Riddle v White Constructions Pty Ltd

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The defendant contends:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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