New South Wales Court of Appeal CITATION: Callaghan v Dunning [2009] NSWCA 112 HEARING DATE(S): 7 May 2009 JUDGMENT OF: Hodgson JA at [1], [29], [36]; Young JA at [2]; Bergin CJ in Eq at [35] EX TEMPORE JUDGMENT DATE: 7 May 2009 DECISION: Appeals dismissed with costs. CATCHWORDS: CONVEYANCING - vendor and purchaser- matters arising between contract and completion- whether contract validly rescinded- whether trial judge erred in construction of a special condition of a contract for the sale of land- whether letter from architect was a determination according to that clause- trial judge was correct in finding that the letter was not a determination according to the clause- appeals dismissed. - WORDS AND PHRASES - "Delay". LEGISLATION CITED: Supreme Court Act 1970, s 101(2)(r) CASES CITED: Westminster Corporation v J Jarvis & Sons Ltd [1970] 1 WLR 637 William Cable Ltd v Trainor [1957] NZLR 337 (CA) 40268/08: Stephen Lloyd Callaghan (1st Appellant) Kenneth Reginald Hardaker (2nd Appellant) John Alban Dunning (Respondent) PARTIES: 40269/08: Stephen Lloyd Callaghan (1st Appellant) Kenneth Reginald Hardaker (2nd Appellant) Thomas David Dunning (1st Respondent) Pauline Dunning (2nd Respondent) FILE NUMBER(S): CA 40268/08; 40269/08 COUNSEL: M J Watts (Appellants) B Ralston (Respondents) SOLICITORS: Grogan & Webb (Appellants) St Mary's Legal (Respondents) LOWER COURT JURISDICTION: Supreme Court - Equity Division LOWER COURT FILE NUMBER(S): 4986/06; 4987/06 LOWER COURT JUDICIAL OFFICER: Windeyer J LOWER COURT DATE OF DECISION: 3 June 2008 LOWER COURT MEDIUM NEUTRAL CITATION: Dunning v Callaghan; Dunning v Callaghan [2008] NSWSC 553 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40268/08 CA 40269/08 HODGSON JA YOUNG JA BERGIN CJ in EQ Thursday 7 May 2009 CALLAGHAN v JOHN ALBAN DUNNING CALLAGHAN v THOMAS DAVID DUNNING Judgment 1 HODGSON JA: I will ask Young JA to give the first judgment. 2 YOUNG JA: These are two appeals from decisions of Justice Windeyer in cases which were heard together and which raise identical issues. The second appeal is an appeal as of right as it involves more than $100,000. The first is not and probably needs leave, see s 101(2)(r) of the Supreme Court Act 1970, but I think that is academic in view of the fact that the matters were heard together at all material times both below and here. 3 The appellants were proprietors of industrial land at Vineyard. They were contemplating erecting a series of four star industrial units on their land. They wished to sell those lands to purchasers before they were constructed. 4 On 2 March 2005, the vendors entered into contracts with the respondents for sale of land in virtually identical form covering all four units. Each contract was in the 2000 edition of the standard form with some special conditions. In each case the purchase price per unit involved was $600,000 with a five per cent deposit, namely $30,000 in each case. 5 The second appeal involves lots 2, 3 and 4. The purchasers were Thomas David Dunning and Pauline Dunning. The first appeal deals with lot 1, the purchaser of which was John Alban Dunning. 6 Special condition 42 of each contract provided that the property was sold subject to the relevant plan being registered as a Strata Plan. It concluded with these words - and I am reading it as rectified by the court below: "Should the Plan not be registered as a Strata Plan with the Land Titles Office within twelve (12) months of the date hereof, then either the vendor or the purchaser shall be at liberty to rescind this Contract by notice in writing to the other party or to his Conveyancers and in such case the provisions of clause 19 hereof shall apply." 7 Special condition 43 then provided: "Notwithstanding the time limit for registration of the Strata Plan referred to in special condition 43 above (sic), the vendor shall be entitled to extend the date by which the Strata Plan must be registered...by each day that the vendor or its builders have been delayed by reason of: 43.1 Inclement weather or conditions resulting from inclement weather; 43.2 Any civil commotion, combination of workmen or strikes or lockouts affecting the progress of the works or affecting the manufacture or supply of materials for the construction of the property; 43.3 By reason of any delay and any approval required for the construction of the property by the proper authority or authorities. And the parties agree that the vendor's architect shall be the sole determinator of the vendor's entitlement to extensions or time (sic) to the said ... period referred to above, AND IT IS FURTHER AGREED that the vendor's architect shall act as an expert and not as an arbitrator and his decision shall be final and binding upon the parties hereto." 8 The plan was not registered within the twelve month period which expired on 1 or 2 March 2006. Indeed it was not registered until 16 July 2006, some 140 days after the date of special condition 42. 9 On or about 27 February 2006, the vendors' solicitors wrote to the purchasers' solicitors to the effect that they understood that the purchasers had agreed to an extension of the time for registering the Plan for a further ninety days from 2 March 2006. However, on 1 March 2006, the purchasers' solicitors replied that the purchasers did not agree to an extension of time. 10 I will omit reference to the correspondence between the solicitors which has no effect on the matters on which the court has to decide. On this basis the next letter from the vendors' solicitors was that of 8 March 2006 which concluded with the following words: "We refer you to special condition 43 of the contract and advise that the delay has been occasioned by various issues as set out in the enclosed letter and attachments from G B Moore and Associates. In particular we also draw your attention to the construction certificate wherein it stipulates when work on the site was to commence, ie on 24 June 2005. In short we advise that our client will require a ninety day extension in accordance with special condition 43 of the contract." 11 The enclosed letter which is set out in the Blue Appeal Books at 320-321 was addressed to the appellants, was headed "97 Railway Road North" and omitting formal parts was as follows: "Please be advised of the following factors which all contributed to the delay in completion of the above property, 1. Issue of Construction Certificate. Please find attached the Construction Certificate which was finally issued on 22nd June 2005. 2. Inclement weather. From the actual commencement date being 22nd June 2005, until 3rd March 2006, we have lost 37 days attributed to rain. Access to the site became impossible due to, not only rain, but also the conditions as a result of the rain. 3. Structural Steel. Please note due to the illness of our structural steel manufacturer and installation mid-stream of installation, a period of 21 days was lost. 4. Water Board. Please note that Sydney Water being under-staffed, the issue of certification for water supply was not issued until late November which delayed the water main and supply installed. 5. From 3rd March 2005, the total days lost, not including the Water Board delay, is 168 days." 12 I set out that letter verbatim even though it does not quite make sense grammatically. The attachments are of no value and I have omitted them. 13 Each of the purchasers gave notice of rescission on 23 June 2006 on the basis that the purchasers were entitled to be refunded their deposits which totalled $120,000 plus interest. Those deposits were not refunded. The purchasers commenced these proceedings by summonses filed on 21 September 2006. Subsequently the court ordered that pleadings be filed and that was duly done. 14 The matter came on for hearing before Mr Windeyer J on 3 June 2008. His Honour delivered judgment the same day, finding for the purchasers. The appeals were heard today, Mr M J Watts appearing for the appellants and Mr B Ralston for the respondents. Before Justice Windeyer it was agreed that his Honour should direct his mind to two issues, namely, (1) whether the letter from the architect was a determination under special condition 43 of the contract; and (2) if it was, whether the letter from the vendors' solicitors of 8 March 2006 was an election to require a ninety day extension in accordance with special condition 43, or whether a period of 168 days was the entitlement under that determination on the basis that there was no election. His Honour noted two subsidiary issues which he disposed of summarily as not able, in his view, to support the vendors' case. 15 The appeals have focused on the two points that I have referred to and indeed the argument on point two only needs to be considered if point one is found in favour of the appellants. As I am of the view that point one must be decided in the same way the learned judge decided, and basically for his reasons, it is not necessary for me to deal with point two. 16 There was some comment in the appellants' submissions that the primary judge should have been speaking in terms of a decision by the architect rather than a determination, but those submissions rightly concluded that this was of no moment, and I will do no more than mention it. The basal question is whether, on the balance of probabilities, the appellants had shown that the architect's letter was a determination within the meaning of special condition 43 of the contract. 17 Justice Windeyer said at [16] that "determination" was an ordinary word and it basically meant reaching a decision. In the instant case the architect needed to act as an expert and make a decision that would bind the parties. It was strange that a document which on its face does not appear to be a determination, but a letter addressed to the vendors should be considered a determination. Furthermore, the letter did not appear to be a determination which took into account the relevant matters in accordance with special condition 43. For instance, it mentioned the twenty-one days allegedly lost through the illness of the structural steel manufacturer, and so he concluded that the letter was not a determination and thus the purchasers should succeed. 18 Now Mr Watts submits that the primary judge erred in taking this approach. He said that there is no magic about the word "determination". It just means reaching a conclusion about a matter and that the architect did so in his letter. Mr Watts notes that no particular form is required for the architect's decision. This point is not gainsaid, however that submission overlooks the fact that it was most significant that the architect did not refer to cl 43 and referred to an irrelevant matter, when one is trying to reach the conclusion as to whether that letter really was, in fact, a determination. Mr Watts cavils with the proposition that there was an irrelevant consideration. 19 The debate here is whether the words "combination of workmen" in special condition 43(2) includes the situation where the work of one workman down the line from another workman is put out because the first workman gets sick. Mr Watts says that the words "combination of workmen" could mean that and accordingly it could not be said that his reference to the sickness of the structural steel manufacturer was irrelevant. 20 That is an ingenious argument. With respect I cannot agree with it. It seems to me quite plainly that the combination of words of "civil commotion, combination of workmen or strikes or lockouts" all focus on there being some industrial problem which has caused delay, not that there might happen to be an illness of a subcontractor which has held up others. 21 However, the real question is what did the architect have in mind or rather what was it shown to the court that the architect had in mind when he issued his letter. There is on p 919 of the Blue Appeal book a passage from an affidavit of one of the appellants, Mr Hardaker, that he contacted Mr Moore, the architect: " … and I requested him to give an advice regarding the events which occasioned delays to the construction of the Railway Road Units, having regard to special condition 43 of the sale contract. I furnished him with a copy of the DA approval and Construction Certificate. During our telephone discussion Greg Moore said to me 'I will need to undertake my own investigations and then I will send you a letter.'" 22 And then on 8 March 2006, Greg Moore delivered a letter to him. This is very vague material. There was obviously oral contact with Mr Moore. Mr Moore was never called to give evidence. We do not know what material he in fact had. The appellants say that Mr Hardaker referred to special condition of the sale contract, but we do not know whether the architect ever had the sale contract though he may have known about special condition 43. The architect does not actually refer to special condition 43 and as I say has mentioned the irrelevant matter. 23 Thus, not only is there little material to show what was before the architect, but when one looks at the architect's letter and what he in fact did, it is difficult to conclude on the balance of probabilities that he was making a determination in accordance with special condition 43 and I believe the judge was correct in so determining. 24 Indeed, in my view, before one can make a decision or determination one must ask what is the issue or question that needs to be determined or decided and there is just not the material here to show that the architect did direct his mind to any specific question, he merely set out what delays there had been to the project. 25 There is also, within the letter of 8 May 2006, the problem that in one part of his letter the architect refers to delays and in other he talks about days lost. Mr Watts in his written submissions says that the two expressions are synonymous however, that is not the usual meaning of the word "delay". Delay usually means a postponement of performance beyond the point of time when the act should have been committed, see for instance William Cable Ltd v Trainor [1957] NZLR 337 at 345(CA) and Westminster Corporation v J Jarvis & Sons Ltd [1970] 1 WLR 637 at 646. 26 As the primary judge pointed out, it is very difficult to see how one can count the whole of the 102 days between the date of contract and the construction certificate as being a "delay". What has to be done is to assess when a reasonable vendor could expect the construction certificate to issue and count from then until the actual issue. As the primary judge put it, no-one expected that work on the project would commence immediately contracts were signed and there was no evidence at all as to when anyone might reasonably have expected the construction certificate to have issued. 27 It also seems to me that it is relevant when construing this contract to remember that under special condition 42 there was not an automatic extension of time just because the architect had made a determination. Once the twelve months was up, taking the vendors' side, the vendors had the option of either putting an end to the contract or claiming an entitlement. Now, I will not go further than merely mention this point because, really, that difficulty deals more with the second matter that was put up in the notice of appeal rather than the first and it seems to me that it would be inappropriate to deal with it without having heard full argument. 28 Accordingly in my view, the learned judge properly came to the conclusion he did. I would affirm that decision and dismiss the appeals with costs. 29 HODGSON JA: I agree with the orders proposed by Young JA and with his reasons. I will just add a couple of comments of my own. 30 It was submitted by Mr Watts that it should be inferred that the architect did address the question posed by cl 43; and he also made an alternative submission that even if the architect did not address that question explicitly, his certification of days of delay was conclusive so long as categories of delay that he certified fitted within categories set out in cl 43. 31 On the first submission, I agree with what Young JA has said. The primary judge was not satisfied that the letter of 8 March 2006 was a determination within cl 43; and I understand that to have been a decision by the primary judge that he was not satisfied that the architect actually addressed the question posed by cl 43. So understood, in my opinion that decision of the primary judge was correct. The letter of 8 March did not refer to cl 43, and the matters referred to by Young JA are further indications that the architect was not addressing cl 43. 32 Had it otherwise been shown that the architect was addressing the cl 43 question, the fact that the architect may have made mistakes would not have prevented his decision being final and binding; but what would have been errors in terms of cl 43, pointed out by Young JA, are indications that the architect was not addressing the cl 43 question. The appellant had the onus of proof on this matter, and evidence could have been led that cl 43 was actually given to the architect, and of course evidence could have been led from the architect himself as to what he was doing in producing that letter; and that evidence was not led. 33 On the second alternative point put by Mr Watts, it seems to me clear that it would be insufficient that some of the days referred to in the architect's letter happened to coincide with categories that would have entitled the vendor to an extension, if it is not the case that the architect actually addressed the cl 43 question. 34 So for those additional reasons, I agree with the orders proposed by Young JA. 35 BERGIN CJ in EQ: I agree with the orders proposed by Justice Young and with his Honour's reasons. 36 HODGSON JA: So the order of the court is appeals are dismissed with costs. ******************** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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