[1999] 9 BPR 16,873 Reported Decision : [1999] ANZ ConvR 476 [1999] NSW ConvR 55-894 New South Wales Supreme Court CITATION : BRISONS HOLDINGS v IRONWILL [1999] NSWSC 91 CURRENT JURISDICTION : EQUITY FILE NUMBER(S) : 4325/98 HEARING DATE(S) : 12 February 1999 JUDGMENT DATE : 19 February 1999 BRISONS HOLDINGS PTY LTD PARTIES : v IRONWILL PTY LIMITED & ANOR JUDGMENT OF : Bryson J at 1 COUNSEL : PLAINTIFF: MR P O'LOUGHLIN FIRST DEFENDANT: MR J MASTON PLAINTIFF: REIMER WINTER SOLICITORS : FIRST DEFENDANT: COODE & CORRY SECOND DEFENDANT: SUBMITTING CATCHWORDS : VENDOR and PURCHASER; rescission by P for misrepresentation consisting of error in annexed s.149 (5) Certificate about availability of Development Consent; Development Consent had lapsed 2 years before and s.149(5) Certificate was wrong; P's rescission upheld although V obtained extension of lapsed consent several months after rescission; deposit to be refunded. Conveyancing Act 1919 s 55 (2A) Environmental Planning and Assessment Act 1979 s 149 Environmental Planning and Assessment Amendment Act 1997 Environmental Planning and Assessment (Savings and Transitional) Regulation 1998 cl 16. ACTS CITED : Local Government (Consequential Provisions) Act 32 of 1993 Statute Law (Miscellaneous Provisions) Act (No 2) No 108 of 1993. Batey v Gifford (1997) 42 NSWLR 710 Flight v Booth (1834) 1 Binghams New Cases 370. Glennon v Sullivan (1985) NSW Conv R 55-253 and 61 ALJR 63. DECISION : SEE PARAGRAPH 37 IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BRYSON J FRIDAY 19 FEBRUARY 1999 4325/98 BRISONS HOLDINGS PTY LTD v IRONWILL PTY LIMITED & ANOR JUDGMENT 1 HIS HONOUR : The plaintiff was the purchaser and the first defendant was the vendor in Contract for Sale of Land dated 11 March 1998; sale of vacant land at 146-148 Mulgoa Road Penrith, Lot 12 DP868453 for $415,000.00. A deposit of $20,750.00 was provided for and was paid to the vendor's agent; Zamoford Pty Ltd trading as Richardson & Wrench, the second defendant still holds the deposit, filed a submitting appearance and took no active part in the litigation. The Contract provided that the completion date was the 42nd day after the date of Contract, that is 22 April 1998; this date was not made of the essence. 2 The purchaser claims that the Contract was validly rescinded by the purchaser by a Notice of Rescission delivered to the vendor and its solicitors on 5 May 1998; that the purchaser is entitled to return of the deposit and if not so entitled that the Court should order the return of the deposit under the discretionary powers in s 55 (2A) of the Conveyancing Act 1919. The vendor claims that the Contract was terminated by a Notice to Complete delivered on 22 July 1998 requiring completion on 7 August 1998 (but later extended by arrangement between the parties to 28 August 1998) followed by termination by the vendor on 31 August 1998; and Cross-claims for orders establishing that its termination was effective, that it is entitled to the deposit held by the deposit holder and a further $20,750.00 (being the balance of the deposit to 10%) under a special condition of the Contract, damages and interest. 3 The purchaser's position is that it was entitled to rescind because there was a substantial misdescription of the property sold in the Contract, and also because it was induced to enter into the Agreement by misrepresentations made by and on behalf of the vendor which were material, although innocent. Rescission for innocent misrepresentation and refusal of specific performance on the ground of substantial misdescription are equitable remedies; they are discretionary and it is not wholly within the power of a party to bring about a rescission of a Contract for Sale of Land on either basis. Rescission on those grounds is the act of the Court not of the party, occurs at the time of the Court's order and is accompanied by whatever other orders if any are appropriate to bring about an equitable adjustment of the rights of both parties. Because of the discretionary nature of the remedies it is not possible to be entirely dogmatic in asserting that a party to a Contract is entitled to rescission on these grounds, although according to the circumstances it may be fairly clear what the outcome would be. 4 When it purchased the property the purchaser had a clear view of what it intended to do with the property when it got title; it intended to proceed straight away to build a multi-unit housing development of nine units in accordance with a development consent and building plans which had been approved by the Penrith City Council, the development consent being DA No.234/93 granted on 29 October 1993. Mr Anthony Brischetto, a director who conducted this aspect of its business, saw an advertisement published in the "Penrith Press" by the vendor's selling agents, which showed an outline plan of the approved development and included the statements:- "DA and BA approved Contributions Paid Start work immediately" 5 He was also shown the development application and stamped building plans, and a copy of a letter dated 3 November 1995 written on behalf of the Environmental Planning Manager at Penrith City Council to Mr T J Willis in these terms (Exhibit B5):- "Extension to Development Consent DA 2341/93 dated 29th October 1993 Lots 1 & 2 DP611167 Mulgoa Road Penrith I refer to your request for an extension to the abovementioned development consent. You are advised that the consent is still valid. This is because section 99 of the Environmental Planning and Assessment Act was amended on 1st July 1993 so that all development consents would be valid for a period of five years from the date of approval unless the consent authority resolves otherwise. As the subject development consent was still valid at the time of this amendment, it automatically became valid for a period of five years from the date of approval. I can be contacted on the above number should have have any enquiries." 6 Correspondence written on behalf of the Council on 9 September 1996 (not so far as evidence shows to any party to these proceedings) shows continued belief by Council's officers then that the Development Consent was current. 7 A certificate issued by Penrith City Council on 20 August 1997 under s 149 of the Environmental Planning and Assessment Act 1979 formed part of the Contract of Sale. There is no clear statement in the printed form which shows what part the s 149 certificate plays in the parties' contractual relationship. The Contract included a list of documents which were attached; there were two spaces referring to the s 149 certificate, both of which were marked; one space included among the documents attached "S149 (2) Certificate Environmental Planning and Assessment Act 1979" and the other space included "S149 (5) information included in that certificate". Subsection 149 (2) requires that a planning certificate specify prescribed matters relating to the land, and these are collected in the certificate (Exhibit A pages 21-26) under the heading "PART 1 PRESCRIBED MATTERS." Subsection 149 (5) provides:- "A council may, in a planning certificate, include advice on such other relevant matters affecting the land of which it may be aware." 8 The matter which Council stated in exercise of this discretionary power appears under an identifying heading at A26-A27 and included:- "Development consent pursuant to section 92 of the Environmental Planning and Assessment Act, 1979, has been granted over the subject property. A brief description of the proposed development, the development notice number and the date of consent are as follows: Multi Unit Housing Development - 9 Units; 234/93; 29.10.93" 9 Printed condition 10.1.5 relates to "Restrictions on rights of purchaser" and includes:- "The purchaser cannot make a claim or requisition or rescind or terminate in respect of - …. ….10.1.5 a promise, representation or statement about this Contract, the property or the title, not set out or referred to in this Contract; …." 10 Printed clause 6 provides:- "Error or misdescription The purchaser can (but only before completion) claim compensation for an error or misdescription in this Contract (as to the property, the title or anything else whether substantial or not)." 11 Special condition 31 provides (A8):- "The purchaser acknowledges that the purchaser entered into this Contract relying on the purchasers own inspections, knowledge and enquiries and that the purchaser does not rely on representations made to them by or on behalf of the vendor and the parties Contract that there have been no warranties and no Contract, conditions and undertakings made between the parties hereto other than those in writing contained in this Contract." 12 By special condition 35 a Notice to Complete of 14 days was sufficient. 13 Special condition 39 provides (A10):- "The Vendor warrants that: (a) It own the plans comprised in Development Application No. 234/93 and Building Application No. 970330 and indemnifies the Purchaser against any claims made by the architect in relation to the plans; (b) It has paid all Council and Sydney Water contributions relating to Development Application No. 234/93 and Building Application No. 970330 and indemnifies the Purchaser against any claims made by the Council or Sydney Water in relation to the contributions." 14 In truth and in fact the Development Consent 234/1993 dated 29 October 1993 could no longer be relied on on 11 March 1998 or 22 April 1998 to carry out development work on the land and it would have been unlawful to start work immediately, or to start work at all on the development to which that consent related. Duration and lapse of consent DA234/93 were governed by s 99 of the Environmental Planning and Assessment Act 1979 in the form which s 99 took on 1 July 1993 when amendments made by the Local Government (Consequential Provisions) Act 32 of 1993 commenced. The short effect of those provisions was that a development consent lapses five years after the date from which it operates (subsection (1) ) that the consent authority in granting development consent might vary that period (subsection (2) ) but not to under two years (subsection (3) (a) ) and development consent for the erection of a building does not lapse if work is physically commenced (subsection (4) ). By subsection (4B), where the period to lapse has been reduced to less than five years the applicant or any other person entitled to act on the consent might apply before expiry for an extension of one year; there is a discretion to grant the extension if satisfied that the applicant had shown good cause (subsection (4C) )and an extension of one year if granted commences to run from the later of the date on which the consent would have otherwise lapsed and the date of grant of the extension (subsection (4E) ). 15 I set out the full terms of subsection (4E), to which I will return:- "An extension of 1 year granted under this section commences to run from the later of the following: (a) the date on which the consent would have elapsed but for the extension; (b) the date on which the consent authority granted the extension or, if the Court has allowed the extension in determining an appeal, the date on which the Court determined the appeal." 16 Other provision was made by amendments effected by the Environmental Planning and Assessment Amendment Act 1997 No 81 of 1997 which commenced on 1 July 1998, but the operation of s 99 in its previous form was continued in respect of existing determinations by the Environmental Planning and Assessment (Savings and Transitional) Regulation 1998 clause 16. From 1 July 1993 until 1 July 1998 there was no amendment to s 99, except for correction of a drafting error by the Statute Law (Miscellaneous Provisions) Act (No 2) No 108 of 1993. 17 The vendor offered no significant evidence and did not explain itself, but it would seem that Penrith City Council's officers and also the vendor overlooked or forgot or for some reason were unaware of condition 3 of development consent DA 234/93 in these words (Exhibit B2):- "This consent shall lapse if the development to which it refers is not commenced within two (2) years after the date of the consent; provided that Council may, if good cause be shown in a written application requesting an extension of time, grant an extension of the consent for a further twelve months pursuant to Section 99(3) of the Environmental Planning and Assessment Act, 1979." 18 By 29 October 1993 the relevant provision was no longer subsection 99 (3) but had become subsection 99 (4C). 19 It appears from slight scraps of information in evidence that in or by October 1995 Mr T J Willis requested an extension of the development consent, and that Council then did not deal with and decide the application for an extension because it had lost sight of condition 3; and it seems likely that Mr Willis had lost sight of condition 3. Little is known of Mr Willis from the evidence but Exhibit 1, the only evidence tendered by the vendor, is a very sparse statement by Mr Willis to Penrith City Council dated 28 July 1998 by which he confirmed that he was the original applicant for an extension and that he assigned his rights in the application and the property to the vendor. (Mr Willis does not state any facts which establish why he applied for an extension or how he was qualified to do so, remembering that under subsection 99 (4B) the persons authorised to apply for an extension are "The applicant or any other person entitled to act on the consent" ; the applicant was Building Environments Pty Limited and I am left to suppose that Mr Willis was in some way acting on behalf of the applicant, or of the vendor, or of some intermediate owner.) Presumably Mr Willis' application prompted the Council's letter of 3 November 1995 which I set out earlier. Council took no further action on the application until June 1998. 20 A letter of 17 June 1998 (Exhibit B62) from the vendor's solicitors to the Council referred to the Council's letter to Mr Willis of 3 November 1995 and called on the Council to determine the extension application and notify its decision. The purchaser's solicitors by letter contended that the Council should not do so, but Council again took the application under consideration (Exhibit B73) and on 20 July 1998 resolved to extend the consent for a twelve month period; Council's letter dated 22 July 1998 notifying this decision (Exhibit B77) said (correctly) "The consent shall now lapse twelve months from the date of this letter." (It is interesting that Mr Willis' statement to the Council explaining his position was later in date than the Council's decision.) 21 Mr Brischetto came to know the true position about the development consent having lapsed as a result of inquiries which he made of Penrith City Council. The purchaser obtained a s 149 certificate for itself from the Penrith City Council and that certificate dated 23 March 1998 (Exhibit A51) contained exactly the same statement about the development consent as the certificate annexed to the Contract for Sale of Land. The vendor gave Notice to Complete dated 23 April 1998 (B38) requiring settlement by 11 May. In some way an inquiry which Mr Brischetto made at the office of Penrith City Council directed the attention of its officers to the true position; on 24 April 1998 Mr Britten, the Council's legal officer told him that Council had reviewed its file and taken legal advice, and that the consent had lapsed. Mr Brischetto made some observations which show how surprising this was to him; later that day he contended in a telephone conversation with Mr Britten that the Council was bound to hold to the position in its letter of 3 November 1995, and Mr Britten did not accept that this was so. On 27 April 1998 the purchaser by letter asked the Council to state the grounds for its decision that the development approval was no longer valid. Mr Britten replied on 29 April 1998 by letter stating the position in a considered way. 22 The Notice of Rescission was delivered a few days later on 5 May and stated grounds, referring to the statement in the s 149 certificate which formed part of the Contract, Penrith City Council's advice that DA 234/93 had lapsed and asserting that the Contract contained a misrepresentation or alternatively a misdescription in a material respect and that the purchaser had relied on the misrepresentation or misdescription. It also asserted that it was a condition of the Contract that development consent was current and that there was a breach of the condition giving rise to an entitlement to rescind. After the Notice of Rescission was delivered the parties adopted contentious positions expressed in their solicitors' correspondence. 23 On behalf of the vendor counsel submitted that the statement relating to the development consent in the s 149 certificate forming part of the Contract for Sale was correct. This remarkable contention was based on the historical truth that the development consent had indeed been granted; it had been granted some years earlier and there was no express statement in the s 149 certificate about whether it was still in effect or had lapsed. However if the statement did not convey the meaning that the development consent had effect it is not possible to understand why it appeared in the certificate or why it appeared in a document forming part of the Contract for Sale of Land. A statement in a document forming part of a Contract made on 11 March 1998 about a development consent which had lapsed on 28 October 1995 could have no possible purpose and have no possible function except to mislead the reader. It is in the nature of advice included in a planning certificate under subsection 149 (5) that the advice is on relevant matters affecting the land of which the Council is aware. No reasonable reader would suppose that a statement of relevant matters affecting the land would include a reference to a development consent which had once had a life of two years but had elapsed two and half years ago; that could not be relevant to a certificate and could not affect the land and no reasonable people would think it did. When the statement in the certificate is taken in the context of the whole of the Contract of which it formed part, bearing in mind the nature of the Contract and the transaction which it effected, it was a clear and unmistakable representation that the development consent still had effect. The warranties in special condition 39 are an important part of the context in which the reference to the development application in the s 149 certificate bears this meaning. 24 The character of the statement in the certificate as a misrepresentation is clear enough if attention is confined to the terms of the Contract for the Sale of Land but becomes far clearer if attention is also directed to the context of the dealings between Mr Brischetto and the agent conducting the vendor's business; those dealings included the terms of the advertisement and the documents which the agent had shown to Mr Brischetto, including the approved plans and the Council's letter assuring validity. Resort to these surrounding circumstances is obviously appropriate for the purpose of understanding what the Contract represented to the purchaser, and is not restricted by the special condition or other terms of the Contract for Sale itself. There was no condition such as was referred to in the Notice of Rescission, and the purchaser does not and cannot assert that there has been any warranty or Contractual condition such as is referred to in special condition 31. 25 Counsel for the vendor made submissions to the effect that a close and legally informed consideration of the terms of Council's letter of 3 November 1995 would have shown that the burden of the letter could not be correct. The reasons for this are that the amendment to s 99 which took effect on 1 July 1993 happened earlier than the consent of 29 October 1993, so that the reason given for the development consent becoming valid for five years cannot be correct. Counsel also observed that the fact that there had been an application for an extension itself showed that there must have been a condition shortening the period of five years, having regard to the state which s 99 had assumed by 29 October 1993. I see that a very insightful person with an extremely close understanding of the workings of s 99 might have, on reflection, developed some doubts about the information furnished by the letter, but the ordinary reasonable reader would not, Mr Brischetto as a matter of fact did not, the Council officers accepted the position, it would seem for several years, and it is improbable that the vendor saw through the letter, because if it had it is unlikely that the property would have been marketed in the way it was. 26 The purchaser's counsel contended that the purchaser was entitled to rescind on the Flight v Booth principle. That principle relates to errors or misdescriptions which are such that a decree for specific performance against the purchaser would be refused; the circumstances where an error or misdescription would lead to such refusal can vary very widely and cannot be gathered into clear categories, essentially because of the discretionary nature of specific performance and because of Equity's concern to enforce Contracts for Sale of Land according to their substance, involving a need to address the facts of each case and judge the substance. 27 If there was a material misrepresentation which induced the purchaser to enter into the Contract, it is not necessary that the representation should have had contractual force if it is to warrant rescission. Flight v Booth (1834) 1 Binghams New Cases 370 is referred to to identify cases, not necessarily closely related to any holding in that case, where a purchaser can resist specific performance of an agreement for purchase of land where the property to be conveyed on completion is substantially different from what the purchaser contracted to buy. At Common Law a purchaser was not obliged to complete if there was any difference, whether substantial or not, so the subject relates to a qualification of a qualification which Equity placed on the contractual obligation. See discussion in Professor Butts' The Standard Contract for Sale in New South Wales 2nd edition paragraph [6.51]. In Batey v Gifford (1997) 42 NSWLR 710 Handley JA considered and applied this qualification; see 716C and following. 28 Cases in which Flight v Booth has been invoked have recurringly been cases where the vendor could not make title to land of the dimensions described or to all of the parcels described. Problems of these kind are not often encountered for land under the Torrens System. However there is no restriction of the kind of problems to which Flight v Booth can relate to problems of title. 29 There is no doubt that the misrepresentation or misdescription related to a matter of substance; the existence of development consent led the purchaser to be interested in the property, and was the prominent feature of the vendor's marketing. There is substantial difference between land with development potential without any available development consent and the same land with a development consent, building approval and plans ready to start work. There is no less a substantial difference if prospects exist of getting back an earlier advantage of a development consent by making another application or pursuing a long-standing application for an extension; one situation is certain and the other is contingent. What Mr Britten told Mr Brischetto on 28 April was completely correct; it was a statement about an objective fact, not about a decision that the Council had made or would make. There was no analogy with the situation in which information about what Council would do was communicated in Glennon v Sullivan (1985) NSW Conv R 55-253 and 61 ALJR 63. 30 When the Notice of Rescission was given the vendor had issued a Notice to Complete and was maintaining the position that time would become of the essence and the purchaser would be in default and liable to a decree for specific performance in a few more days, yet had brought about the Contract by an important misrepresentation, quite untrue, manifestly so and one which it had taken no step to make good. Although it was thus precipitating a crisis in a situation in which it did not have any merits, its counsel contended that it was then entitled to specific performance and pointed to the fact that some months later it obtained an extension of the consent. 31 The vendor's counsel contended that the fact that the extension was in fact granted proves that the application was one which was bound to be determined by way of approval. This contention was manifestly groundless, and was not an appropriate use of the opportunity furnished to counsel to make submissions. 32 In these circumstances the purchaser had, in my opinion, a very strong claim, indeed an unanswerable claim to rescission of the agreement by decree in Equity at the time when it delivered its Notice of Rescission. 33 If the purchaser had at that time brought proceedings claiming an order of the Court rescinding the Contract for Sale of Land, or if the vendor had brought proceedings for specific performance and the proceedings had been heard in the state of facts which then existed there could be no doubt of the outcome. The only matter for debate arose out of the decision which Council made on 20 July and notified on 22 July to grant an extension. If the hypothetical proceedings I have referred to were heard after that happened the fact that an extension had been granted would have to be considered, but it would be no more than a discretionary consideration. The fact that an extension was obtained in July made it no less true that the Contract with an agreed completion date in April was induced by misrepresentation and contained a misdescription in March and was liable to be rescinded in May; an extension granted in July did not mean that the property had development consent on the contracted date for completion in April or in the interim, or that if the purchaser had it completed about 22 April would have been able to carry out the purpose for which it purchased the property. Mr Brischetto's evidence establishes that the purpose of acquiring the property was related to obtaining a development project on which to work at a particular time, and that the opportunity passed and was no longer useful. The grant of an extension from 20 July 1998 to 19 July 1999 gave emphasis to the earlier want of compliance, but the agreement was no less based on misrepresentation and misdescription than it had ever been. The vendor's counsel suggested that in some way the grant of the extension had retrospective effect and meant that the development consent was in effect throughout the interim or hiatus between 29 October 1993 and 19 July 1998. In my opinion there is no basis for this and indeed the terms of subsection 99 (4E) clearly demonstrate that it is wrong, as the date from which the extension commences to run is clearly prescribed. 34 Whether the extension when granted was effective would appear to depend, potentially or actually, on whether the person who made the application for extension was qualified to do so. The vendor, who was maintaining that there had been an effective extension and that that fact enabled it to answer purchaser's case, and which was in a position to adduce evidence showing whether or not the applicant was so entitled, did not lead any evidence on the subject. 35 In my opinion the purchaser's claim for rescission was so strong that, in the absence of any showing by the vendor that it had any discretionary considerations or other matter of defence to put against the claim, the Notice of Rescission should be treated in Equity as having taken effect on 5 May 1998. Even if this were not correct the strength of the purchaser's claim for a discretionary decision relieving it from forfeiture of its deposit and other liabilities is overwhelmingly strong, as it was led by the vendor into buying the property on a completely false basis, although on the true basis the property did not fit into the purchaser's business requirements. Although the vendor was in a position to revive the long-pending application and direct Council's attention to it, it did not do so at the time when currency of the development consent was important, did so only after it had taken up a position of contention after the Notice of Rescission, and did not succeed in obtaining an extension until three months later than the time for completion to which it had agreed. The vendor showed extreme hardihood in resisting the purchaser's claim for the return of its deposit, and is fortunate that the purchaser, which has been caused a great deal of trouble expense and uncertainty, has claimed no more than the return of its deposit. 36 Counsel sought to uphold the vendor's position by maintaining the untenable, and the vendor endeavoured with inappropriate tenacity to retain control over the deposit to which the purchaser was plainly entitled. 37 ORDERS: (1) Declare that the Contract for Sale of Land made 11 March 1998 between the plaintiff as purchaser and the first defendant as vendor for the sale and purchase of the property known as 146-148 Mulgoa Road, Penrith being the whole of the land comprised in Folio Identifier 12/868453 was validly rescinded. (2) Declare that the plaintiff is entitled to the return of the deposit of $20,750.00 paid under the Contract referred to in Order 1. (3) Order that the second defendant return to the plaintiff $20,750.00 being the deposit paid under the Contract referred to in order 1 within 28 days. (4) Dismiss the Cross-claim with costs. (5) Order that the first defendant pay the plaintiff's costs of the proceedings. (6) Order that the first defendant pay the costs of the proceedings of the second defendant as a submitting defendant. I hereby certify that paragraphs 1-37 are the reasons for judgment of the Honourable Justice John Bryson Dated 19 February 1999. (H D LEWIS) Associate. Last Modified: 04/08/1999 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.