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Godfrey Constructions Pty Ltd v Kanangra Park Pty Ltd [1972] HCA 36; (1972) 128 CLR 529 (30 June 1972)

CATCHWORDS

HEARING

DECISION

"7. The purchaser shall be deemed to have waived all
objections or requisitions which he has not made and delivered
to the Vendor or to the Vendor's Solicitor within 21 days
from the delivery of the said abstract or particular. Within 28
days from delivery of the said abstract or particular, or, in
any case where a consent as mentioned in clause 5 (d) of this
agreement is required to the transfer of the whole or part of
the property, within 14 days of the Purchaser or his Solicitor
being notified of the granting of such consent, the Purchaser
shall at his own expense tender to the Vendor or to his
Solicitor for execution the appropriate assurance of the
property.
14. If the Vendor shall be unable or unwilling to comply
with or remove any objection or requisition which the Purchaser
has made and shall not waive within fourteen days
after the Vendor has given him notice of intention to rescind
this Agreement, the Vendor, whether he has or has not
attempted to remove or comply with such objection or
requisition, and notwithstanding any negotiation or litigation
in respect thereof, and whether the Purchaser has or has not
taken possession shall be entitled by notice in writing to
rescind this Agreement." (at p533)

2. Prior to entering into the contract of sale with the appellant, the respondent had sold the land to one Parkinson. Upon Parkinson's delay in settlement, the respondent had given to Parkinson a notice to complete and on Parkinson's failure to do so had rescinded the contract. However, Parkinson entered a caveat with the Registrar-General with respect to the land after she had received the notice to complete and before the respondent had given notice of rescission. The Registrar-General placed a notification of the caveat on the relevant certificate of title. The contract with the appellant was made some days after the notice of rescission had operated according to its terms. On 31st July 1970, Parkinson commenced a suit against the respondent for specific performance of the contract which the respondent claimed by the said notice to have rescinded. (at p534)

3. The appellant, having received particulars of title, delivered to the respondent what were said to be "requisitions on title". Two of them are central to the present matter and should be quoted in full -

"2. At settlement, the Vendor should be registered as
proprietor of the subject property free from encumbrances
and caveats, other than the undermentioned mortgage.
33. Caveat No. L877733 should be removed from the
Vendor's title. Would you kindly give us details of this
Caveat." (at p534)

4. The respondent's replies to these two "requisitions" were as follows -

"As to No. 2 - Noted and subject to contract.
As to No. 33 - Noted. The subject Caveat was lodged
by Doris Parkinson claiming Estate or interest under Contract
of Sale dated 31st October, 1969. Our Client Company
unilaterally cancelled the above matter because Parkinson
failed to comply with the Notice to Complete. A summons
has been served on our Client Company by your firm, acting
for Parkinson and a defence has now been filed. As yet the
matter has not been listed for hearing by the court. A section
73A Application No. L950536 has also been lodged at the
Registrar General's Department."

5. An originating summons thereafter brought by the appellant in the Supreme Court of New South Wales (in Equity) sought the determination of two questions, namely -

"(1) Was the notice dated 7th April 1971 given by the
defendant to the plaintiff's solicitors pursuant to cl. 14 of the
contract for sale?
(2) Did the notice dated 7th April 1971 given by the
defendant to the plaintiff's solicitors rescind as from the
date thereof the contract to which the said notice relates?"

6. Upon this appeal it has been contended that the two paragraphs from the appellant's requisitions on title, numbered 2 and 33, were not requisitions within the meaning of cl. 14 of the contract or, alternatively, that if they were, they were not requisitions of a kind which the vendor was entitled under cl. 14 to call upon the appellant to waive. Thirdly, that in any case the action of the respondent in rescinding was unconscionable within the case law developed in connexion with clauses such as cl. 14 of this contract. (at p535)

7. It is perhaps difficult to apply to the examination of title to land held under the Real Property Act all the concepts current in connexion with the examination of title to land held under common law title. A vendor of a fee simple of which he is the registered proprietor does not face the uncertainties of title which might obtain in the case of land held under common law title. He should have no difficulty in showing title or of making it. If there is a caveat lodged against dealings with his land, he must know of it at the time he sells unless he should chance to sell in the interval between the lodgment of the caveat and the Registrar's notification of it to him pursuant to s. 97 (1) of the Real Property Act. Consequently, the occasions for resort to cases decided on sales on land held under common law title must indeed be rare in the case of sales of land held under Torrens title. But, nevertheless, I think that it is possible to maintain the distinction between an objection to title and an objection to conveyance in respect of land held under the Real Property Act. An objection to title involves an assertion that there is a defect in the vendor's title to the estate in the land which he has sold. An objection or requisition as to conveyance is an objection or requirement as to the form of the memorandum of transfer as, for example, the absence of or the need for parties to join in the transfer. But solicitors are accustomed, it seems to me, to make both demands and inquiries which cannot be fitted into either of these categories. Some of these requisitions may relate to structures on the land or to physical features connected with it which may not accord with the contractual terms as, for example, the connexion of water or sewerage services through common facilities. These are, in my opinion, truly requisitions demanding something of or some action on the part of the vendor. Other "requisitions" are merely inquiries for information. Some of this information the purchaser might have been able to ascertain by his own endeavours: perhaps he really seeks the vendor's admission of the facts. Then, it seems to me, that there are other so-called "requisitions" which are no more than reminders to the vendor of his obligations under the contract. Paragraphs 2 and 33 of the appellant's requisitions in this case, in my opinion, form a good example of this class of so-called "requisition". They are not objections to title nor demands as to the form of conveyance, nor do they relate to the physical condition of the land or the structure thereon. They do no more than remind the vendor of what is expected of him according to the terms of the contract as a performance of his obligations. The respondent's answers to requisitions so treated them. (at p536)

8. It is important to bear in mind that the obligation of a vendor of an estate or interest in land held under the Real Property Act, 1900-1970 (N.S.W.) is, on settlement, to place his purchaser in a position to be registered in respect of that estate or interest. For example, on a settlement of a contract of sale, taking place at the Registrar-General's Office, if required, the vendor, in exchange for the purchase money, should hand to the purchaser documents or secure for him their immediate production which, being passed immediately to the Registrar-General, would secure the purchaser's registration on the certificate of title for the estate or interest contracted to be sold. That quite clearly was the obligation of the vendor under this contract. Section 57 (1) of the Conveyancing Act, 1919-1970 (N.S.W.) is corroborative of this obligation. (at p537)

9. A caveat against dealings, such as the caveat in the present case, is not a defect in a vendor's title. It is in its nature a notice to the Registrar-General, which he is bound to observe, not to register any dealings without notice to the caveator. I have pointed out elsewhere (see J. & H. Just (Holdings) Pty. Ltd. v. Bank of New South Wales [1971] HCA 57; (1971) 125 CLR 546 ) that the purpose of such a caveat is not to give notice of an interest claimed by the caveator in the land, though the Real Property Act requires the caveator to state the nature of the interest on the footing of which he claims to be entitled to lodge the caveat - see s. 72 (2) of the Act and the form of caveat in the 16th Sch. But the purchaser is clearly entitled to refuse to settle until the caveat has been removed or its removal certainly assured. (at p537)

10. It therefore seems to me that the two "requisitions" which I have quoted from the appellant's so-called requisitions on title were not requisitions within the meaning of cl. 14. They were no more than mere reminders to the vendor of one of his fundamental obligations under the contract to the performance of which the purchaser was entitled at or before settlement. They were not requisitions which the vendor was entitled to require a purchaser to waive on pain of losing his contract. The facts of the present case illustrate the matter very clearly. Here a vendor, unable to complete because of the caveat and the currency of the suit for specific performance, endeavoured to require his purchaser on pain of losing his bargain to be prepared to settle, paying over the purchase money, whilst the caveat against the registration of the unencumbered transfer to which he was entitled on settlement was still effective. To so require was to seek the removal from the contract of the fundamental obligation of the vendor. It seems to me that to regard the statement in the appellant's "requisitions" in cll. 2 and 33 as requisitions within cl. 14 is virtually to construe the contract as one which was only to be performed at the discretion of the vendor. The removal of a caveat against dealings, such as was on the certificate of title in this case in which an unencumbered fee simple in the land was sold, is not required, in my opinion, by s. 57 (1) of the Conveyancing Act, 1919-1970, to be the subject of an objection or requisition. (at p537)

11. The provisions of cl. 7 of the contract are also relevant to the nature of a requisition in cl. 14. I can see no reason why the meaning of "requisition" should be different in cl. 7 to what it is in cl. 14. It would indeed be a strange construction of a contract of sale of land under the Real Property Act that the purchaser must settle whilst a caveat against dealings is on the title simply because he had not "requisitioned" its removal. But this would be the result if the so-called "requisition" 33 is held to be a requisition; and, because of the terms of cl. 7, an indispensable requisition if the purchaser is to be entitled on settlement to be placed in a position to be registered on the certificate of title for the estate or interest sold. (at p538)

12. In my opinion, therefore, the notice given by the respondent on 12th March 1971 requiring the waiver of "requisition" 33 was not authorized by cl. 14 of the contract in the circumstances and the consequential notice of rescission was ineffective. (at p538)

13. If the matter be approached, as in my opinion it should not, by assuming that what the appellant had said in his "requisitions" 2 and 33 were requisitions within the meaning of cl. 14 of the contract, it ought, in my opinion, to be held that it would be unconscionable for the respondent to have attempted to exercise his powers under cl. 14, in the circumstances. I would have thought clearly it was so, because what he would be doing would be to deny to the purchaser the performance of an essential obligation which he had undertaken when entering into the contract with knowledge of the existence of the caveat. In this connexion I find no need to refer to decisions on the use of this type of clause in connexion with land under common law title. The title to this land is under the Real Property Act. The caveat was lodged and presumably notified before the sale was made. To allow the vendor to rescind in the circumstances would be to afford him the right, in substance, to say that the sale was in reality no sale at all: only a transaction conditional on his own willingness to perform. (at p538)

14. In connexion with the argument as to whether or not the conduct of the respondent was unconscionable, on the footing that the requisitions within cl. 14 had been made, the appellant submitted that the caveat was invalid for lack of a sufficient description in it of the caveator's interest in the land, and that therefore the respondent ought to have taken steps to have it removed from the register as being invalid, irrespective of the suit for specific performance. I find no need to pass upon the question whether or not the caveat was invalid, in the sense of being void and capable of being ignored by the Registrar-General, because, in my opinion, with the suit for specific performance on foot, it would have been a futility for the respondent to have taken any steps for the removal of the caveat upon any ground. Either an interim injunction in the suit or a new caveat would have resulted. (at p539)

15. In my opinion, the appeal should be allowed, and the order of the Supreme Court set aside. Both questions asked in the Originating Summons should be answered in the negative. (at p539)

16. Jongar Investments Pty. Ltd. v. Kanangra Park Pty. Ltd. In my opinion, all the questions in this case should be answered in the negative for the reasons given in my judgment in Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd. which has been handed down today. (at p539)

McTIERNAN J. Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd. In my opinion the appeal should be allowed for the reasons stated by the Chief Justice. (at p539)

2. Jongar Investments Pty. Ltd. v. Kanangra Park Pty. Ltd. In my opinion the appeal should be allowed for the reasons stated by the Chief Justice. (at p539)

WALSH J. Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd.; Jongar Investments Pty. Ltd. v. Kanangra Park Pty. Ltd. The appellant Godfrey Constructions Pty. Ltd. filed an originating summons in the Supreme Court of New South Wales in Equity for the determination of two questions relating to a contract for the sale of land made between it and the respondent. The appellant Jongar Investments Pty. Ltd. filed an originating summons relating to three contracts for the sale of land made between it and the respondent. It sought the determination of six questions of which questions 1 and 2 related to one contract, questions 3 and 4 to another, and questions 5 and 6 to a third contract. The questions which referred respectively to the contracts to which the second suit related were in similar terms. It was agreed at the hearing of the first suit that the decision in it should govern the disposal of the second suit. The questions asked in the first suit were:

"(1) Was the notice dated 7th April 1971 given by the
defendant to the plaintiff's solicitors pursuant to cl. 14 of the
contract for sale?
(2) Did the notice dated 7th April 1971 given by the
defendant to the plaintiff's solicitors rescind as from the date
thereof the contract to which the said notice relates?"

2. The appellant Godfrey Constructions Pty. Ltd., by its notice of appeal to this Court, challenged the answer given to the second question in its suit and asked that the order of the Supreme Court be varied by substituting for it a declaration that the second question should be answered "No". The appellant Jongar Investments Pty. Ltd., by its notice of appeal, challenged the answers given to the second, fourth and sixth questions in its suit and asked for an order that those questions should be answered "No". The appeals have been heard together. Except in framing its formal orders, there is no need for this Court to deal separately with the two appeals. I shall confine my attention, therefore, to the facts and the questions asked in the first suit and I shall refer to the plaintiff in that suit as the appellant. (at p540)

3. The events which led to the suit may be stated as follows. On 31st October 1969 the respondent agreed to sell certain land, of which it was the registered proprietor under the provisions of the Real Property Act, to one Doris Parkinson. According to an allegation made by the respondent in a subsequent suit between it and Doris Parkinson, the respondent gave notice on 12th May 1970 calling on her to complete the agreement on or before 2nd June 1970. On 4th June 1970 Doris Parkinson lodged a caveat. On 17th June 1970 the respondent purported to rescind its contract with her. On 25th June 1970 it entered into the contract which is the subject of the present proceedings. I shall refer later to some of the terms of that contract. On 10th July 1970 the respondent's solicitors gave formal particulars of title. On 31st July 1970 Doris Parkinson commenced a suit against the respondent for specific performance of the agreement of 31st October 1969. On 6th August and 17th August 1970 the respondent entered an appearance and put on a statement of defence and counterclaim, by which it sought a declaration that that agreement had been duly rescinded. On 27th August 1970 the appellant's solicitors sent requisitions to the respondent's solicitors. The relevant parts of this letter and of the reply sent on 2nd September 1970 are set out in the judgment of the Chief Justice herein. Correspondence took place between the solicitors for the parties concerning a request that an obligation to pay interest should be waived. This continued from September 1970 to January 1971. The respondent did not accede to the request. On 8th March 1971 the appellant gave notice to the respondent that the appellant was ready and willing to complete the contract and required the respondent to complete it on or before 30th March 1971. It stated that should the respondent fail to comply the appellant would institute proceedings to enforce the contract and to recover damages with respect to any breach of it. On 12th March 1971 the respondent advised the appellant that the respondent -

"... is presently unable to have Caveat No. L. 877733
removed from the Register book and accordingly pursuant to
Clause 14 of the Contract and Section 56 (1) of the Conveyancing
Act hereby gives you notice of intention to rescind the Contract
dated 25th June 1970, if you do not waive your objection
within 14 days from the date hereof."

"WHEREAS
By notice in writing dated 12th March, 1971 you were
notified that the Vendor intended to rescind the Contract
dated 25th June, 1970 failing you removing your objection
to title within 14 days from that date.
You have failed to remove your objection, viz. Caveat
No. L. 877733 lodged by Doris Parkinson, by the said date.
NOW TAKE NOTICE that the Vendor in accordance with its
rights under Clause 14 of the Contract and Section 56 (1) of
the Conveyancing Act hereby rescinds as from the date hereof
the Contract to which the said notice relates and will refund
the deposit paid in due course". (at p541)

4. It is necessary now to refer to some of the provisions of the contract. It contained no reference to the caveat. It did not fix a date for completion. It provided that the purchaser was to pay the balance of purchase money ($7035) "together with interest thereon at the rate of 6 per cent on daily balances calculated from the date of this Agreement in cash on completion of this Contract". There was a proviso that if the full balance of purchase money should be paid within ninety days of the date of the agreement the vendor agreed to waive the payment of interest. The contract was on the printed form approved by the Law Society of New South Wales and the Real Estate Institute of New South Wales. It contained the printed cll. 7 and 14 which are set out in the judgment of the Chief Justice. It contained also a clause (cl. 8) providing that compensation should be made or given in respect of an error or misdescription of the property and that cl. 14 should not apply to any such claim for compensation. It contained a clause (cl. 10) precluding the purchaser from making any "objection or requisition or claim for compensation" in respect of any of certain enumerated matters. (at p541)

5. The notice of 7th April 1971 has features upon which some comments are appropriate. It treats the appellant as having made an objection to title. But cl. 14 is not restricted to such objections and if that was not an apt description of the matter that had been raised by the appellant, that would not necessarily preclude the respondent from relying on the width of the expression "any objection or requisition which the Purchaser has made". The statement to the appellant that it had failed to remove its "objection, viz. Caveat No. L. 877733 lodged by Doris Parkinson", is an inaccurate description of what had occurred. The reference to s. 56 (1) of the Conveyancing Act in a way which suggests it is a source of a right in the respondent is also inaccurate. It has been submitted that having regard to a clause in the contract providing that if it should be rescinded under the provisions of cl. 14, or of certain other clauses, such rescission should be deemed to be a rescission ab initio, the notice was defective in stating that the respondent rescinded "as from the date hereof". In my opinion, however, none of these points is of any real significance in the decision of the appeal. (at p542)

6. During the hearing of the appeal a question was raised which was not argued before the learned primary judge and, in my opinion, was not raised by the notice of appeal to this Court. It was submitted that the appellant did not make "any objection or requisition" within the meaning of cl. 14 of the contract. The appellant sought leave to amend its notice of appeal so as to include in it this contention. That was opposed and it was submitted for the respondent that, in so far as it was necessary to determine the scope of the terms "objection" and "requisition" in the contract, evidence of expert conveyancers might have been relevant and might have been obtained if the question had been raised at the hearing. (at p542)

7. It seems plain that the term "requisition" is not always used in what has been said to be its strict sense, namely, a demand addressed to the vendor in relation to some specific matter arising out of the title shown by the vendor or some objection taken to that title: see Voumard, The Sale of Land, 2nd ed. (1965), p. 449. The term is used in varying senses. Its meaning in cl. 14 is a question of the construction of the contract upon a consideration of all its terms, including cll. 7 and 10. In the present case it is not necessary, in my opinion, to decide whether or not cl. 14 includes within its scope the statements by the appellant that at settlement the vendor should be registered as proprietor of the property "free from encumbrances and caveats" and that the caveat "should be removed from the vendor's title". If that question had to be decided, I should not feel satisfied that it would be correct to hold that the words used in cl. 14 can have no application to any request made to a vendor, if by that request he is merely called upon to do something which he would be obliged in any event to do in order to fulfil his obligations in accordance with the terms of the contract. In my opinion such a view would not be in accordance with authorities of long standing dealing with such a clause, some of which were discussed by Isaacs J. in Gardiner v. Orchard [1910] HCA 18; (1910) 10 CLR 722, at pp 738-739 . It has been doubted, however, whether such a clause should be construed as applying to an objection or requisition which goes "to the root of the whole subject matter of the contract": see Baines v. Tweddle (1959) Ch 679 , per Lord Evershed M.R. (1959) Ch, at p 687 and Pearce L.J. (1959) Ch, at p 698 . But I need not pursue the question whether or not cl. 14 does apply to the "requisitions" made in this case by the appellant. If it be assumed that the appellant did make an objection or requisition within the meaning of cl. 14, I am of opinion that the respondent was not entitled to exercise the power of rescission, which on that assumption was conferred by the clause, at the time at which and in the manner in which the respondent purported to exercise that power. (at p543)

8. The principles by which limitations have been imposed upon the right of a vendor to exercise the power conferred by such a clause as cl. 14 are well known and they were of course recognized by the learned primary judge, who referred in his judgment to some of the authorities on this subject. But with due respect to his Honour I am of opinion that he did not give sufficient weight, in deciding whether the respondent did attempt to use the power arbitrarily or unreasonably, to some features of the case to which I shall now refer. In the first place, the contract into which the parties entered was one under which it was plainly the duty of the respondent to have the caveat removed: see s. 57 (1) (d) of the Conveyancing Act and see Thomson v. Richardson (1928) 29 SR (NSW) 221 . Secondly, if the appellant had waived its objection, as proposed by the respondent's letter of 12th March 1971, the consequence would have been that the appellant would have become obliged to complete the contract paying the full purchase price, in return for a memorandum of transfer executed by the vendor which could not have been registered so long as the caveat remained in force: see Real Property Act, s. 74. If the contract had been completed on those terms, the respondent would have had no further interest requiring it to defend the pending suit in which Doris Parkinson was plaintiff and the appellant could have been placed in the position of embarking upon litigation to establish that a contract to which it was not a party had been validly rescinded and that Doris Parkinson was not entitled to any beneficial interest in the property. It has been argued that in form the caveat was defective and that on that ground its removal could have been procured without litigating the substantial question as to the validity of Doris Parkinson's claim to be entitled to specific performance of the contract made with her. But even if that could have been done, the removal of the caveat on that ground would not have extinguished any equitable estate to which she was entitled and in any event it was the respondent's obligation to have the caveat removed: see Taylor v. Land Mortgage Bank of Victoria (1886) 12 VLR 748, at p 754 , where there is a useful discussion of the duty of a vendor upon whose title a caveat against dealings has been lodged. The respondent endeavoured to use cl. 14 to require the appellant, either to give up its contract altogether without any recourse against the respondent for breach of it, or to complete the contract upon radically disadvantageous terms. I do not mean to assert that the circumstance that the waiver of an objection will have drastic consequences will always be sufficient to make it unreasonable for a vendor to exercise a power of rescission under such a clause. But it is an important circumstance, to be weighed with the other facts of the case, in determining whether or not the respondent was disentitled to make that use of the clause. (at p544)

9. The next important fact is that the respondent was fully aware when it made the contract with the appellant that Doris Parkinson had lodged her caveat and had done so after the expiry of the time fixed in the notice to complete which the respondent claimed had been given to her. This provides one important ground of distinction between the present case and that of Woolcott v. Peggie (1888) 14 VLR 444 , and on appeal to the Privy Council (1889) 15 App Cas 42 . The learned primary judge recognized the principle that the freedom of a vendor to rely upon such a clause may be affected by his conduct before and at the time of entry into the contract. But he observed that the respondent had consistently maintained the validity of the notice of rescission which it claimed to have given to Doris Parkinson. In my respectful opinion that has little bearing upon the question which has to be resolved. It may be that a vendor who enters into a contract without disclosing an earlier contract can be considered less reckless if he believes that the earlier contract has been validly rescinded than he would be considered if he believed it to be still in force. But whatever his belief may be in that regard, it remains no less true, in my opinion, that if he enters into a contract under which it is his responsibility to carry out the task, whether it turns out to be easy or difficult, of getting rid of a caveat which has already been lodged, his knowing acceptance of that obligation has an important bearing upon the reasonableness of his subsequent attempt to use cl. 14 to rid himself of it. The learned judge observed also that the caveat represented what might be described as a blot on the respondent's title, but he said it was "a blot that was there for all to see". But, in my opinion, the respondent can obtain no assistance from the fact that a search of the title would reveal the existence of the caveat. It is well settled that the conduct of a vendor may disentitle him to exercise the power of rescission although he is not guilty of fraud or dishonesty. It may disentitle him, although there is no ground for suggesting that he hoped to be able to pass off a title having a defect which would not be discovered before completion. It should be observed also that the fact that the caveat was there to be seen upon a search of the title was not a fact which placed any responsibility or obligation upon the appellant. It has been said that a caveat is not a blot on the title: see Thomson v. Richardson (1928) 29 SR (NSW) 221, at p 223 . The respondent's title was defective only if Doris Parkinson had a valid and subsisting equitable interest in the land. If she did not the respondent's title was entirely good. But whilst the caveat remained that title could not be effectively transferred to the appellant. Webb J. said in Taylor v. Land Mortgage Bank of Victoria (1886) 12 VLR, at p 755 , that a caveat throws a cloud on the title. Whether or not that is a useful metaphor, the importance of a caveat for present purposes is, as Webb J. there observed, that "it forms, until removed, an effectual obstacle to making a good title to (a purchaser)". It forms an obstacle to making a title, in the sense that it prevents registration of a transfer and registration is necessary to vest the estate in the land in the purchaser. If the vendor carries out his obligation to remove the caveat, as the purchaser is entitled to expect, there is no difficulty. But if the purchaser waives that requirement, what he obtains upon completion of the contract is something very much less than that which he agreed to buy. (at p545)

10. Subject to one matter to which I must yet refer it seems plain to me that the respondent, if acting reasonably, would have proceeded with the litigation in which it was engaged with Doris Parkinson. If successful in that litigation, it would then have completed the contract with the appellant. If successful, it would have been unable to complete that contract. There is no need now to consider whether it would have been entitled in that event to be relieved of liability to pay damages for breach of the contract, either under its terms or by the application of the rule in Bain v. Fothergill (1874) LR 7 HL 158 . I am of opinion that what the respondent could not do, if acting reasonably, was to exercise the power under cl. 14 to get rid of its contract with the appellant whilst the litigation with Doris Parkinson was still pending. The respondent was not engaged in that litigation because it had made the contract with the appellant. The case is not one in which the existence of that contract involved, or might involve, the respondent in expensive litigation of which otherwise it would have been free and which it was reasonable for it to avoid by exercising its power of rescission. (at p546)

11. It is necessary to consider whether the appellant's conduct placed the respondent in such a position that it was reasonable for it to act, in order to extricate itself, in a way which would otherwise have been unreasonable. I have referred to correspondence concerning the payment of interest on the balance of the purchase money. I am of opinion that the appellant's requests for the waiving of the obligation to pay interest were quite reasonable and afforded no justification to the respondent for taking any action to bring the contract to an end. The appellant on its part may have felt aggrieved at being required to pay interest during a long period of delay for which it was not responsible. But it was not thereby justified, in my opinion, in taking up the attitude that the respondent must complete the contract within a short time, when it was known that this could not be done until the litigation with Doris Parkinson had come to an end. If the appellant had persisted in its demand made in the letter of 8th March 1971 for the completion of the contract by 30th March and in its threat that upon failure to comply with that demand it would take proceedings to enforce the contract, there would have been a great deal to be said for the view that the appellant tried to force the respondent into a corner in such a manner as to justify the use of cl. 14: see Woolcott v. Peggie (1888) 14 VLR, at p 451 . It may well have been the delivery of the notice to complete that provoked the respondent into giving the notice of 12th March 1971 to the appellant. But the appellant did not persist in its demand for the completion of the contract by 30th March 1971. On 24th March it withdrew that demand. Ultimately it is the reasonableness of the action taken by the respondent on 7th April 1971 that has to be assessed. The question is not whether it was justified on 12th March 1971 in giving the notice which was then given. By 7th April it was known that the notice of 8th March 1971 was of no effect. It had been withdrawn before the time for completion mentioned in it had elapsed. It was not operative to create an obligation to complete the contract on a specified day. Still less was it effective to make completion within a specified time the essence of the contract. In these circumstances, I am of opinion that it was the duty of the respondent under its contract with the appellant to abide the outcome of the pending suit, doing what it could reasonably do to expedite the hearing of that suit. It was not entitled, in my opinion, to rescind the contract at a time when it had not yet been established whether it would be able or unable to carry it out, but when, as the respondent was found always to have maintained, it expected to be successful in resisting the claim of Doris Parkinson. (at p547)

12. In my opinion the appeals should be allowed. (at p547)

GIBBS J. Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd.; Jongar Investments Pty. Ltd. v. Kanangra Park Pty. Ltd. In my opinion, it was unreasonable for the respondent on 7th April 1971 to attempt to exercise the power of rescission given by cl. 14 of the contracts and the attempt was accordingly ineffectual. I concur with what my brother Walsh has said in his judgment in relation to this aspect of the case. Taking this view, I need not discuss the other questions raised as to the application of cl. 14 and in particular would not decide whether the appellant had made an objection or requisition within the meaning of that clause. I would therefore not disturb the declaratory orders in so far as they answered in the affirmative the first question in the originating summons issued by Godfrey Constructions Pty. Ltd. and the first, third and fifth questions in the originating summons issued by Jongar Investments Pty. Ltd., but I would answer the other questions in the negative. I would allow the appeal. (at p547)

STEPHEN J. Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd. I have had the advantage of reading the judgment delivered by the Chief Justice and to avoid repetition will not attempt again to state the material facts of this case and the form which the relevant letters, contract and other documents take, which are all set out in that judgment. (at p548)

2. This case deals with a matter of some general importance since it concerns the effect of a condition of sale commonly occuring in contracts for the sale of land. The question for decision involves the circumstances in which a vendor of Torrens system land may, under a condition of sale to that effect, elect to rescind rather than satisfy the purchaser's requirement that a caveat by an earlier purchaser, whose contract had been rescinded by the vendor, be removed before settlement; more particularly, whether the vendor may do so if he both knew of the caveat when he contracted to sell and he is also currently defending a suit brought by the original purchaser and has, in those proceedings, counter-claimed for a declaration that the contract with the original purchaser had been effectively rescinded by him. (at p548)

3. Because the ability of a vendor to make good title to land was inherently uncertain in view of the peculiar complexities of the English law of real property, there early developed in English contract law an exceptional rule relating to damages for breach of a contract for the sale of land. A purchaser was prevented from recovering from a vendor damages for loss of his bargain in an action for breach of contract if the sale went off because the vendor could not make good title to the land sold. In such a case the only damages recoverable were, and still are, such as are attributable to expenses incurred by the purchaser: Flureau v. Thornhill (1776) 2 W Bl 1078 [1746] EngR 175; (96 ER 635) ; Bain v. Fothergill (1874) LR 7 HL 158 . (at p548)

4. Owing its origin to those same complexities of the English law of real property is that now common condition of sale which Sir Lancelot Shadwell V.C. described in 1840 as being new in his experience - Tanner v. Smith [1840] EngR 328; (1840) 10 Sim 410, at p 411 [1840] EngR 328; (59 ER 673, at p 674) - and which entitles a vendor to rescind the contract should he be unable or unwilling to comply with or remove objections or requisitions insisted upon by his purchaser. Clause 14 of the present contract of sale, the effect of which is in issue in this case, is just such a clause. (at p548)

5. The common origin of the rule in Bain v. Fothergill (1874) LR 7 HL 158 and of this type of condition of sale is significant; over the years each has, by judicial decision, been kept within quite narrow limits so as to confine its operation to its original purpose and to prevent it being invoked by vendors for improper and extraneous purposes. The restrictions in each case resemble each other; I am not here concerned with the restrictions imposed upon the rule in Bain v. Fothergill (1874) LR 7 HL 158 , some of which are referred to in the judgments in Noske v. McGinnis [1932] HCA 32; (1932) 47 CLR 563 , but only with the way in which the courts have, over the years, given a quite restricted operation to clauses of the nature of cl. 14. (at p549)

6. Courts have approached the task of confining the operation of such clauses within what are regarded as proper limits in one or other of two ways; the vendor has been denied the right to rescind either upon the basis that, as a matter of construction, the circumstances of the particular case do not fall squarely within the terms of the clause or else because, although, on its proper construction, the clause applied, nevertheless, the vendor having attempted to use the rights conferred upon him for an improper purpose, he could not be permitted to rely upon its terms. In Webster's Conditions of Sale, 3rd ed., p. 356, the learned author concludes that: "It is not really a question of construction - the court interferes with the contract to prevent a fraud being committed." It perhaps matters little which of these two approaches be preferred; there may, on analysis, be no very clear distinction between them. I do not propose in this judgment to adhere to any clear distinction between the two approaches. (at p549)

7. Turning then to the contract of sale in the present case and to the circumstances of the parties to this contract, there appear to me to be, consistently with the authorities as I understand them, at least two reasons why the vendor could not validly rescind the contract under the powers conferred upon him by cl. 14. (at p549)

8. First, cl. 14 only applies if the vendor is "unable or unwilling" to comply with the purchaser's requisition. There was in the present case, as the admitted facts demonstrate, neither inability nor unwillingness in any relevant sense. The vendor, in its notice of 12th March 1971 advising the purchaser of its intention to rescind unless the purchaser's requirement concerning the caveat was waived, did not rely on unwillingness and asserted only inability and that only in a qualified way since the notice described the vendor as being "presently unable" to have the caveat removed from the register book. (at p549)

9. The original requirement of the purchaser was, as I interpret pars. 2 and 33 of the purchaser's requisitions on title, only that the caveat should be removed before settlement; at the time when these requisitions were delivered, in August 1970, there was no settlement date fixed and thereafter, until the purchaser gave its notice to complete, the parties were apparently content to defer settlement until Mrs. Parkinson's suit against the vendor had been disposed of. The position changed in March 1971, when the notice to complete was given by the purchaser, and it then became appropriate enough for the vendor to regard the purchaser's original requirement as now calling for removal of the caveat by the settlement date fixed by the purchaser's notice, 30th March 1971. It was this view to which the vendor's notice of 12th March 1971, gave effect. However, on 24th March 1971, the purchaser withdrew its notice to complete and that withdrawal appears to me to have been effective to place matters in statu quo ante. Thenceforth the purchaser's requirement resumed its former significance, namely as a requirement that the caveat be removed at or prior to settlement, which was only to take place on some uncertain date in the future. (at p550)

10. In those circumstances, the vendor could no longer maintain the position that any inability to comply with the purchaser's requirement existed. The correspondence between the parties' solicitors suggests, and it was not disputed in argument, that both vendor and purchaser regarded Mrs. Parkinson's suit as likely to fail and the vendor's counterclaim, seeking a declaration that the vendor had duly rescinded its contract with Mrs. Parkinson, as likely to succeed. Thus, once any specific date for settlement disappeared, there was no longer any inability to comply with the requisition; there was, of course, no known and certain ability to do so but that is irrelevant to the issue whether the vendor could invoke cl. 14. (at p550)

11. For like reasons the vendor could not have invoked "unwillingness" as a ground for rescission; on the contrary, its actions showed it to be very willing to remove the caveat; that was precisely what it was engaged in doing by its defence of Mrs. Parkinson's suit and its counterclaim in those proceedings, and neither before nor after the threat of an early settlement date was withdrawn by the purchaser could any question of unwillingness be said to exist. (at p550)

12. The facts of this case bear, in some respects, a similarity to those in Woolcott v. Peggie (1888) 14 VLR 444 , and on appeal (1889) 15 App Cas 42 , but that decision is of significance rather because of the respects in which the present facts differ. In that case the purchasers called the vendor's attention to an entry on the register of deeds of a prior contract of sale of the relevant land to a third party; of this alleged contract the vendor had never previously heard and he promptly set about having the entry removed by resort to litigation which, through no fault of his own, involved delay. The purchasers insisted upon prompt removal of the entry in the register and immediate settlement unless the vendor gave an indemnity, which he refused to do; the vendor accordingly rescinded and his right to do so was upheld by the trial judge, by the Victorian Full Court and on appeal by the Privy Council. (at p551)

13. It was the purchasers' refusal unconditionally to afford the vendor sufficient time to have the entry removed which was regarded as creating a situation of impossibility which entitled the vendor to rescind under a condition similar to cl. 14. The trial judge, Webb J., took this view and in the Full Court, Holroyd J. said that when such a condition provided (1888) 14 VLR, at p 459 :

"...that the vendor shall be at liberty to rescind if he is
unable to remove an objection to or comply with a requisition
on title, it means if he is unable to do so at any time. If the
purchaser were willing to give him 100 years to do it, I do
not think the vendor could make any objection, nor could
he take advantage of the condition and rescind; but the
purchaser has a right to say: 'I am not going to wait for
ever. I insist on this objection being removed within a
reasonable time.' If the vendor then cannot remove it within
a reasonable time he is at liberty to say: 'You have a right
to put a limitation of time on the condition but having done
that I can no longer comply, and I will rescind'." (at p551)

14. In the present case the purchaser's notice to complete placed the vendor in much the position of Mr. Peggie (ignoring for present purposes the distinction that Mr. Peggie was quite unaware of the entry on the register when he contracted to sell to Woolcott) but the withdrawal of that notice, if not amounting to a statement that the vendor could take as long as was necessary to seek to remove the caveat, at least resulted in time being no longer a factor justifying the vendor in regarding it as impossible for him to comply with the purchaser's requirement. (at p551)

15. Accordingly, there were here no circumstances such as would suffice to call into operation the terms of cl. 14. (at p551)

16. So far, I have concerned myself with whether the vendor's situation was in fact one to which cl. 14 in its terms applied and have concluded that it was not. Viewing the matter somewhat more broadly there exists a second reason why the vendor should not be permitted to rely upon the power to rescind contained in cl. 14. It is allied to the first but arises from the fact that in interpreting clauses of this character the courts have consistently looked at the purposes for which the particular clause was designed and have refused to allow a vendor to "ride off upon a condition to rescind which was obviously not framed with reference to" the circumstances which in fact have arisen: per Rigby L.J. in In re Deighton and Harris's Contract (1898) 1 Ch 458, at p 464 . In Gardiner v. Orchard (1910) 10 CLR, at pp 739-740 , Isaacs J. said of a clause similar to cl. 14:

"In considering whether such a clause justifies a vendor in
any given case in cancelling his contract, the Court must bear
in mind three things: First, the purpose of every such condition,
which is a matter of law, and is stated in the passage
quoted from Greaves v. Wilson [1858] EngR 455; [1858] EngR 455; (1858) 25 Beav 290 (53 ER 647) ; next, the

bona fides on the part of the vendor in using his power for
that purpose: see also Woolcott v. Peggie (1889) 15 App Cas 42 . This is

of fact, and is admitted here. The third essential is that the
cancellation must be reasonable. Reasonableness is a question
of fact, dependent on the whole of the circumstances, though
one of those circumstances consists always of the wording of
the contract itself." (at p552)

17. His Honour's reference to Greaves v. Wilson [1858] EngR 455; (1858) 25 Beav 290 (53 ER 647) is to a passage in which Sir John Romilly M.R. said (1858) 25 Beav, at p 293 (53 ER, at p 649) that such conditions were introduced to meet the case where a vendor finds that he is to be put to: "..so much expense and trouble as to make it unreasonable that he should be called upon to do it." The learned Master of the Rolls emphasized that it was always "a question of the reasonableness of the thing required". As early as 1841 Lord Langdale M.R. had used reasonableness as a test of the validity of the vendor's rescission in his judgment in Page v. Adam [1841] EngR 960; (1841) 4 Beav 269, at p 285 [1841] EngR 960; (49 ER 342, at p 348) . (at p552)

18. Isaacs J. also relied upon what was said by Turner L.J. in Duddell v. Simpson (1866) 2 Ch App 102 , where the learned Lord Justice instanced involvement in expenses far beyond what the vendor ever contemplated or in unforeseen litigation and expense as being the type of circumstance for the avoiding of which the vendor reserved to himself the power of annulling the contract. (at p552)

19. As was said by O'Connor J. in Gardiner v. Orchard (1910) 10 CLR, at p 736 , the material time to be looked at is the time when the contract is rescinded, in the present case 7th April 1971. There was, at that time, nothing at all onerous or unreasonable involved in compliance with the requirement of the purchaser concerning the caveat of Mrs. Parkinson; as previously stated, the vendor was already involved in a suit in which he was, of his own volition and not as a result of any prompting by the purchaser, seeking, by way of counterclaim, a declaration that he had duly rescinded the contract with Mrs. Parkinson upon which the efficacy of her caveat depended. No doubt, in its own interests, and whether or not it had re-sold the land to the appellant purchaser, the vendor would have defended Mrs. Parkinson's suit and counterclaimed as it in fact did. In these circumstances the terms of the purchaser's requirement, once the time factor, later introduced by the notice to complete, is eliminated by the subsequent withdrawal of that notice, exposed the vendor to neither trouble nor expense and it was in my view quite unreasonable for it to have recourse to rescission under cl. 14. Accordingly, I consider that for this additional but associated reason rescission was not open to the vendor. (at p553)

20. In Duddell v. Simpson (1866) 2 Ch App 102, at p 107 , Turner L.J., in a passage much cited in later cases, said, after referring to earlier authorities cited to the Court:

"Those cases have settled, and, I think very wisely settled,
that the word unwilling, in a condition of sale of this description,
is not to be considered as giving an arbitrary power to the
vendor to annul the contract ... he must shew some reasonable
ground for unwillingness ..." (at p553)

21. To hold otherwise, said his Lordship, would be to give to the vendor the power of saying that that which was intended as a sale, and was a sale, should in truth be no sale at all. (at p553)

22. In In re Jackson and Haden's Contract (1906) 1 Ch 412, at p 420 , Collins M.R. said of Duddell v. Simpson (1886) 2 Ch App 102 , that it clearly brought out the exact line of difference between the cases in which the court would allow the vendor to avail himself of such condition as the present cl. 14 and that where it would not. I consider that the present case is clearly one in which rescission could not be availed of in the circumstances. (at p553)

23. Once it be accepted, as I think it must be, that a vendor's powers under such a clause as cl. 14 are limited to the extent observed above a rather different objection to the vendor's purported exercise of a right of rescission in the present case becomes apparent. This being a sale of Torrens system land what the purchaser had bargained for was to become registered as proprietor of the land; as was said by Webb J. in Taylor v. Land Mortgage Bank of Victoria (1886) 12 VLR 748, at pp754-755 :

"The difference between the registration of a conveyance
under the old law, and the registration of a transfer under the
statute, is manifest. Under the old law the conveyance
divested out of the vendor all his estate, and when he had
executed that he had done everything necessary to divest the
estate out of himself and vest it in the purchaser, and he had
no further concern in the matter; the purchaser might
register the conveyance, or not, as he pleased. But under
the statute, s. 58, the registration, and not the execution of
the transfer, divests the estate. Until then, the estate and
interest of the proprietor remain in him; and until then the
proprietor has not done all that is necessary to divest the
estate out of himself and vest it in the transferee." (at p554)

24. It was this contractual obligation to place the purchaser in a position to become registered as proprietor that the vendor sought to avoid by seeking to treat what was in effect no more than a statement by the purchaser of that obligation as an objection or requisition which it was unable to remove or comply with. (at p554)

25. There has not been raised in these proceedings any suggestion of fraud or lack of good faith and it may be asked how was it that the vendor came to find this obligation to be one impossible to perform? As one might expect where a Torrens system title is in question, there had arisen no unexpected difficulty as to title of the kind which might arise in general law conveyancing. Was there then recklessness on the vendor's part in originally entering into its contract of sale with the purchaser at a time when a caveat was already on the title? If so, it is well established that such a reckless vendor cannot avail himself of the power of rescission contained in cl. 14: In re Jackson and Haden's Contract (1906) 1 Ch 412 ; Baines v. Tweddle (1959) 1 Ch 679 . But it seems that in this case the vendor may not have been reckless; both it and the purchaser, when it too learned of the caveat, apparently were confident that it could be removed; the purchaser was prepared initially to await that removal and the vendor was, as the learned trial judge found, diligent in pursuing its removal by its counterclaim. (at p554)

26. The answer is, I think, provided by the fact that there was in this case in truth no existing defect in title or difficulty as to conveyance at all; I emphasize "existing"; there was of course what Webb J. in Taylor v. Land Mortgage Bank of Victoria (1886) 12 VLR, at p 755 has described as a cloud thrown over the title but it was a cloud which both parties believed would pass. It cannot be, consistently with the authorities to which I have already referred, that a vendor may, in such circumstances, take advantage of what it believes to be only a passing cloud which the purchaser has pointed out must be, and which both parties believe will be, removed and, while proceeding in fact to have it removed, declare that it constitutes such an obstacle in fulfilling its contractual obligations as to entitle it to have recourse to cl. 14. To do so is to employ the clause for a purpose quite foreign to that which the courts have regarded as its true function. (at p555)

27. As Romer J. said in In re Des Reaux and Setchfield's Contract (1926) 1 Ch 178, at p 190 :

"... in all cases the vendor must do his best to comply with
the obligations which by contract he has undertaken towards
the purchaser. I can well understand that where, on a closer
examination of the title it appears that there is some blot on
it which was unknown and unsuspected by the vendor, even
although that blot can be removed by the expenditure of a
comparatively small sum of money, it may be quite reasonable
for him to rescind the contract if the purchaser insists upon
that expenditure being incurred. It is to meet such cases as
that that conditions of this description are inserted." (at p555)

28. It is for the above reasons that I have concluded that this appeal should be allowed; I have, in the circumstances, found it unnecessary to advert to certain other grounds upon which this appeal was argued, including what appears to me to be the difficult question of the proper characterization of pars. 2 and 33 of the purchaser's requisitions, whether as going to title, to conveyance or neither and whether properly to be regarded as requisitions or objections or neither. I have had the opportunity of reading the judgment of my brother Walsh and it suffices to say that I agree with his observations concerning this aspect, which becomes material in view of the contention that there existed in the present case no "objection or requisition" within the meaning of cl. 14. I also respectfully adopt the views expressed by Walsh J. concerning the learned primary judge's reliance both on the vendor's consistent attitude that its rescission of the contract with Mrs. Parkinson was valid and on the fact that the existence of the caveat was there for all to see. (at p555)

29. In my opinion, the appeal should be allowed. (at p555)

30. Jongar Investments Pty. Ltd. v. Kanangra Park Pty. Ltd. In my opinion, all the questions in this case should be answered in the negative for the reasons given in my judgment in Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd. which has been handed down today. (at p555)

ORDER

Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd.:
Appeal allowed with costs. Order of the Supreme Court

Question 1 - By majority "No"
Question 2 - "No".
The defendant to pay the plaintiff's costs of the suit.

Jongar Investments Pty. Ltd. v. Kanangra Park Pty. Ltd.:
Appeal allowed with costs. Order of the Supreme Court

Question 1 - By majority "No".
Question 2 - "No".
Question 3 - By majority "No".
Question 4 - "No".
Question 5 - By majority "No".
Question 6 - "No".
The defendant to pay the plaintiff's cost of the suit.