The Facts

Vendor and purchaser enter land development contract

On 12 November 1973, a vendor and purchaser signed a contract for sale of land near Sydney, described in the contract as "being Lots 1 to 9 inclusive in the Vendors Plan of Sub-division a copy of which is annexed hereto...".

The purchaser paid a ten percent deposit upon signing the contract.

Special condition 4 requires registration of plan of subdivision

Special condition 4 of the contract provided that:

...the Plan of sub-division, a copy of which is annexed hereto, has been lodged with the... Council. The Vendor will... have the relevant plan of sub-division lodged for registration as a deposited plan, provided however that if the said plan has not been lodged for registration as a deposited plan within a period of 12 months from the date hereof... either the Purchaser or the Vendor may... rescind this contract whereupon all moneys paid to the Vendor hereunder shall be refunded to the Purchaser...."

Vendor applies for subdivision in two stages

There were thirty-five lots in the plan of subdivision annexed to the contract.

At the time the contract was signed, the vendor had not lodged that plan of subdivision.

The vendor instead sought to subdivide the land in two stages.

A month before the contract was signed, the vendor obtained council approval for the stage 1 subdivision of 11 lots, being the nine lots it later contracted to sell the purchaser, and two other lots comprising the balance of the land.

A couple of weeks before the contract date, the vendor applied for council approval for the stage 2 subdivision of the balance of the land.

Vendor seeks completion of contract after stage 1 plan registered

Under the contract, completion was to take place within fourteen days of written notification being sent to the vendor by council, that the plan for subdivision had been registered.

The stage 1 plan of subdivision was registered on 7 June 1974.

On 14 June, the vendor confirmed registration of the plan with the purchaser and sought payment of the balance of the purchase price and completion of the sale.

Purchaser and vendor each purport to cancel contract

Seeing that the registered plan was different from the plan annexed to the contract, the purchaser took this to mean that the vendor had repudiated the contract (ie indicated that it did not intend to perform its contractual obligations).

The purchaser, therefore, notified the vendor that it was rescinding (ie cancelling) the contract and sought damages for failure of the vendor to comply with its contractual obligations.

The vendor responded that the purchaser's rescission was a wrongful repudiation of the contract, that it accepted this repudiation, and that it was itself now rescinding the contract, keeping the deposit, and reserving its right to claim damages.

Dispute goes all the way to High Court

The purchaser applied to the Supreme Court of New South Wales for a declaration that it had validly rescinded the contract.

The vendor, for its part, cross-claimed for a declaration that it had validly rescinded.

The primary judge ruled in favour of the vendor and the purchaser appealed.

The NSW Court of Appeal reversed the Supreme Court's decision, ruling that the purchaser's rescission was valid.

The vendor appealed to the High Court of Australia.

case a - The case for the vendor

case b - The case for the purchaser
  • Under the contract for sale, we were entitled to subdivide the land in two stages.
  • In the first stage we subdivided the land into the nine lots the subject of the sale and in the second stage we subdivided the balance of the land, so as to provide the remaining lots in the plan annexed to the contract.
  • This is consistent with special condition 4, which requires us to lodge "the relevant plan of subdivision", here being the plan of subdivision relevant to the nine lots in the contract.
  • Therefore, the purchaser was not entitled to rescind the contract, and when it purported to do so, it repudiated the contract.
  • We were entitled to accept that repudiation, rescind the contract and keep the deposit, and the purchaser has no right to claim damages against us.
  • Special condition 4 requires the vendor to lodge the plan of subdivision annexed to the contract within 12 months of the date of the contract.
  • The plan annexed to the contract requires the vendor to develop the land by one subdivision into thirty-five lots, not in two stages as the vendor incorrectly argues.
  • By obtaining registration of a plan embodying only the limited subdivision of the 9 lots, the vendor insisted on adhering to an incorrect interpretation of the contract.
  • This was a repudiation of the contract by the vendor, entitling us to rescind the contract and to claim damages for the vendor's failure to comply with its contractual obligations.

So, which case won?

Cast your judgment below to find out

Tom Williams
Contract disputes
Stacks Champion

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