 and installation of the dead-man anchors.

127. Later in cross-examination, Mr Metlej gave this evidence in response to questions from me:

“Q.   You have no idea when between [the] end of CSM wall and… 2 August [the dead-man anchors were installed]?

A.   No, your Honour. As soon as CSM – sorry. As soon as the anchors were done, the capping beam started. We were at the mercy of Civil Foundations because it was a specialised trade and it was one contract which they had to start and finish.

Q.   Why didn’t you put the dead-man anchor in at the end of May, for example, as soon as the CSM wall finished?

A.   Civil Foundations I think at the time had a shortage of sheets – the sheet piles – and they didn’t have a rig available to come and do the work.

Q.   So the answer is you couldn’t get [Civil Foundations] on the site?

A.   I couldn’t get Civil Foundations to do that section of the work.”

128. Mr McInerney submitted that I should not accept Mr Metlej’s explanation for the delay in installation of the dead-man anchors. Mr McInerney pointed out that in his affidavit evidence, Mr Metlej had not offered any explanation for the delay in installing the capping beams, let alone that which emerged in cross-examination. That is true. In his affidavit, Mr Metlej raised general matters which he said contributed to the time taken to complete the work. Those general matters included “the tight site”, “the water logged site”, “the delay, and later failure, of the CSM wall”, “the soft ground and the piling rig”, “the withdrawn [construction certificate] issue”, “the crane issue”, “the crane and wind speed issue”, “the steel issue” and the “local inspector issue”. I discuss some of those matters later in these reasons.

129. In those circumstances, Mr McInerney asked me draw a “Ferrcom inference”. Mr McInerney was referring to the familiar observations of Handley JA in Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418–9, summarised by the High Court in Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; 243 CLR 361 at [63] as follows:

“Where counsel for a party has refrained from asking a witness whom that party has called particular questions on an issue, the court will be less likely to draw inferences favourable to that party from other evidence in relation to that issue.”

130. Here, as I have explained, Mr Metlej did not address these questions in his affidavit; nor did he do so in his evidence-in-chief. But Mr McInerney pursued the matter in cross-examination. The evidence that emerged was in response to those questions, and questions that thereafter I asked (set out at [127] above) by way of clarification. Thus, this case is not a matter of drawing inferences favourable to Mr Metlej, or the other defendants, concerning matters not raised in their evidence. It is a matter of assessing the evidence given by Mr Metlej in response to questions put to him.

131. As I have said, I found Mr Metlej to be an impressive witness. I see no reason to disbelieve what he said. I accept his evidence that the defendants were delayed in installing the dead-man anchors because they needed to wait for Civil Foundations to have available the rig and raw materials to do the work.

132. Mr Derham gave no evidence on this topic; he said nothing in his affidavit about it and, unlike Mr Metlej, was not asked about it in cross-examination.

133. The plaintiffs called evidence from a geotechnical engineer, Mr Ross Best, and a civil engineer, Mr Henry Newman, about the progress of the works. Neither Mr Best nor Mr Newman had been to the Site prior to the completion of construction. Both used their skills and experience to draw inferences and express opinions based upon documents made available to them.

134. Mr Best said:

“Excavation could have commenced immediately following completion of the CSM wall on 17 May 2010 as this provided a barrier to lateral ingress of shallow groundwater.

Following installation of the CSM wall a capping beam and deadman anchors were installed. I am not sure of the timing of these works but as they involved activity around the perimeter of the site or outside the excavation I believe they could have been carried out while bulk excavation was in progress.

…

There does not appear to have been any significant site work over the period mid-May to mid-August 2010. …

There is no reason apparent to me preventing excavation from being carried out in earnest some three months earlier than is evident from the records”.

135. Mr Newman opined that:

“The delay that took place between the completion of the CSM wall in mid-May 2010 and commencement of the capping beam at the beginning of August 2010 would have most likely caused a delay to the project Critical Path of around 2.5 months. This does not represent competent practice. A competent builder would program the capping beam to commence directly following the completion of the CSM wall, and possibly earlier if there was adequate space on the site to undertake both activities at the same time.”

136. In cross-examination, Mr Metlej gave this evidence:

245. That delay did not cause the defendants to fail to register the draft Strata Documents by the various Dates for Registration. The plaintiffs have not shown that had the defendants used reasonable endeavours during that period, the Strata Documents could have been registered by the Dates for Registration.

246. The plaintiffs have thus failed to establish a relevant breach of cl 52.1 of the contracts, nor that the defendants were not entitled to rescind the contracts.

247. The proceedings must be dismissed. I will hear the parties as to the orders that should now be made to dispose of the proceedings.

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Amendments

07 October 2015 - Typographical errors corrected

Decision last updated: 07 October 2015