Opera Properties Pty Ltd v The Uniting Church in Australia Property Trust (NSW)

These proceedings concern a Put and Call Option Deed entered into by the plaintiff and the defendant on about 18 November 2010. The subject matter of the options under the Deed is part of the land contained in Lot 10 in Deposited Plan 5055 and known as 10 Jubilee Road, Warriewood. The land is owned by the defendant. Upon the exercise of either option, a contract for the sale of land would come into existence between the defendant as vendor and the plaintiff as purchaser in respect of Part 10 Jubilee Road Warriewood, being a lot in an unregistered plan of subdivision of Lot 10 in Deposited Plan 5055, as depicted on a certain drawing. The contract would be in the form of the contract annexed to the Deed. However, it is clear that neither option has been exercised, and the time for such exercise expired several years ago.

The Deed was evidently entered into in connection with a proposed development by the plaintiff of its nearby land at 120-122 Mona Vale Road, Warriewood.

The plaintiff paid a Call Option Fee of $80,000 and a Call Option Extension Fee of $80,000 under the terms of the Deed. The plaintiff seeks to recover those sums upon the basis that the Deed was frustrated by the commencement on 27 June 2014 of the Pittwater Local Environmental Plan 2014 (“the 2014 LEP”). Clause 4.6(6) of the 2014 LEP operated to prohibit any subdivision of Lot 10 in Deposited Plan 5055 so as to create a lot able to be conveyed to the plaintiff as envisaged by the Deed and the form of contract annexed to it. Recovery is sought at general law, or alternatively pursuant to s 12 of the Frustrated Contracts Act 1978 (NSW). Recovery is also sought pursuant to s 55(2A) of the Conveyancing Act 1919 (NSW) on the basis that the option fees should be regarded as deposits within the meaning of the section.

The defendant accepts that cl 4.6(6) of the 2014 LEP prohibits any subdivision of its land that would create a lot as envisaged by the Deed and the form of contract annexed to it. However, it disputes that the 2014 LEP brought about any frustration of the Deed. In that regard, the defendant says that the provisions of the Deed show that the plaintiff assumed the risk of its proposed development not being able to proceed. The defendant further says that steps could have been taken by the plaintiff to seek a re-zoning of the defendant’s land which, if successful, would have enabled the envisaged subdivision of the land to occur regardless of cl 4.6(6) of the 2014 LEP. The defendant also disputes that the option fees paid by the plaintiff are deposits within the meaning of s 55(2A) of the Conveyancing Act.

There was little dispute between the parties as to matters of fact. Many of the key facts were the subject of a Statement of Agreed Facts.

The plaintiff’s land at 120-122 Mona Vale Road consists of Lot 1 in Deposited Plan 383009 and Lots 3, 4 and 5 in Deposited Plan 124602. Prior to the commencement of the 2014 LEP, the applicable instrument was the Pittwater Local Environmental Plan 1993 (“the 1993 LEP”). The plaintiff’s land was zoned 1(a) Non-Urban under the 1993 LEP. The land would thus need to be re-zoned in order to accommodate residential development of the land as proposed by the plaintiff.

The plaintiff’s land, which is referred to in the Deed as the Development Land, is roughly triangular in shape. It is bounded by bushland towards the south. It is bounded towards the north by Mona Vale Road and on the east by Boundary Street. The Development Land has access to and from Mona Vale Road, but only via a private driveway which the Pittwater Council considers is in an unsafe location. The Development Land has access to and from Boundary Street, but Boundary Street itself, which formerly ran northwards to Mona Vale Road, is now blocked at that point. It is agreed that as at 18 November 2010 there was no public road access from Boundary Street to the local road network. It is thus accepted that if there is to be a residential development of the plaintiff’s land, suitable road access arrangements will have to be made.

One potential option for road access would involve construction of a road from Boundary Street east to Jubilee Road (or Avenue) using part of a property known as 4 Boundary Street (which is owned by Planet Warriewood Pty Ltd, a company related to the plaintiff) and part of the defendant’s land, referred to in the Deed as the Church Land.

Under the 1993 LEP, both the property at 4 Boundary Street (Lot 2 in Deposited Plan 816070) and the defendant’s land were zoned 1(b) Non-Urban. It is common ground that although the terms of cl 12(2) of the 1993 LEP, which prescribe minimum lot sizes, would preclude a subdivision of the defendant’s land to create an area for part of the proposed road, cl 3 of the State Environmental Planning Policy No 1 – Development Standards (“SEPP1”) would allow the Pittwater Council to grant consent to such a subdivision if it was of the view that compliance with the minimum lot size was unreasonable or unnecessary in the circumstances.

The Deed was entered into on about the date it bears, namely, 18 November 2010. It is necessary to refer in some detail to its provisions.

The defendant is referred to in the Deed as the Owner. The plaintiff is referred to as the Grantee. Roy Mustaca and Josephine Mustaca are named as parties to the Deed as Guarantor, but it is not clear on the pleadings or the evidence whether they in fact became parties to the Deed.

Recitals to the Deed, under the heading “Background”, state:

Clause 2 provides for the grant of options in the following terms:

Clause 3.1 provides for the preparation by the plaintiff of a Rezone Application (which the defendant may require to be amended), and the lodgement of the application with the Pittwater Council. Rezone Application is defined to mean an application to change the development controls applying in respect of the Development Land to permit it to be developed for the Project. Project is defined to include:

Clause 3.2 is concerned with the Project DA (defined to mean an application for development consent under the Environmental Planning and Assessment Act 1979 seeking approval for the Project), and certain Buffer & Road Works (which includes works to construct the Road, and fencing to divide the Property from the balance of the Church Land along the boundary between the Property and the balance of the Church Land). In particular, cl 3.2 provides:

Clause 4 is concerned with an extension of the Call Option Period by the Grantee in certain circumstances. Call Option Period is defined to mean the period commencing on the Rezone Date and ending at 5.00pm on the first to occur of the following dates:

If the Call Option Period is extended pursuant to cl 4, as it was by the plaintiff, the above definition is changed so that the date in (c) becomes 6 years instead of 3 years. The extension was effected on about 13 November 2013. The plaintiff paid the Call Option Extension Fee of $80,000 on or around that date as required by cl 4(c).

Clause 5 is concerned with the exercise of the Call Option. It provides:

Clause 6 is concerned with the exercise of the Put Option. It provides:

Clause 7.1 provides:

Clause 9.1 is primarily concerned with the determination of the Price for the purposes of the Contract upon the exercise of an option. It also stipulates, in cl 9.1(a), that the Contract Deposit is $10.00. It is not necessary to set out the entirety of this lengthy clause. It relevantly provides:

Finally, it should be noted that by cl 14.11, stipulations as to time are stated to be of the essence of the Deed.

The contract annexed to the Deed comprises the 2005 edition of the Law Society/Real Estate Institute standard form supplemented by a number of Additional Clauses. The land is described on the front page as Part 10 Jubilee Road Warriewood, being a lot “in an unregistered plan of subdivision (copy attached) of part of Lot 10 in DP5055”. It seems that the attached Mepstead & Associates drawing dated 11 September 2007 was intended to serve as the plan of subdivision. It shows part of Lot 10 in DP 5055 at the southern end being used for a proposed road that would run between Boundary Road and Jubilee Avenue.

Additional cl 35 is headed “Pre payment of Purchase Price”. It relevantly provides:

Additional cl 36 relevantly provides:

Additional cl 37.1 is concerned with registration of the plan of subdivision of Lot 10 in DP5055. It relevantly provides:

Additional cll 38 and 39 are concerned with completion. They provide:

In February 2011 the plaintiff lodged a development application with Pittwater Council for the construction of a new private road to access 120 Mona Vale Road. The new road was proposed to be constructed over parts of the 4 Boundary Street and 10 Jubilee Avenue properties. It can be inferred that the owners of those properties, Planet Warriewood Pty Ltd and the defendant respectively, gave their consent to the lodgement of the application. A statement to that effect is contained in the Statement of Environmental Effects (“SEE”) that accompanied the application. The SEE includes the following:

On 4 July 2011 the Pittwater Council decided to defer consideration of the application. A resolution was passed in the following terms:

The fate of the application is not clear on the evidence. It may have been withdrawn, but in any case it seems that it has never been finally determined.

On 11 October 2012 the plaintiff lodged a Planning Proposal with the Pittwater Council in respect of a proposed rezoning of the Development Land, and also 4 Boundary Street and part of the 10 Jubilee Avenue property. The Council regarded the application as deficient, but after the supply of further information, the Council formally accepted the application as a proposal on 13 November 2012.

The plaintiff retained Charles Hill Planning in relation to the rezoning proposal. A letter sent by Charles Hill Planning to the Council on 15 October 2012, which attached further information requested by the Council, included the following:

The Planning Proposal itself included the following:

The Planning Proposal was not supported by the Council. An internal council report dated 4 March 2013 included a recommendation that the proposal be refused, and a resolution to that effect was passed by the Council. In these circumstances, the plaintiff sought a “pre-gateway review” by the Department of Planning and Infrastructure. On 30 April 2013 the Deputy Director-General of the Department informed the Council that the application met the assessment criteria to enable it to be forwarded to the Joint Regional Planning Panel (“JRPP”) for review. On 22 May 2013 the JRPP recommended that the application be submitted for a “gateway determination”. It advised as follows:

On 7 June 2013 the Deputy Director-General of the Department forwarded the advice to the plaintiff and informed the plaintiff that the proposed rezoning would proceed to a “gateway determination”. On 4 September 2013 a “gateway determination” was issued, supporting the proposed rezoning of the Development Land from 1(a) Non-Urban to a combination of R2 Low Density Residential and E4 Environmental Living. The proposal was placed on public exhibition in the period from 23 October 2013 to 19 November 2013.

On 19 November 2013 the Council lodged a submission in relation to the proposal which recorded its vehement objection to it, including on the ground that the proposal was premature as the issue of suitable access was unresolved.

On 30 May 2014 the 2014 LEP was published on the NSW legislation website and commenced operation 28 days after that date (i.e. on 27 June 2014). Upon the commencement of the 2014 LEP part of the Development Land became zoned R2 Low Density Residential, and part of it became zoned E4 Environmental Living. Accordingly, 27 June 2014 (or perhaps 30 May 2014) became the Rezone Date within the meaning of the Deed. At the same time, the land at both 4 Boundary Street and 10 Jubilee Avenue became zoned RU2 Rural Landscape.

As noted earlier, it is accepted that cl 4.6(6) of the 2014 LEP (which applies to various zonings including RU2 Rural Landscape) would prohibit any subdivision of the 10 Jubilee Avenue land so as to create a lot as envisaged by the Deed and the form of contract annexed to it.

The plaintiff emphasised that the options the subject of the Deed were for the purchase of the Property, namely, that part of the Church Land identified in the Mepstead & Associates drawing dated 11 September 2007, and that in order for such purchase to occur it would be necessary to subdivide the Church Land. However, such a subdivision became impossible from 27 June 2014 when the 2014 LEP and cl 4.6(6) in particular commenced to operate. It was submitted that before that date it was within the power of the Pittwater Council to approve a subdivision of the Church Land in order to facilitate a purchase of the Property, but that power was removed by the introduction of the 2014 LEP. The Council was henceforth prohibited from granting consent to the subdivision. It was put that in these circumstances the Deed had been frustrated. The centrepiece or focal point of the transaction was eviscerated.

The plaintiff accepted that under the terms of the Deed it bore the risk that the Rezone Application and the Project DA would not be approved. However, it was submitted that it was not contemplated that there would be no possibility that the envisaged subdivision of the Church Land could be approved.

The plaintiff submitted that when the Development Land was rezoned, making it possible to exercise the Call Option, cl 4.6(6) of the 2014 LEP meant that no conceivable purpose would be served by an exercise of the option. Had it (or the Put Option) been exercised, the plaintiff would have been bound to pay the Price under the contract that would come into existence, but there was no possibility that the Property could be created and then conveyed. It was submitted that no other genuine benefit was capable of being obtained by the plaintiff under the contract. The plaintiff submitted that the purpose of the Deed, being an option to purchase the Property, was precluded. It was put that the Deed and the contract for sale were predicated on the assumption that consent to the subdivision of the Church Land has either been obtained or will be obtained. In that regard, reference was made to the provisions of the Deed (cl 3.2) and the contract (Additional Clause 36) concerning the carrying out of works including the construction of the Road. The plaintiff submitted that the Road Easement referred to in Additional Clause 39 of the contract was illusory or of only minor significance.

The plaintiff referred to well-known statements of principle in relation to frustration of contracts, including the speech of Lord Radcliffe in Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 at 729, which has been adopted by the High Court of Australia in Brisbane City Council v Group Projects Pty Ltd (1979) 145 CLR 143 at 161 and in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 357. The plaintiff submitted that frustration may occur even if it remains possible for the contract to be performed without breach, and even if the nature of the contractual obligations does not change, where events give rise to a fundamental commercial difference between contemplated performance and actual performance (see oOH! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd (2011) 32 VR 255; [2011] VSCA 116 at [64]-[70]).

Reference was also made to the judgment of Smith J in Thaluntha Pty Ltd v Citic Pacific Mining Management Pty Ltd [2019] WASC 196 at [99]-[108] where her Honour discussed the authorities that consider situations where some provision is made in the contract for or in relation to events that are alleged to give rise to frustration. Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (supra) was cited as an illustration of how the principles operate in that situation.

Finally, in answer to certain contentions of the defendant, the plaintiff submitted that the conclusion of frustration was not defeated merely because it may have been possible to avoid the effect of cl 4.6(6) of the 2014 LEP by taking timely steps to achieve a subdivision of the Church Land or a rezoning of the Church Land before the commencement of the 2014 LEP. The plaintiff submitted that the taking of such steps was neither required nor envisaged by the Deed. It was submitted that there was no obligation under the Deed to seek a subdivision, and the only required rezoning concerned the Development Land. It was submitted that the Deed envisaged that subdivision of the Church Land would occur pursuant to the Project Consent.

The defendant submitted that the Call Option could have been exercised at any time after the Deed was signed, as it was not a term that it could only be exercised during the Call Option Period. It was then submitted that cl 3.2(h) of the Deed obliged the plaintiff to diligently and with due expedition obtain the Project Consent. By reference to the definitions of Project, Project DA, and Project Consent, the defendant submitted that the Project Consent would include consent to a subdivision of the Church Land. The defendant submitted that the plaintiff failed to diligently and with due expedition pursue a subdivision of the Church Land. It was pointed out that the development application lodged by the plaintiff in February 2011 did not propose a subdivision of the land; it only proposed the construction of a new road. The defendant submitted that a subdivision could have been applied for if the application was accompanied by a “SEPP1 objection”. That would allow the Council to consider and approve the application notwithstanding the minimum lot sizes prescribed by the then current 1993 LEP.

The defendant further submitted that prior to the commencement of the 2014 LEP the plaintiff could have sought to have the Church Land rezoned, and that if that had occurred, the 2014 LEP might not have precluded a subdivision of the land. It was pointed out that the Planning Proposal that was ultimately pursued to a “gateway determination” concerned a rezoning of only the Development Land. The defendant submitted that the definition of Rezone Application (which refers to “the Project”) means that the application must include an application to rezone (or perhaps subdivide) the Church Land.

The defendant submitted that the commencement of the 2014 LEP did not bring about a situation that was fundamentally or radically different to what was contemplated by the parties, unlike the situation that arose in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (supra). The defendant referred to the provisions of the Deed that placed upon the plaintiff the risk of the Project Consent not being obtained. It was put that the plaintiff, which failed to act diligently and expeditiously, should be regarded as the author of the situation in which it ultimately found itself.

In relation to Additional Clause 39 of the Contract, the defendant submitted that it was expressed to operate if “for any reason whatsoever” the Subdivision Documents were not registered three years after the date of the Contract. It was also noted that once the defendant had complied with its obligations in relation to the Road Easement, it was taken to have discharged all of its obligations under the Contract and was under no further obligation to transfer title to the Property or proceed with registration of the Subdivision Documents.

The defendant submitted that frustration of a contract should not be found merely because it has become more difficult or less profitable to perform (see Scanlan’s New Neon Ltd v Tooheys Ltd (1943) 67 CLR 169 at 187). It was submitted that there was here no fundamental change of situation, or a situation that was radically different to what was contemplated by the parties.

In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (supra), Mason J expressed agreement (at 356-7) with the earlier acceptance by Stephen J in Brisbane City Council v Group Projects Pty Ltd (supra) of the approach adopted by Lord Reid and Lord Radcliffe in the House of Lords in Davis Contractors Ltd v Fareham Urban District Council (supra). (See also Aickin J at 378). In that case, Lord Reid said (at 720-1):

Lord Radcliffe said (at 729):

In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (supra) Mason J continued (at 357):

In oOH! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd (supra) Nettle JA discussed the test for frustration at [63]-[74]. After referring to the judgment of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (supra) his Honour stated at [70]:

Whilst Lord Radcliffe spoke of frustration occurring when a contractual obligation becomes incapable of being performed because circumstances would render it radically different from that which was undertaken by the contract, this has not been understood as saying that without a change in obligation there can be no frustration (see Stephen J in Brisbane City Council v Group Projects Pty Ltd (supra) at 161). In oOH! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd (supra) Nettle JA said (at [64]):

The plaintiff contends that cl 4.6(6) of the 2014 LEP gave rise to such a fundamental commercial difference between contemplated and actual performance, and a fundamentally different situation, that the principles of frustration operate to bring the Deed to an end.

The relevant enquiry calls for a consideration of the nature and terms of the Deed, read in the light of the circumstances existing at the time it was made, and the event or events which are said to bring about the frustration of the contract (see Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (supra) at 358-9).

It should be noted at the outset that the relevant contract is the contract embodied in the Deed itself. In circumstances where neither the Call Option nor the Put Option has been exercised, no contract has come into existence on the terms of the Contract that is annexed to the Deed. Accordingly, no question of frustration of such a contract arises. However, the terms of the contract annexed to the Deed are relevant to the question whether the Deed has been frustrated as contended by the plaintiff. Those terms identify what the parties intended their legal relationship to become in the event an option under the Deed was exercised.

The Deed was entered into in circumstances where the plaintiff wished to develop its land, the Development Land, for residential purposes, and needed to arrange suitable road access for such development. A new road, extending from Boundary Street to Jubilee Road (or Avenue) across a portion of the defendant’s land, the Church Land, was a potential option for achieving suitable road access. These background circumstances are broadly reflected in Recital B to the Deed in the following terms:

The granting of the options the subject of the Deed can be seen as acts in furtherance of that broad objective. Both the Call Option (granted pursuant to cl 2.1) and the Put Option (granted pursuant to cl 2.2) refer to a purchase of the Property “for the Price and otherwise on the terms and conditions contained in the Contract”. Price is the amount calculated in accordance with cl 9 of the Deed. The Contract is a contract in the form of that which is annexed to the Deed. It is a standard form of contract for the sale of land supplemented by a number of Additional Clauses.

Exercise of the options is dealt with in cll 5 (Call Option) and 6 (Put Option). I do not accept the defendant’s submission that the Call Option could have been exercised at any time after the Deed was signed. In my opinion, cl 5.1 identifies a period within which the Call Option may be exercised, namely, at any time during the Call Option Period. That is the natural reading of the language of cl 5.1. Were it read otherwise, as contended for by the defendant, the definition of Call Option Period would have little or no work to do, and neither would the provisions of cl 4 which give a right to extend the Call Option Period in certain circumstances. Further, and as also pointed out by the plaintiff in submissions, there would be difficulties in calculating the Price under cl 9 if the option could be exercised before the Rezone Date. Accordingly, the Call Option is only able to be exercised by the plaintiff during the Call Option Period which commences on the Rezone Date and ends on the first to occur of the dates specified in the definition (or the amended definition if, as later occurred, the Call Option Period is extended pursuant to cl 4). Similarly, cl 6.1 identifies a period within which the Put Option may be exercised, namely, the Put Option Period. That period cannot commence unless either a Rezone Date or a Project DA Date occurs.

Clause 3.1 of the Deed sets out the obligations of the parties in respect of the preparation and lodgement of the Rezone Application. That is an application to change the development controls applying in respect of the Development Land to permit it to be developed for the Project. If the application succeeds so that the Development Land is rezoned, there will be a Rezone Date for the purposes of the Deed.

Clause 3.2 of the Deed sets out the obligations of the parties in respect of the preparation and lodgement of the Project DA and the obtaining of the Project Consent. It is envisaged that the Project DA will incorporate certain Buffer & Road Works, and it is stipulated that the Road (as defined) must be constructed prior to commencement of construction on the Development Land pursuant to the Project Consent.

If either option is exercised, the Contract (as defined) becomes binding upon the parties from the time of exercise (see cll 5.2 and 6.2). In that event, the Price for the purposes of the Contract is determined in accordance with cl 9 of the Deed. In essence, the Price is $800,000 plus the Price Adjustment Sum (if any), minus the Call Option Fee and any Call Option Extension Fee. By cl 9.1(a), $10.00 is stated to be the amount of the deposit. This should be regarded as forming part of the Price (see cl 9.1(b)). By Additional Clause 35 of the Contract, the Price is to be paid 14 days after the date of the contract, although in certain circumstances a Price Adjustment Sum is to be paid at a later date. The Price and any Price Adjustment Sum is not refundable to the plaintiff (see Additional Clause 35(h)).

Additional Clause 36 of the Contract is concerned with the carrying out of various works, including the Buffer & Road Works the subject of the Project Consent.

Additional Clause 37 of the Contract is concerned with the obligations of the parties in respect of the registration of the subdivision of the Church Land (in a manner consistent with the Mepstead & Associates drawing dated 11 September 2007) so as to create the Property. If the Subdivision Documents are registered, notification of that fact operates to set the Completion Date for the Contract (see Additional Clause 38). However, Additional Clause 39 contemplates a situation where the Subdivision Documents are not registered by the date three years after the date of the Contract. (Where no contract date is dated on the front page, the contract date is the date the contract is made – i.e. the date when the relevant option is exercised.) Additional Clause 39 provides that if for any reason whatsoever the Subdivision Documents are not registered three years after the date of the Contract, the defendant must provide the duly executed Road Easement to the plaintiff so as to allow it to be registered. Once the defendant complies with its obligations in that respect it is taken to have discharged all of its obligations under the Contract. In particular, the defendant is under no further obligation to transfer title to the Property, and no further obligation to proceed with the registration of the Subdivision Documents. Moreover, it is provided that in those circumstances neither party has any obligation to the other except in relation to antecedent breaches and the terms of the Road Easement.

The asserted frustrating event is the commencement on 27 June 2014 of the 2014 LEP, and in particular cl 4.6(6) of the 2014 LEP. The asserted frustrating event is not said to prevent the performance of any obligations under the Deed, or the exercise of any option under the Deed. Rather, it is said to undermine the fundamental purpose of the Deed, being the purchase of the Property.

Clause 4.6(6) of the 2014 LEP undoubtedly precludes a subdivision of the Church Land such as would be necessary in order to create the Property. As explained by Mr Doyle, a consultant town planner called by the defendant, recourse to the provisions of SEPP1 was not available in relation to the 2014 LEP as it is a “standard instrument LEP”. Mr Boston, a consultant town planner called by the plaintiff, agreed with Mr Doyle on that point. The position thus differed from that which pertained when the 1993 LEP applied (see [9] above).

As the Property is the subject of the Contract that would come into existence upon the exercise of one of the options, cl 4.6(6) of the 2014 LEP stood in the way of the conveyance that is contemplated to occur following an exercise of an option. To that extent, the purpose of the Deed can be seen to have been defeated. However, even if that purpose is regarded as of central or primary importance in the transaction embodied in the Deed, the terms of the Deed and the Contract referred to above show that conveyance of the Property is not the only purpose of the transaction. It is apparent from Additional Clause 39 that the parties contemplated that in some circumstances the conveyance of the Property would not occur, and the Road Easement would be granted instead. That is to say, the parties contemplated circumstances in which an option was exercised (so that they became bound by the Contract) and the Contract would be completed not by the transfer of title to the Property but by the transfer of the Road Easement. The parties contemplated that the Contract would be so performed in the event that, for any reason whatsoever, the Subdivision Documents were not registered by the date three years after the date of the Contract.

At the time the Deed was entered into the parties evidently turned their minds to the possibility that registration of the Subdivision Documents may not be achieved even three years after the exercise of an option (which itself might not occur for several years). The potential cause or causes of such a failure to achieve registration are various, and obviously include changes in applicable planning laws. The parties stipulated that there would be a transfer of the Road Easement if such a failure to achieve registration occurred “for any reason whatsoever”. It is not correct that the Deed and the Contract were predicated on the assumption that consent to the subdivision of the Church Land has either been obtained or will be obtained.

In these circumstances I do not think it can be concluded that the parties entered into the Deed on a common assumption that there would be no change to applicable planning laws that would preclude a subdivision of the Church Land so as to create the Property. Or, put another way, that there was a common assumption that it would continue to be the case that consent could be given to such a subdivision.

Neither can the continuation of that state of affairs be regarded as essential to the performance of the Deed (or any contract that arises upon the exercise of an option under the Deed). A departure from that state of affairs would not preclude the performance of any obligations under the Deed, including the obligations in relation to the Project DA and the Project Consent. If the Project DA was refused in whole or in part because consent could not be given to the subdivision of the Church Land, the Deed continues to operate (see cl 3.2(m)). If, following the exercise of an option, the registration of the Subdivision Documents was not achieved by the date three years after the date of the Contract, the provisions of Additional Clause 39 would operate so as to require the grant of the Road Easement instead of the conveyance of the Property.

It may be accepted that the preclusion of a subdivision of the Church Land brought about a significant change. It was henceforth highly unlikely, if not impossible, that the Property could be created and conveyed to the plaintiff. The situation would plainly affect the commercial calculations of the parties, in particular in relation to the possible exercise of the options. In that regard, it should be noted that as the Rezone Date occurred at or about the same time, it was open to the plaintiff to exercise the Call Option, and the Put Option Period would commence no later than 12 months thereafter. The preclusion of a subdivision of the Church Land may well have made an exercise of the Call Option unattractive to the plaintiff. However, the provisions of the Deed show that the options might be exercised in a variety of situations. It is expressly envisaged, for example, that either option might be exercised at a time when there is no consent to the Project DA (see cl 9.1(h)). The Project DA involves seeking consent for a development that includes the subdivision of the Church Land. The parties should thus be taken to have contemplated that either option might be exercised before any subdivision is approved. Moreover, the terms of Additional Clause 39 indicate an appreciation that, for whatever reason, the subdivision might not be achieved within three years after the exercise of an option.

It seems to me that the preclusion of a subdivision of the Church Land, brought about by the commencement of the 2014 LEP, did not give rise to such a fundamentally different situation that the Deed should be held to be frustrated. I do not think that the continued performance of the obligations under the Deed was rendered a thing radically different from that undertaken under the Deed. The parties evidently appreciated that advancement of the Project depended upon various consents being given. The parties made provision against the possibility that one or more of the consents might not be forthcoming. For example, if a rezoning of the Development Land is not achieved there is no Rezone Date; and if the Project DA is refused the Deed continues to operate. Here, upon the happening of the Rezone Date, it was open to the plaintiff to exercise the Call Option, and within 12 months it would be open to the defendant to exercise the Put Option (unless the Call Option was exercised first). That is so regardless of the status of the Project DA. In either case, upon the exercise of the option, a contract would come into existence which would oblige the defendant to grant the Road Easement if for whatever reason the subdivision was not registered within three years. Again, the parties envisaged that, for whatever reason, registration of the subdivision might not be achieved. I do not accept the plaintiff’s submission to the effect that the benefit of the Road Easement that would be granted in those circumstances is illusory or of only minor significance. It is a tangible property right, and in the context of a proposed residential development comprising 71 residential lots that lacked suitable road access, an easement of that character may be of considerable value. The Road Easement can be seen as an alternative means of achieving the broad objective that is referred to in Recital B to the Deed.

The present case is unlike Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (supra). In that case, the parties entered into a construction contract acting on erroneous advice that the work could not be the subject of an injunction to restrain noise or other nuisance. The parties thus proceeded on the basis that the work would be completed within 130 weeks, by a method involving three 8 hour shifts a day. The contract was held to be frustrated due to the issue of injunctions that precluded work between 10:00pm and 6:00am. The injunctions made it impossible for the work to be lawfully completed in accordance with the contract. Performance of the contract in the new situation became fundamentally different from performance in the situation contemplated by the contract. Here, for the reasons set out above, the preclusion of a subdivision of the Church Land did not cause performance of the Deed to become fundamentally different from performance in the situation contemplated by the Deed at the time it was made. Of course, questions of degree arise in applying the principles of frustration to the particular facts of the case at hand (see Brisbane City Council v Group Projects Pty Ltd (supra) at 162-3 per Stephen J). To my mind, the impact of the allegedly frustrating event in the present case is insufficient to warrant a conclusion that the Deed was frustrated.

The Deed was not discharged by frustration upon the commencement of the 2014 LEP. The plaintiff is not entitled to recover either the Call Option Fee of $80,000 or the Call Option Extension Fee of $80,000 on that basis. Neither is the plaintiff entitled to recover those sums pursuant to s 55(2A) of the Conveyancing Act. Whilst this claim was not formally abandoned, Senior Counsel for the plaintiff fairly conceded that there were difficulties in the way of treating the option fees as deposits within the meaning of the section. In my view, s 55(2A) applies only to deposits paid under contracts for the sale of land. The Deed is not such a contract, although the exercise of an option under the Deed would give rise to one. That did not occur. The option fees paid by the plaintiff would not in any event be regarded as deposits paid under the contract. Clause 9.1(a) of the Deed stipulates that the Contract Deposit is $10.00.

The above conclusions are sufficient to dispose of the plaintiff’s case. It is not necessary to consider certain other arguments advanced by the defendant in opposition to the frustration case. However, I will state that insofar as the contentions of the defendant rested on the proposition that the plaintiff breached the provisions of the Deed (notably cl 3.2(h)) I would not have accepted them. It was not pleaded that the plaintiff was in breach of the Deed. Neither was it pleaded that any breach of the Deed prevented the plaintiff from relying upon the commencement of the 2014 LEP as an event of frustration.

The Statement of Claim will be dismissed. The Court will also order that the plaintiff pay the defendant’s costs of the proceedings.