SCN Pty Ltd v Smith[2006] QSC 161

SUPREME COURT OF QUEENSLAND

1. The plaintiff seeks specific performance of a contract dated 29 July 2004 by which it agreed to buy land described as Lot 1 on SP 108853, Lot 60 on RP 45530, Lots 92, 93 and 94 on RP 218814, Lots 71, 89, 90 and 91 on RP 218815 and Lot 83 on RP 223843 all in the County of Stanley, Parish of Yeerongpilly (‘the land’ or ‘the contract land’) for a price of $2,000,000.  The land is located at Beerinba within the boundaries of Logan City.  It is undeveloped and unserviced by water, power or sewerage.  To the extent the land has been used, the use was rural activity. 

2. The plaintiff intends to develop the land into a substantial and fully serviced industrial estate. To assist in that purpose it also bought adjacent land. That land is also to become part of the industrial estate.

3. The contract land consists of two parcels. One is about 50 metres wide by 500 metres long.  This parcel adjoins the Logan Motorway and is the remnant of land resumed for the construction of the Motorway.  The other parcel is triangular in shape and separated from the first parcel by a road reserve.  No road has yet been constructed on the reserve.  It is, though, called Pagewood Street.

4. The contract required a deposit of $5,000 which has been paid. It is in the standard REIQ form for the sale of commercial land and buildings (second edition GST reprint) though standard conditions 21.1, 28.1, 28.2 and 28.4 have been deleted.

5. The contract contains a number of special conditions. They are:

‘1.This contract is subject to and conditional upon the Purchaser lodging an application for material change of use application, development application and operational works (herein after called the “application”) in respect of the property with the Local Authority on or before 60 days from the date hereof and approval of such application being received by the Purchaser on or before 15 months from the date hereof.  If the Purchaser fails to lodge the material change of use application with the local authority within 60 days of the date hereof then the Vendor may by notice in writing terminate the contract. 

…

3.Should the Purchaser not be granted approval in relation to the application referred to in special condition 1 on terms satisfactory to the Purchaser then this contract shall be at an end.

4.The Purchaser undertakes to diligently pursue the application referred to in special condition 1 and to answer all reasonable requests for information made by the local authority or other relevant government departments and to keep the Vendor fully informed of the progress of the application referred to in special condition 1 on a monthly basis.

5.This contract will still be in force if the Purchaser demonstrates that through no fault of his own time delays experienced in obtaining the approval for the application referred to in special condition 1 were caused by the local council authority or government body.  If the Purchaser has done all things reasonably required of it to obtain such approval and such approvals are not in place within the time limited in these conditions then the Purchaser in its sole option may extend the date for satisfaction for this condition for a period not exceeding 90 days.  To give effect to this extension the Purchaser must within 15 months of the date hereof:

i.Give notice in writing to the Vendor that it wishes to extend pursuant to this clause. 

…

9.The parties agree that the Purchaser may waive reliance on any part of these conditions by notice in writing to the Vendor whereupon this conditional (sic) shall be deemed satisfied on the date of giving notice of such waiver.

10.Should any of the conditions not be satisfied within the period stipulated in the clauses hereunder then the Purchaser may at its option by notice in writing to the Vendor terminate this contract and the contract shall be at an end.  If notice of satisfaction or non-satisfaction of a condition is not given within the period stipulated then the Vendor may by notice in writing to the Purchaser terminate this contract. 

12.Completion of this contract shall be effected on the day being 30 days after notice advising that the application referred to in special condition 1 has been approved or waived.

6. The defendant has purported to rescind the contract by reason of the failure of the conditions, or the plaintiff’s breach of them, and has executed another contract to sell the land to another purchaser. The plaintiff contends that it complied with the special conditions and that, prior to the expiration of the time allowed to obtain approval for its industrial development, it waived the conditions and required the defendant to convey the land to it on payment of the purchase price. It has lodged a caveat to protect its asserted interest in the land pending the resolution of this action which the parties therefore seek as a matter or urgency.

7. The defendant had entered into an earlier contract for the purchase and sale of the same land on 5 April 2004. That contract was terminated by the plaintiff when it did not receive satisfactory responses from the Logan City Council with respect to its intention to develop the land. The defendant wanted to sell the land. Obviously the best prospect of obtaining a sale at a good price depended upon a purchaser receiving satisfactory indications from the Council that it could be developed.

8. On 9 June 2004 the defendant and his wife, together with their solicitor Mr Wheldon and their estate agent, Mr Jolly, attended the Council’s offices to discuss how the barriers to obtaining development approval might be surmounted.  The Council was represented at the meeting by Mr David Rowland and Mr Ray Shaw.  They recommended that the defendant, or a developer, should lodge a preliminary development application which would compel Council to determine what infrastructure would be needed for the proposed development.  Mr Jolly asked what prospects of success such an application would have.  He was told they would be ‘at least seven out of ten’. 

9. At the conclusion of the meeting the defendant instructed Mr Jolly to tell the plaintiff what had been said at the meeting and to say that he would be prepared to execute another contract with the plaintiff if the latter agreed to make all necessary applications for development approval.

10. Some days before the end of July 2004 Mr Jolly spoke by telephone to Mr Street, the plaintiff’s sole director and shareholder. Mr Jolly said that he and the defendant had had ‘a very successful meeting with the Council about the development of the land.’ He told Mr Street that the defendant had been critical of the Council for its earlier unhelpfulness when the plaintiff had made enquiries about the possibilities of developing the land. Mr Jolly went on to say ‘that an application for preliminary approval covering a range of potential uses would be the best way forward as the Council would look more favourably on such an application.’

11. By a letter dated 30 July 2004, the day after the contract had been executed, Mr Jolly wrote: 

‘I had a meeting with the Council.  Attendees were Graham and Sue Smith the owners, Andrew Wheldon the vendors solicitor, two representatives from Council Ray and David (sic).

We discussed many issues relating to the site and the outcome was to submit an application for preliminary approval for use in an attached list to the application.  This application is to include a planning report with the reasons why, prepared by a planning consultant.

David and Ray offered to look at the application prior to it being lodged to make sure we have all the bases covered. …’

12. On 24 September 2004 the plaintiff’s solicitors wrote to the defendant’s solicitors seeking an extension of time to satisfy special condition 1. They said:

‘We are instructed to seek an extension of the date for satisfaction of Special Condition 1 to 26 November 2004, to give our client (and the Logan City Council) further time to address all the issues involved such as the provision of Water, Sewerage, Electricity and so on prior to the lodgement of the Material Change of Use and development Application. 

… 

Could you please advise as soon as possible whether your client is agreeable to granting the extension proposed above in relation to Special Condition 1 …’

13. On 28 September 2004 the defendant’s solicitors replied:

‘We refer to your facsimile of 24 September 2004 and advise that our client agrees to extend the date for satisfaction of Special Condition 1 of the Contract to 26 November 2004 with time to remain of the essence.’

14. On 25 November 2004 Ray Somerville Surveys Pty Ltd (‘Surveys’), a town planning company engaged by the plaintiff, lodged an application for preliminary approval for a material change of use of the land with the Logan City Council.

15. On 7 December 2004 the defendant’s solicitors asked the plaintiff’s solicitors to ‘… confirm that your clients have (sic) satisfied Special Condition 1 …’.  The plaintiff’s solicitors replied on 9 December 2004 that they ‘are instructed to advise that [their] client has now satisfied … Special Condition 1 …’.

16. On 15 March 2005 the Council approved the plaintiff’s application for a material change of use of the land.

17. On 5 August 2005 the defendant’s solicitors wrote to the plaintiff’s solicitors: 

‘We note that the Development Application and Operational Works Applications have not been lodged. 

… For formality only, as our clients have now become aware of this circumstance, we reserve our client’s rights under the Contract in regard to your client’s possible failure to diligently pursue the Application.’

18. On 11 August 2005 the plaintiff’s solicitors replied. They enclosed a report prepared by Mr Sandmann, an employee of Surveys, of the endeavours he had made ‘to progress the Development application …’. The letter went on to note that the ‘… Operational works approval application cannot be made until the Development approval has been issued stating the conditions imposed by Council.’ The plaintiff’s solicitors also sought the defendant’s agreement to increase from 90 to 180 days the time by which the plaintiff could extend the period for obtaining approvals contained in special condition 5.

19. On 22 August 2005 the defendant’s solicitors refused to increase the period of 90 days specified in special condition 5.

20. On 18 October 2005 the defendant’s solicitors again wrote to the plaintiff’s solicitors: 

‘We note that your client has not lodged its Development Application or Application for Operational Works.  …

It is therefore our client’s position that your client cannot extend the Contract pursuant to clause 5 of the Special Conditions and that as at 29 October 2005 this Contract shall be at an end.’

21. On 27 October 2005 the plaintiff’s solicitors responded. It described the steps that had been taken by the plaintiff to comply with its obligations contained in special condition 1 and asserted that the plaintiff had a right to extend the time permitted for obtaining approvals by 90 days. The letter went on:

‘… our client is now entitled pursuant to Special condition 5 of the contract to a 90 day extension of time to obtain such approval and this letter hereby notifies you that our client “in it’s (sic) sole option” now elects to extend the time for satisfaction of Special condition 1 accordingly pursuant to Special condition 5 of the contract.  We therefore calculate that the further date which now applies for satisfaction of Special condition 1 is 27 February 2006 with time to remain of the essence.’

22. The plaintiff’s solicitors made an error in their reckoning of the date 90 days after 29 October 2005. The proper date was 27 January 2006. The correction was made by a letter from the plaintiff’s solicitor on 28 October 2005.

23. On 2 November 2005 the defendant’s solicitors wrote to the plaintiff’s solicitors:

‘We refer to Special Conditions 1 and 4 of the Contract.  …  Your client has not lodged an Application for Development Application and Operational works and has failed to diligently persue (sic) the Application in accordance with Special Condition 4.  The extension in relation to Special Condition 5 is conditional upon your client having done all things reasonably required of it to obtain such approval.  The fact that your client has not lodged the application is grounds to be said that your client has not done all things reasonably required of it.

… 

If your client would like to provide our client with evidence that it has actually taken some steps to obtain the approval to attempt to convince our client that it has taken steps in accordance with the Contract then please submit the same …’.

24. Five days later, on 7 November 2005, the defendant’s solicitors purported to terminate the contract on behalf of the defendant. Their letter of that date was in these terms:

‘Our client’s position is that:-

(a)By your letter … dated 9 December 2004, your client has materially misled our client.  Your client was to satisfy same and to lodge a Material Change of Use Application, Development Application and Operational Works.  The reality is that your client, by that date and still to this date, has only lodged the Preliminary Approval for Material Change of Use.

(b)Therefore, pursuant to Special Condition 1, our client terminates the Contract for your client’s failure to lodge the Application as required.

(c)Alternatively, your client has failed to diligently pursue the Application and therefore is not entitled to an extension as per Special Condition 5.

(d)… your client has not obtained … approval … within the time stated in Special Condition 1.  Therefore, pursuant to Special Condition 10, our client elects to terminate the Contract.’

25. On 9 November 2005 the plaintiff’s solicitors responded to the intimation that the defendant had terminated the contract. Their letter informed the defendant’s solicitors that the plaintiff had decided ‘to treat [the] letter of termination of the contract as a wrongful repudiation of [the defendant’s] contractual obligations.’ The letter further informed the defendant’s solicitors that the plaintiff would immediately commence proceedings for an order for specific performance of the contract and enclosed a copy of the caveat lodged by the plaintiff to protect its interest in the land.

26. The last shot in the battle of correspondence between the solicitors was fired by the plaintiff’s solicitors who, on 25 January 2006, wrote:

‘We hereby give you notice pursuant to special condition 9 of the contract … that our client waives reliance in respect of obtaining any approval from the Local Authority that may be required under special condition 1 of the contract.

Our client also waives special condition 3 of the contract.

Accordingly, these conditions are deemed to be satisfied pursuant to special condition 9.

Without limiting the above, and for the avoidance of doubt, if there remain any conditions of the contract for our client’s benefit which have not been complied with, we hereby waive same. …’

27. This letter was written two days before the extended date by which the plaintiff was to obtain approval from the Council for its proposed development. The accuracy of this last statement depends, of course, upon the plaintiff having effectively extended the time for obtaining approval, pursuant to special condition 5, to 27 January 2006.

28. The plaintiff’s case is that it made an application to the Council for a material change of use for the land within the extended time agreed to by the defendant for that purpose, and that between 29 July 2004, the date of the contract, and 27 October 2005 prior to the expiration of fifteen months allowed for obtaining approval in special condition 1, it had done all things reasonably required of it to obtain the approvals but it was clear that it would not obtain the approvals by 29 October 2005.  It therefore extended, pursuant to the right given by special condition 5, to extend the time for obtaining approvals to 26 January 2006 and that, prior to that date it waived the special conditions and made the contract unconditional so that settlement was due within 30 days of the waiver, 25 January 2006.

29. The defendant’s contentions are that:

(a)the plaintiff is in breach of special condition 1 in that:

(i)the plaintiff did not make an application to the Council for approval for material change of use of the land but instead made an application for preliminary approval for such change;

(ii)it did not make an application for operational works;

(b)the plaintiff did not diligently pursue the application it did make and did not make the application for operational works and so was not entitled to an extension pursuant to special condition 5;

(c)the plaintiff failed to keep the defendant fully informed of progress of the applications in accordance with special condition 4 and the defendant is thereby entitled to terminate the contract pursuant to clause 13.1 of the general conditions of contract.

30. There are, in essence, two points which arise for determination. They are: (1) What did special condition 1 of the contract oblige the plaintiff to do with respect to making applications to the Council? This point is to be determined as a matter of construction. (2) Did the plaintiff perform its contractual obligations diligently? The second point is one of fact.

31. Before turning to the question of construction it is, unhappily, necessary to consider some of the provisions of the Integrated Planning Act 1997 (‘the IPA’).  I will do so as briefly as possible.

32. Section 1.3.2 defines the meaning of ‘development’. It is any of the following –

‘(a)carrying out building work;

(b)carrying out plumbing or drainage work;

(c)carrying out operational work;

(d)reconfiguring a lot;

(e)making a material change of use of premises.’

33. It should be noted that ‘premises’ includes land: see schedule 10. A ‘material change of use’ of premises, or land, means ‘… generally … the start of a new use of the [land] …’: see s 1.3.5. ‘Operational work’ means a number of things but for present purposes it is excavating or filling land, or undertaking work in on or over land that materially affects its use.

34. By schedule 10 an ‘application’ is, relevantly, a development application. A development application means, in turn, ‘an application for a development approval’.

35. By s 3.1.5:

‘(1)A preliminary approval approves development (but does not authorise assessable development to occur) –

(a)to the extent stated in the approval;  and

(b)subject to the conditions in the approval.

…

(3)A development permit authorises assessable development to occur –

(a)to the extent stated in the permit;  and

(b)subject to –

(i)the conditions in the permit;  and

(ii)any preliminary approval relating to the development …’

36. It will be recalled that special condition 1 made the contract conditional upon the plaintiff making ‘an application for material change of use application, development application and operational works’. Carrying out operational work and making a material change of use of land constitutes development as defined by the IPA. A development application must therefore be understood as an application for approval to do all or any of the five categories of activity listed in s 1.3.2 of the IPA. An application for change of use, and one for operational works, are both ‘development applications’. The IPA does not appear to recognise a ‘development application’ as such. To be a development application the application must be for one of the activities described in s 1.3.2. The IPA does recognise a development permit, the purpose of which is to allow work to proceed once approval has been given for a development, i.e. one of the five defined categories of activity.

37. The plaintiff did not make an application for approval for operational works on the land at any time.

38. With these considerations in mind one turns to the construction of special condition 1.

39. I summarised the principles to be applied when construing a commercial document in Norco Co-operative Ltd v Parmalat Australia Ltd [2006] QSC 38 at [11] in these terms:

‘1.The court must first look at the words of the document which constitutes the contract between the parties.  The whole of the document must be considered and a construction should be attempted which will make all clauses operate harmoniously.  If the words are plain and unambiguous the court must give effect to them even though the result may appear one sided or even unreasonable.  See Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109.

2. If the language of the contract is ambiguous, or open to two constructions, or if the plain meaning of the clause renders it inconsistent with another, the court should resolve the ambiguity, or reconcile the inconsistency, by adopting a construction which accords with “business common sense” or the commercial purpose of the agreement which appears from its terms and the knowledge, common to the parties, which formed the background to the formation of their agreement.  See Australian Broadcasting Commission;  Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313-4 per Kirby P.

3. If the words of a contract, while plain and unambiguous, lead to a result which is not only unreasonable but absurd, the court should construe the contract, if necessary by supplying, omitting, or correcting words to avoid the absurdity:  Watson v Phipps (1985) 60 ALJR 1 at 3;  Westpac Banking Corporation v Tanzone Pty Ltd [2000] NSWCA 25 paras [19] and [20].  Before this rule is put into operation it must, I think, be unmistakably clear that the parties cannot have meant what they said was their bargain.’

40. The summary won the approval of Jerrard JA, [2006] QCA 129 at [42], but his Honour stressed the importance of the first proposition that if a contract be plain and unambiguous the court must give effect to it though the result appears unfair or unreasonable.

41. Special condition 1 is ambiguous, or open to two constructions, and its construction is to be essayed by reference to the principles set out in the second paragraph of the summary. The ambiguity is apparent on the face of the condition. It provides that the contract is conditional upon the purchaser lodging ‘an application for material change of use application, development application and operational works …’. As I have mentioned the IPA does not recognise a ‘development application’. This I understand to be common ground between the parties who accept that the words ‘development application’ must be ignored or regarded as though the word ‘and’ where it appears in the third line should be understood as ‘for’. The condition would thus notionally read that the contract was subject to the plaintiff lodging an application ‘for material change of use application, development application for operational works …’. This realisation came late, after counsel was retained. The solicitor’s correspondence is replete with references to the ‘Development Application, as a distinct process. The parties were, I think, confused about what special condition 1 required.

42. The parties are agreed that special condition 1 did not require the plaintiff to make three applications but only two: one for a material change of use to the land and the other for operational works on the land. I accept that is so but one can only arrive at the conclusion by amending the words of the clause.

43. The second ambiguity arises from the inconsistency between the first and second sentences in special condition 1. The first sentence makes the contract conditional upon the plaintiff making two applications, for a material change of use and operational works. These applications are to be designated ‘the application’. The second sentence allows the defendant to terminate the contract if, within the stipulated time, the plaintiff does not lodge the ‘material change of use application’. The second sentence is quite specific in its conferral of the right to terminate. The specific term does not coincide with the expression of the conditions to which the contract was made subject. The express right to terminate seems to imply that there is not to be a right to end the contract if the plaintiff did not lodge ‘the application’, or even the applications referred to in the first sentence.

44. The defendant’s submission is that special condition 1 required the plaintiff to apply to the Council for approval for both a material change of use and for operational works within 60 days (which was extended). The defendant’s submission is that while there are ambiguities in special condition 1 the first sentence is clear and free from doubt. It makes the contract conditional upon the plaintiff applying inter alia for approval for operational works within 60 days. 

45. The defendant then submits that regard may not be had to surrounding circumstances or ‘a matrix of facts’ to alter the plain meaning of the condition. I accept the proposition of law which is implicit in the principles of construction which I summarised earlier. Its application, however, depends upon the premise that the condition is plain and unambiguous. When read as a whole the condition is not of that kind.

46. If read literally the contract is made conditional upon the lodging of the two applications but the defendant’s right to terminate is given with respect only to a failure to lodge the first-mentioned application. That one was, in fact, lodged in time. A literal reading of the condition will not assist the defendant because the specified right to terminate did not arise. The plaintiff did lodge the application which, if not made, would have given the defendant a right to terminate.

47. To make sense of the condition one has to change its wording. In doing so the court is concerned to find the presumed meaning of the parties and does so by having regard to the words actually used and the circumstances, known to the parties when they made the contract, which identifies the commercial object of the contract. The court should give the words a meaning which will achieve the commercial result which the parties intended.

48. The High Court in Gollin & Co Ltd v Karenlee Nominees Pty Ltd (1983) 153 CLR 455 (at 464) rejected a construction of a lease which had ‘something to commend it on the ground of the literal interpretation of the words used’ but ‘little to commend it on the grounds of commercial efficacy or common sense.’ 

49. One cannot accept the defendant’s submission. It ignores the inconsistency between the two sentences in special condition 1, focuses only upon the words found in the first sentence and overlooks the fact that that sentence is not flawless but needs an admitted readjustment to make sense.

50. To achieve his desired result the defendant has to omit the words ‘material change of use’ from the second sentence so that it notionally reads:

‘If the [plaintiff] fails to lodge the application with the local authority within 60 days … the Vendor may … terminate the contract.’

‘The application’ is defined by the first sentence to be both applications.

51. Alternatively the defendant must insert into the second sentence the words ‘or the operational works application’ so that it notionally reads:

‘If the Purchaser fails to lodge the material change of use application or the operational works application … the Vendor may … terminate the contract.’

52. The plaintiff’s approach to construction is to emphasise the evident commercial purpose of the special conditions. This is said to be ‘not the making of applications but the securing of necessary approval’ with the results that ‘the applications … should be seen as a means to that end, not ends themselves.’ It is then pointed out that the first sentence of special condition 1 contains two requirements: that the plaintiff lodge ‘a certain application’ by 26 November 2004 and that it obtain approvals for the applications within 15 months. It is submitted, correctly I think, that the requirements are conditions precedent not to the formation of the contract but to the obligation to complete it.

53. The plaintiff further submits that ‘the commercial and reasonable view of the contract’ is that the plaintiff was obliged to lodge ‘the application’ that it practically could after consulting with the Council and on professional advice within the stipulated time so that ‘the first sentence of special condition 1 operated so that the material change of use application had to be made within the stipulated time … to trigger [the plaintiff’s] right to the benefit of being able to terminate the contract [after] 15 months if … unable to get all … approvals in that time.’ It is said that the plaintiff did not lodge an application for approval for operational works because that could not practically be done without first obtaining preliminary approval for a material change of use of the land.

54. It is correct that, as a matter of fact, an application for approval for operational works could not practically be made without having first obtained the Council’s approval, preliminary or final, for the material change of use. This is established by the evidence of Mr Sandmann and Mr Steer. It is also the opinion of Mr Venn, the joint expert appointed by the parties.

55. Mr Sandmann said:

‘… it was not possible … to prepare or lodge an operational works application of any kind together with the material change of use application … because until a decision notice was handed down [the plaintiff] had no indication of even the type or nature of the development that could occur on the site.  In these circumstances, [Surveys] could not … prepare … specific operational works designs and drawings. …  [W]ithout indication of the approved uses, any operational works application at that point would have been an entirely hypothetical exercise.’

56. Mr Steer, a civil engineer, said:

‘… an operational works application could not sensibly be lodged until the Council had determined what uses, or potential uses, it would accept on the land.  An operational works application, even for preliminary approval, is an application to do something specific on the ground.  It must include a detailed design setting out the works proposed to be done in the development.  This design is essentially what the Council must assess and approve … or reject.

Depending on the job, the design might take the form of a number of drawings prepared by the civil engineer, setting out the precise nature and scope of works.  The drawings might include … road and earth works, as well as layout plans for stormwater and sewerage …  Road layouts … are usually included.  …

In the case of this land, given its rural zoning, any operational works application would have been premature until there was an indication from Council as to the uses it would approve for the land. …  [I]n … this job involving large-scale development of rural and unserviced land, it was not possible to foretell the nature and scope of operational works that might be required without first securing preliminary approval for the material change of use.’

57. Mr Venn said in his report (para 5.2.3, 5.2.5):

‘… an application for Operational Works could be prepared for any particular development scenario by isolating the site from its external service infrastructure environment.  …  This presupposes … that sufficient design of the proposed development has been undertaken to provide a basis for layout of those operational works.  In the case of this Preliminary Approval [for material change of use] … this was definitely not the case.

…

It is doubtful however, that the net gain in time saved … would contribute any advantage to the process (and may even confound it).  Hence I conclude that, while there was a logistical way of making an Operational Works application, this would have had no practical benefit.’

58. Mr Venn also said (para 5.2.7):

‘A Preliminary Approval application could have been made merely to keep Contract Special Condition 1 live but would have been rather meaningless and would probably have slowed the process by its nuisance.  That is, it would have been a virtual nullity.’

59. In cross-examination Mr Venn said (T 105.15-.45):

‘… there should have … been an application made for operational works even though it would have been a nullity.  I am not proud of the fact that I have done that myself … merely to achieve a contract date.

Why would it have been a nullity?-- … I have not seen an application for preliminary approval for operational works made at the same time as a[n] … application for preliminary approval for material change of use because of the fact that there is … insufficient information.  A design has to be conceptualised so that one knows where the services are required on the land. …  With a preliminary application [for material change of use] you don’t supply that sort of information.  To then make an application for operational works it would have had no information attached to it.  It would have had nothing.’

60. I accept this evidence which was not really contradicted. The defendant’s case is that the contract obliged the plaintiff to make a pointless application for approval for operational works at or about the same time as it made its application for approval for a change of use of the land and that he is entitled to terminate the contract because the plaintiff did not perform that exercise in futility. The defendant’s construction has an element of caprice about it. The contract is conditional upon the plaintiff making the application for operational works at a time when the application could serve no useful purpose.

61. The plaintiff’s case is that special condition 1 should be construed to achieve the result that it was obliged to make the application for approval for a material change of use within 60 days (which was extended) and that, having done that, the contract was conditional upon the plaintiff receiving approval from the Council for both change of use and operational works within 15 months.

62. In my opinion this is the preferred construction. It produces a sensible result. It provides an intelligible regime for the protection of both parties. The plaintiff must have properly commenced the process which would lead to Council approval for the development of the land. The commencement, the making of an application for a change of use of the land, was to be made within a designated, relatively brief, time and the approvals to allow the development to proceed were to be obtained within a longer specified time. The contract could be avoided by either party if after 15 months approvals had not been obtained.  The contract could be terminated by the defendant vendor if the plaintiff purchaser did not commence the process to obtain approvals within 60 days. 

63. The plaintiff’s construction has the result that it might have applied for approval for operational works when it knew what works would be required to service the uses which had been approved. The only time constraint was that approval for the works had to be given within 15 months of the contract. The defendant’s construction would have required the plaintiff to make an application which could not be approved until changed uses had been approved, when a further application for operational works would have to be made.

64. The plaintiff’s construction can be achieved by repositioning the words ‘and operational works’ to a later point in the first sentence. Special condition 1 would thus notionally read:

‘This contract is subject to and conditional upon the Purchaser lodging an application for material change of use (hereinafter called “the application”) in respect of the property with the local authority on or before 60 days from the date hereof and approval of such application and operational works being received by the Purchaser on or before 15 months from the date hereof.  If the Purchaser fails to lodge the material change of use application with the local authority within 60 days of the date hereof then the Vendor may by notice in writing terminate the contract.’

65. This reworded condition has omitted the words ‘development application’ which are plainly surplusage. As reworded it remains repetitive but it is devoid of ambiguity. It is how I think the clause should be read.

66. The defendant objects to this process of analysis because it depends upon utilising surrounding circumstances as an aid to construction when the circumstances were not known to the defendant. That is, the defendant submits that he did not know that it was vain to make an application for approval for operational works at the same time as an application for change of use and this fact should not therefore be relied on when construing special condition 1.

67. There are two answers. The first is that in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Mason J made the point that facts which exist when a contract was made will be receivable as part of the surrounding circumstances if known to both parties or if the facts are notorious so that knowledge of them will be presumed.  The fact in question here is of that kind, or akin to it.  It is, I think, self-evident that an application for what is in effect construction work in connection with the development could not be made until it was known what development would be permitted.  Mr Smith knew that his land was in what used to be called the rural zone and that it was unserviced.  He knew also that the Council had been reluctant to reveal what development it would permit or encourage on his land and the surrounding area.  Indeed he had used ‘colourful language’ when speaking to the Council officers on 9 June 2004 about its unhelpfulness.

68. The second answer is that Mr Smith did know that the appropriate way by which to commence the process of obtaining development approval was to lodge an application for material change of use of the land. He was told that at the 9 June 2004 meeting and he instructed Mr Jolly to relay that fact to the plaintiff.  Mr Jolly did so in his letter of 30 July 2004 and his earlier telephone conversation.  Both parties therefore made the contract knowing that the Council had recommended such an application as a means of compelling it to say what development would be acceptable.

69. The contract should be construed in the light of this common knowledge.

70. That this was the defendant’s understanding is corroborated by the correspondence from the plaintiff’s solicitors of 24 September 2004 and the exchange of correspondence on 5 and 11 August 2005. It will be recalled that in the September letter the plaintiff’s solicitors wrote to seek an extension of time to satisfy special condition 1. The plaintiff sought until 26 November 2004 to lodge the material change of use application. Nothing was said about an application for operational works. The defendant’s solicitors granted the extension. In August 2005 the defendant’s solicitors wrote to say they had discovered that the application for operational works had not been lodged and, for formality only, they reserved the defendant’s rights because of the plaintiff’s ‘possible failure to diligently pursue the application’. There was no complaint that the application for operational works had not been lodged on or before 26 November 2004. The complaint was of a possible breach of special condition 4, not special condition 1.

71. Were my view about the meaning of special condition 1 different I would conclude that by his solicitor’s letter of 28 September 2004, granting the extension to lodge the application for material change of use, and keeping the contract on foot, the defendant waived the contractual requirement that the plaintiff also lodge at the same time an application for approval for operational works.

72. Mr Smith’s own evidence establishes that he understood the contract to require the making of three applications, one of which was an operational works application. In granting an extension of time to make one only of those applications but otherwise affirming the contract, Mr Smith absolved the plaintiff from making the other applications within the stipulated time. (It may be pointed out that no-one now supports Mr Smith in his contention that the condition required the making of three applications.)

73. I adhere to the opinions I expressed on the question of waiver in Elias v Forsyth [2004] QSC 338 at [49] – [50].  The correspondence of September 2004 was a clear indication that the defendant waived the precise mode of performance required by special condition 1 and intimated that the condition could be performed by the plaintiff making an application for material change of use only.  The defendant was entitled not to insist upon the performance of that particular obligation (to lodge an application for operational works) but to treat the contract as otherwise intact.

74. It is not necessary to say more on this topic of waiver. It does not arise on the view I take of the meaning of special condition 1.

75. I conclude that special condition 1 did not make the contract conditional upon the plaintiff making an application for approval for operational works within 60 days or such further time as the parties agreed. The plaintiff was not in breach of contract in not making that application within that time and the defendant had no right to terminate the contract by reason of the fact that the plaintiff did not apply for approval for operational works on or before 26 November 2004.

76. There is nothing in the point that the plaintiff applied for preliminary approval for material change of use. Such approvals are contemplated by the IPA and are properly to be regarded as applications for approval for material change of use of land. Special condition 1 did not specify a particular type of application for change of use. The application made by the plaintiff complied with the condition.

77. The next consideration is whether the plaintiff failed to diligently pursue the applications. If it did not it was not entitled to extend time under special condition 5 and the defendant could act by reason of the breach to bring the contract to an end.

78. It will be recalled that by special condition 4 the plaintiff undertook ‘to diligently pursue the application referred to in special condition 1 and to answer all reasonable requests for information made by the local authority and to keep the [defendant] fully informed of the progress of the application … on a monthly basis.’ By special condition 5 if the plaintiff had done ‘all things reasonably required of it to obtain such approval and such approvals [were] not in place within the time limited in [the] conditions then the [plaintiff] … [could] extend the date for satisfaction for this condition for a period not exceeding 90 days.’

79. The defendant contends that the plaintiff was in breach of special condition 4 in not diligently pursuing the application and in not keeping him informed of the progress of the application. Alternatively he seeks to justify his termination of 7 November 2005 by reference to general condition 13.1 of the contract.  That provided that if the plaintiff:

‘(b)fails to comply with any of the terms or conditions of this Contract;

then the Vendor may: 

…

(ii)terminate this contract.’

80. The plaintiff for this part denies a breach of special condition 4 and asserts that it had done all things reasonably required of it to obtain approvals for operational works and it had a right, which it exercised, to extend the 15 month period by
    90 days.

81. The only evidence which touches the questions of delay and the extent to which the plaintiff prosecuted its applications with diligence comes from the plaintiff’s witnesses and Mr Venn, the town planner, who was appointed by the parties as a joint expert to express his opinion about the manner in which the plaintiff went about obtaining Council approvals. The plaintiff’s witnesses were Mr Street, the plaintiff’s sole director and shareholder and an experienced land developer, Mr Sandmann and Mr Steer.  They were cross-examined with a view to showing that the plaintiff had been dilatory in applying for applications and importuning the Council to give approvals.  I thought each of the plaintiff’s witnesses was competent to express the opinions he advanced and credible in their testimony.  I did not think that the cross-examination detracted from the force of their evidence-in-chief which was given by affidavit.  I accept their evidence.

82. Mr Venn was a very proper witness who discharged his role as an independent joint expert with complete detachment. There is no reason to doubt his opinions. The process of analysis of the facts and allegations which occurred in the course of the trial condensed Mr Venn’s criticisms of the applicant’s conduct in applying for approvals to three points which can be discussed relatively briefly. For that reason and because the plaintiff’s evidence was uncontroverted and is conveniently set out in the affidavits, I do not propose to recite the history of the applications at length. There is a third reason why this approach is appropriate. Much of the defendant’s case depends for its force upon the premise that the plaintiff was obliged to lodge an application for approval for operational works within the time fixed by special condition 1, as extended. This contention informs much of the defendant’s criticism of the plaintiff’s activities. It is, as I have indicated, a mistaken contention. As I construe the contract the plaintiff was obliged to act diligently in obtaining the approval for operational works within 15 months from the contract date but was not obliged to lodge the application by any particular date. If by reason of delays occasioned by the Council the approval could not be obtained within 15 months the plaintiff could extend that period by 90 days.

83. With this understanding of the background I turn to the facts. About a month after making its contract with the defendant the plaintiff also contracted to buy another parcel of land, not far from the defendant’s land, from Mr and Mrs Ruhlands (‘the Ruhlands land’). That land was separated from the triangular parcel of the contract land by Pagewood Street. The plaintiff intended to develop the land to be bought pursuant to both contracts into an industrial estate and business park fully serviced by water, sewerage, electricity and roads. The total cost of development is predicted to exceed $30,000,000. It will include a service station and retail showrooms as well as industrial sites. The development is intended to occur in three stages. Stage 1 will be the Ruhlands land. Stage 2 will comprise the nine lots in the narrow configuration adjoining the motorway. Stage 3 will be the triangular-shaped land which is intended to become a business park with offices.

84. Shortly after the execution of the contract the plaintiff’s officers met with Council officers to obtain information necessary to prepare the application for preliminary approval for material change of use. Mr Street spoke on several occasions to Mr Sandmann and Mr Black, a Council employee.  There was a further meeting on 29 September 2004 during which the Council’s officers identified the matters the Council required to be addressed in the application.  Forewarned being forearmed, the plaintiff lodged its application on 25 November 2004 in such a manner as to secure the Council’s rapid approval.  The tactic was successful and, as I mentioned, approval was given on 15 March 2005, an achievement which Mr Venn regarded as most commendable.

85. Mr Street explained that the plaintiff’s immediate objective was to obtain the preliminary approval for the change of use so as to obtain from the Council an indication of what uses and development would be allowed. Development permits could then be obtained on a lot by lot basis which would not be subject to public objection. Another benefit was that the preliminary approval would extend to a variety of uses which, from a commercial perspective, would make the land both more valuable and easier to sell as it would appeal to a greater number of potential purchasers.

86. On 15 December 2004 the plaintiff requested the Council to give its development application ‘one stop shop’ designation which would mean that the Council would appoint one of its officers to give sole attention to the plaintiff’s applications. The purpose was to secure a speedier process. The Council agreed. Nevertheless the plaintiff experienced delays. Mr Street mentions as one example a period of one month Council took merely to confirm that it did not intend to require further information.

87. One obstacle in the path of securing approvals was that the land was unserviced. Until the plaintiff knew that the Council would provide water, sewerage and power to the land, and indicated the location of those services, planning for the development of the land could not proceed and, more particularly, an operational works application could not be prepared. One could not design operational works for any development without knowing where, with respect to the land, the service mains would be laid.

88. Another problem concerned the road layout. As I mentioned Pagewood Street beyond the intersection with Gilbert Street is dedicated but not formed. To the west Pagewood Street intersects Wembley Road. The Council contemplated closing that intersection and bringing traffic from Wembley Road by another route to the east of the land. That might have led to the closure of the Pagewood Street reserve. It also contemplated building a road to connect with an overpass across the Motorway. The proposed route of that road would have taken it across part of Lot 60 and two or three of the lots in the rectangular parcel. This would have affected the planning of any development on the land as well as the provision of services. The development would have to take account of the road network and the direction of access.

89. It was not until about 13 December 2005 that the Council finally decided the road layout for the area.

90. In the early months of 2005 Mr Street and Mr Sandmann attended several meetings with Council officers with a view to reaching agreement on the provision of services to the land. The purpose of the meetings was to obtain from the Council some certainty as to the timing and location at which the services would be provided. Mr Sandmann explained that the closest point from where they could come was to the east along the line of Wembley Road to its intersection with Pagewood Street. From thence it could extend south along Pagewood Street until it reached the boundaries of both parcels of the contract land. The Ruhlands land fronts both Wembley Road and Pagewood Street. The provision of services in the manner I have described would thus reach the Ruhlands land first. The plaintiff, and Mr Sandmann, determined that commercially and practically the best solution to obtaining services to the lands was to make an infrastructure agreement with the Council obliging the latter, for consideration, to bring the services to a point where they could be provided to the Ruhlands land, the proposed Stage 1 of the development. Having got the services to that point it would be relatively easy to extend them to the contract land. A further advantage to the plaintiff was that by limiting the infrastructure agreement to the Ruhlands land the monetary consideration would be reduced.

91. Accordingly the plaintiff negotiated with the Council for an infrastructure agreement. The process took several months and involved the exchange of a number of drafts. The first was delivered on 29 July 2005 but final agreement was not reached until 21 October 2005. That followed a ‘deputation’ to the Council on 27 September in which the plaintiff beseeched the Council to make the infrastructure agreement.

92. Mr Street explained that although the agreement formally secured the Council’s promise to deliver services only to the Ruhlands land the agreement has facilitated the delivery of those services to the contract land, and to the Pagewood Street area generally. Mr Street contends, and I accept, that the only real consequence of removing the contract land from the agreement was that it reduced the head works charges payable by the plaintiff.

93. Mr Street also says, and I accept, that the steps taken to obtain the infrastructure agreement were directed at putting the plaintiff in a position where it could lodge an application for operational works at the first available opportunity and with the greatest prospect of success on commercially acceptable terms. The purpose and function of the infrastructure agreement was to set out the Council’s conditions and requirements relating to the development of services on both the contract and Ruhlands lands, and, once those conditions and requirements were known, the Council could indicate the precise location and connection points for the services it was to provide. Until that time the plaintiff’s engineer, Mr Steer, could not begin the preparation of the application for operational works.

94. As things have developed, in January 2006 the Council decided that the plaintiff itself should be allowed to determine the location of infrastructure connection and discharge points. Since then the plaintiff has been in a position where it could have lodged an application for approval for operational works, at least if it could have conducted a survey of the land to obtain the relevant contours. Since 25 November 2005 the plaintiff has been denied access to the land because of the defendant’s contention that the contract has been terminated.

95. The evidence establishes that the plaintiff was anxious to advance the process of obtaining approvals and took appropriate steps to achieve that end. Mr Sandmann was diligent, indeed assiduous, in pursuing the Council’s officers and in trying to hurry it along. I accept his evidence in that regard.

96. Mr Venn noted that the Council ‘has struggled to articulate a clear direction on service infrastructure’ and that it has ‘clearly been tardy in the consideration of infrastructure planning for this area. The … [local plan] was gazetted … more than four years before the making of the … application [for change of use] … during which time infrastructure planning should have been progressed.’

97. In fairness to the Council it should be recorded that the site was a difficult one to develop. Mr Venn made that point. The time it took the Council to articulate what it required for the purposes of making decisions, and for making decisions themselves, has to be understood in that context. The contract lands are awkwardly shaped and part of them abut the motorway. They are unimproved and remote from services. Their ultimate development has to complement surrounding development and the Council’s strategic town planning. It is not surprising that there were delays.

98. Mr Venn accepts that an application for approval for operational works lodged before the Council had indicated the location and timing of the provision of services to the land would have been of ‘no practical benefit’. The same is true of an application made before the road layout had been determined by the Council. The result is that no application could have been prepared before December 2005. The same point is made by Mr Steer.

99. The evidence I have mentioned can be summarised. Council approval to a material change of use for the contract land was obtained on 15 March 2005. The lapse of time to obtain the approval was reasonable. The next step was to lodge an application for approval for operational works. That could not be done until the Council made a commitment to providing services to the land and indicated where the connection and outlet points for water and sewerage would be located. The Council were slow to make those decisions. The plaintiff determined that an infrastructure agreement which bound the Council to provide services to the Ruhlands land would be the quickest means of achieving its object. The Council took four months to bind itself to the infrastructure agreement which it did only after pressure from the plaintiff. It did not make that commitment until October 2005.  The Council did not decide upon the road layout until mid-December 2005.  It did not make a decision about the precise location of sewerage and water mains and their outlet points until January 2006 when it passed that responsibility to the plaintiff.  The defendant’s letter purporting to terminate the contract came less than a month after the Council had executed the infrastructure agreement and before it had decided the road layout.  The defendant’s waiver of the special conditions occurred at about the time the Council permitted it to choose the locations of the services, thus making the preparation of an application for approval for operational works feasible.

100. In his evidence Mr Venn identified the three respects in which he thought the plaintiff had not acted promptly. The first was that it took some months to prepare and lodge the application for material change of use. The contract had allowed 60 days but the plaintiff took four months.  The short answer, which Mr Venn himself accepted, is that the long preparation led to a very rapidly granted approval.  Mr Venn thought the plaintiff had done extraordinarily well to obtain an approval in just over three months.  Starting from a date 60 days after the contract the plaintiff took about six months to obtain the approval.  Mr Venn said that ordinarily an approval of that kind would be obtained in between six to nine months.  Overall the plaintiff did well.  The lateness, if such it be, in lodging the application was not productive of delays in obtaining approval.  It is probably the case that the speedy response was the result of the longer preparation.

101. Mr Venn’s second criticism was that an operational works application should have been put in within 60 days of the contract date. That application would have been a nullity and would have been an exercise in pointlessness. I explained why when construing special condition 1. The only basis suggested by Mr Venn for his criticism is that the contract required the application for operational works to be made within 60 days and it should have been done, though futile. This criticism disappears if one construes special condition 1 as I have done.

102. The third criticism is that the plaintiff could and should have produced a master plan for its development after it obtained approval for the material change of use. Mr Venn thought that such a plan might have expedited the Council’s consideration of an application for operational works and subsequent applications for development permits.  This criticism was muted.  Mr Venn said it was ‘a little bit difficult to read between the lines’ by which I understood him to mean that he was not entirely sure why a master plan had not been prepared.  As well it appears that Mr Venn misunderstood the Council’s requirement in this regard.  The approval for change of use contained condition 1.1.3:

‘That the master plan for the site should include all of Lot 1 and address management of storm water and drainage issues.’

Mr Venn took ‘Lot 1’ to be a reference to the first lot in the thin rectangular strip of lots adjoining the motorway.  Mr Venn therefore thought that the Council required a master plan for that area of the contract land.  I think that he was mistaken.  That condition follows condition 1.1.2:

‘That prior to any operational works applications being lodged for development on Lot 6 RP 221544 and Lot 60 RP 44530 the applicant must provide … a master plan for the development of those premises.’

Lot 60 is the triangular portion of the contract land.  Lot 6 is the Ruhlands land.  The plaintiff proposed to subdivide that land into two lots, 1 and 2.  The reference to Lot 1 in condition 1.1.3 is most probably a reference to the lot to come from the subdivision.  Mr Venn accepted the proposition (T 137.10.15). 

103. There remains the point that the plaintiff did not prepare a master plan for Lot 60 which was said by the approval to be a pre-condition to approval for operational works. The answer to this comes again from the evidence of Mr Sandmann and Mr Steer who both said that a master plan could not be prepared without knowledge of the road layout and the location of services.  Mr Venn partially accepted this answer.  He agreed that the road network and location of services would have an effect on how the land could be developed, and therefore how one would plan for the development.  He remained of the view that a master plan would have been of assistance to the Council’s consideration of development applications and the grant of approval.

104. I think that Mr Venn on the one hand and Messrs Sandmann and Steer on the other were using the term ‘master plan’ in different senses. Mr Venn meant by the term a concept plan of the kind which was in evidence. This is the nature of an architect’s impression of what structures might be built on the land. These concept plans are not related to actual roads or service mains. Mr Sandmann and Mr Steer meant by the term the plan of a proposed actual development located with reference to actual roads and actual services. This kind of master plan could not, I accept, be prepared without the information described.

105. I do not find that this criticism of the plaintiff’s activities meant that it did not diligently pursue the process of obtaining Council approvals. Mr Venn agreed that the steps taken in that regard and summarised in the affidavits of Mr Sandmann and Mr Steer showed ‘serious and purposeful activity on the part of [the plaintiff] in the period after the granting of the approval’. Mr Steer said that the plaintiff seemed to have been ‘diligent in that regard and I note that the Council did appear, contrary to what I have said before … tardy at the outset of the infrastructure agreement process.’

106. I conclude that the plaintiff did diligently pursue its applications for material change of use and operational works and that it experienced delays in obtaining approvals through no fault of its own but by reason of the Council’s indecision. I conclude also that the plaintiff did all things reasonably required of it to obtain the approvals and that it was entitled to, as it did, extend by 90 days the time allowed by the contract to obtain approvals as provided for by special condition 5.

107. The last point to consider is whether the plaintiff was in breach of special condition 4 by not keeping the vendor fully informed of the progress of the applications. This point comes down to whether Mr Jolly was the defendant’s agent for the purpose of receiving information from the plaintiff. Mr Street testified that he kept Mr Jolly fully informed of all relevant events concerning his dealings with the Council and told him of what was happening. Mr Smith gave evidence that he was told almost nothing of the progress, or lack of it, of the applications and knew nothing of what was occurring with respect to the applications and negotiations for approval. There is no clear reason to doubt Mr Smith’s evidence but I did not think he was completely candid. I suspect he was content to leave things to the plaintiff and ask for information when he wanted it.

108. Mr Street and Mr Smith did not know each other before the contract was made in July 2004. They met only twice, on 29 August 2005 at the defendant’s house and on 14 October 2005 at the Coffee Club in Springwood. Both meetings were arranged by Mr Jolly at Mr Smith’s request and for the purpose of briefing him on developments. I do not accept Mr Smith’s evidence that the meetings were requested by Mr Street. On both occasions Mr Street gave Mr Smith a detailed explanation of the causes of the delay.

109. Mr Street’s evidence was that he spoke to Mr Jolly, almost daily, between December 2004 and December 2005 and told him ‘of all progress made on this project’ and kept him informed ‘not only of any progress made by [the plaintiff] but also as to the numerous problems and delays [it] … encountered in moving this project through the Council.’ Because of the number of conversations, mostly by telephone, Mr Street cannot recall what was said on any particular occasion. I accept Mr Street’s evidence. Given the frequency of the communications between him and Mr Jolly it is a fair inference that Mr Jolly was told in detail of the plaintiff’s attempts to obtain Council approval and of its frustrations.

110. It seems from Mr Smith’s evidence that Mr Jolly did not pass on the information. The question is, as I identified, whether Mr Jolly was the defendant’s agent for the purpose of receiving the communications. If he was, the communications from Mr Street to Mr Jolly would, in law, be communications made to the defendant.

111. It is worth noting that before he sought grounds for terminating the contract Mr Smith did not complain of not being kept informed, or that communications to Mr Jolly were not to be regarded as communications to him.  He had such an opportunity at the meetings with Mr Street in August and October 2005.

112. The defendant submits that the onus was on the plaintiff to prove Mr Jolly’s agency. His counsel submitted that his appointment as real estate agent to find a buyer for the property did not make him an agent for the purpose of relaying information from the purchaser between the date of the contract and its completion. Counsel referred to general condition 27 of the contract which provides that any document or written notice which one party of the contract requires or desires to give to another may be given by and to the respective solicitors. It also provides that such a notice may be given to the vendor’s agent if the notice concerns the fate of an application for finance, where the contract is subject to finance. The condition does not make the agent a general channel of communication. That may be so but the condition does not provide that the designated means of communication are the only ones by which the parties to a contract may speak to each other.

113. Counsel for the defendant also referred to Petersen v Moloney (1951) 84 CLR 91 at 94-95 where Dixon, Fullagar and Kitto JJ said of an agent employed to find a buyer of property that:

‘The mere employment of such a person under the designation of agent does not, apart from the general rule that the employer will be responsible for misrepresentations made by him, necessarily create any authority to do anything which will affect the legal position of his employer.  He may … be given any express authority … but the law does not imply from mere fact of employment to find a purchaser a general authority to do on behalf of the employer anything which may be incidental to the effecting of a sale.’

Counsel referred also to Fairmede Pty Ltd v Von Pein [2004] QSC 220 in which it was held that an estate agent had no authority to make representations as to the vendor’s likely response to a request for an extension of time so as to give rise to an estoppel. 

114. These cases say nothing about whether an estate agent appointed by a vendor is his agent for receiving communications from the purchaser. I would have thought the agency unworkable if the agent did not have that authority. It is notorious that communications between vendors and purchasers of real property commonly occur via the vendor’s real estate agent as well, of course, as through solicitors on matters of legal importance.  According to Commission Agency by Joske:

‘It is undoubtedly the duty of the agent, without any enquiry from his principal, to communicate to him everything that is necessary to enable him to form his own judgment as to the capacity of the purchaser to complete the purchase, and failure to do so is a breach of duty disentitling the agent to commission’,

citing as authority Fitzgerald v Metcalf [1917] NZLR 486.

The progress of the applications for local Government approval on which the contract was conditional, and information about the defendant’s endeavours to obtain those approvals was clearly ‘necessary to enable (the defendant) to form his own judgment as to the capacity of the (plaintiff) to complete the purchase’.  Accordingly it was Mr Jolly’s duty to pass the information on to Mr Smith.  The scope of his agency extended to that role.

115. The evidence supports the conclusion that Mr Jolly was the defendant’s agent for the purpose of receiving and relaying communications from the plaintiff. Mr Jolly was appointed by the defendant as agent to find a purchaser for the property with the concomitant duties of informing the defendant of offers made for the property, or enquiries about it. Before the contract was made the defendant authorised and instructed Mr Jolly to tell Mr Street of the outcome of their meeting with the Council’s officers, thereby indicating that he was to be a mode of communication between them. Mr Smith said in cross-examination that ‘whenever [he] wanted information … [he] contacted John Jolly’. When asked whether Mr Jolly was the usual means by which he communicated with Mr Street and received communications from Mr Street his answer was that he had never communicated with Mr Street until the meeting in August 2005. The question was evasive to an extent. Mr Smith was well aware when answering that Mr Jolly’s status was critical. Nevertheless it appears from his answer that Mr Jolly was the only method of communicating with or receiving communications from Mr Street.

There is some documentary evidence that Mr Jolly did convey to Mr Smith that which he had learned from Mr Street.  See items 19, 28, 49 and 54 in exhibit 1.  It is also instructive that when he wished to convene a meeting with Mr Street the defendant instructed Mr Jolly to convey the invitation. 

116. The defendant objects to a finding as to Mr Jolly’s agency on the ground that he was not called as a witness, though available, and that he had on previous occasions sold some land for the defendant and that he and Mr Street are members of the same church congregation. The second and third considerations are irrelevant. The first does not diminish the force of the evidence I have rehearsed.

117. I find that Mr Jolly was the defendant’s agent for the purpose of communicating with the plaintiff. It follows that information given to Mr Jolly was effectively given to the defendant. See [96] and [97] of Bowstead and Reynolds on Agency (17^th ed, 2001) and Halsbury’s Laws of Australia at [15-295].

118. It follows that the plaintiff properly extended time for obtaining approvals in order to satisfy special condition 1 of the contract to 26 January 2006 and that, before that date, it waived those provisions of the contract which made it conditional, as it was entitled to do pursuant to special condition 9. The defendant has not made out its case that the plaintiff was in breach of the contract with respect to the manner by which it sought approvals or with respect to its obligation to keep the defendant informed of that process. The defendant’s purported termination was a repudiation which, not being accepted, was ineffectual.

119. I declare that the contract of 29 July 2004 between plaintiff and defendant ought to be specifically performed and carried into execution.