As presented at the Seminar and expanded to include s 66ZL Conveyancing Act 1919

1. Sunset clauses and
quantification of damages
When may a Vendor rescind a contract?
When is it appropriate to assess damages at a date other than the date of
breach?
Legalwise Second Annual Property Law Seminar
9 March 2016
Laina Chan
Barrister at Ninth Floor Wentworth Chambers
laina chan
barrister

2. S 66ZL Conveyancing Act 1919
(3) A vendor may rescind an off the plan contract under a
sunset clause if the subject lot has not been created by the
sunset date, but only if:
(a) each purchaser under the contract, at any time after
being served with the notice under subsection (4), consents
in writing to the rescission, or
(b) the vendor has obtained an order of the Supreme Court
under this section permitting the vendor to rescind the
contract under the sunset clause, or
(c) the regulations otherwise permit the vendor to rescind
the contract under the sunset clause.

3. S 66ZL Conveyancing Act 1919
(6) The Supreme Court may on the application of a
vendor under an off the plan contract make an order
permitting the vendor to rescind the contract under a
sunset clause but only if the vendor satisfies the Court
that making the order is just and equitable in all the
circumstances.

4. S 66ZL Conveyancing Act 1919
(7) In determining whether it is just and equitable in all the circumstances the
Court is to take the following into account:
(a) the terms of the off the plan contract,
(b) whether the vendor has acted unreasonably or in bad faith,
(c) the reason for the delay in creating the subject lot,
(d) the likely date on which the subject lot will be created,
(e) whether the subject lot has increased in value,
(f) the effect of the rescission on each purchaser,
(g) any other matter that the Court considers to be relevant,
(h) any other matter prescribed by the regulations.

5. S 66ZL Conveyancing Act 1919
• Regulations are currently silent
• Ss 66ZL(7) is prescriptive.
• In determining whether it is just and equitable for the
developer to rescind the contract and to illuminate
the likely approach of the courts in relation to ss
66ZL, the following cases are instructive.

6. Godfrey Constructions Pty Ltd v Kanangra Park Pty
Ltd (1972) 128 CLR 529
• ‘if the V shall be unable or unwilling to comply with
or remove any objection or requisition which the
purchaser has made and shall not waive within 14
days after the V has given him notice of intention to
rescind this agreement, the V, 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 P has or has not taken possession shall
be entitled by notice in writing to rescind this
agreement.’
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7. Godfrey Constructions Pty Ltd v Kanangra Park Pty
Ltd (1972) 128 CLR 529
• original purpose - improper and extraneous
purposes
• bona fides
• reasonableness
• not an arbitrary power
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8. Woolcott v Peggie (1889) 15 App Cas 42
• The vendor was entitled to rescind the contract,
provided he acted in good faith.
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9. In re Jackson and Haden’s Contract [1906] 1 Ch 412
• something on the part of the vendor less than the
law requires of him in such cases.
• may stop short of fraud
• for example, a reckless disregard by the vendor of
his duty as to accuracy of statement when he is
making a statement with a view to other people
acting on it as correct
• look at circumstances as a whole

10. Selkirk v Romar Investments Ltd [1963] 3 All ER 994
• Clause 3(3) of the agreement conferred power on
the vendor, if any requisition should be insisted on
with which he should be unable or unwilling to
comply, to rescind the contract by notice in writing.

11. Selkirk v Romar Investments Ltd [1963] 3 All ER 994
• A vendor's position, for this purpose, has to be
ascertained as at the date when he enters into his
contract
• not to be arbitrary or without reason
• a vendor has to be reasonable: he does not have to
be beyond criticism before he can exercise his right
to recission
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12. Pierce Bell Sales Pty Ltd v Frazer (1973) 130 CLR 575
• cl 14 contained the usual provision allowing the
vendors to give notice of intention to rescind if
‘unable or unwilling to comply with or remove any
objection or requisition’ and to rescind if the
purchaser did not waive the objection or requisition
within fourteen days of the notice
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13. Pierce Bell Sales Pty Ltd v Frazer (1973) 130 CLR 575
• begin with a contractual right to rescind, all the
circumstances covered by clause 14 being present.
• onus on the P to convince the V that V may not use
its contractual right
• take the circumstances of the case as a whole
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14. Burger King Corporation v Hungry Jack’s Pty Ltd
(2001 69 NSWLR 558
• An action by Hungry Jack’s (franchisee) against
Burger King (franchisor) for the latter’s alleged
wrongful termination of an agreement made
between them and its breach of certain terms
alleged to have been implied in that agreement.
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15. Burger King Corporation v Hungry Jack’s Pty Ltd
(2001 69 NSWLR 558
• general rescission clauses may not be used ‘for
improper and extraneous purposes: Godfrey
Constructions Pty Ltd v Kanangra Park Pty Ltd
• the Contract Review Act 1980, the Credit Act 1984
and s 51A of the Trade Practices Act 1974 (Cth)
• implied obligation of good faith and reasonableness
• disentitling conduct of vendor
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16. Tanwar v Cauchi (2003) 217 CLR 315
• The purchaser was unable to complete the contracts
because of a delay in obtaining finance.
• Finance became available the following day.
• The vendors were aware that the purchaser then
wished to complete the contracts but issued notices
of termination.
• Proceedings for specific performance.
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17. Tanwar v Cauchi (2003) 217 CLR 315
• the vendors had not caused or contributed in any
significant way to the purchaser’s breach
• it was not unconscientious for them to exercise their
contractual right to terminate the contracts.
• relief on the ground of accident was not available
because the possibility of breach was reasonably
within the contemplation of the purchaser.
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18. Ginger Development Enterprises Pty Ltd v Crown
Developments (2003) 12 BPR 22,607
• special condition 30 referred to the ‘caveats’ that
were on the title of the property.
• in the draft contract, special condition 55 referred to
caveats the presence of which were to be
acknowledged by the purchaser. However, special
condition 55 had been deleted from the contract
before exchange.
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19. Ginger Development Enterprises Pty Ltd v Crown
Developments (2003) 12 BPR 22,607
• obligation on the part of the person giving the
transfer to do all that was reasonable to ensure that
the sale could proceed to completion.
• Vendor had issued lapsing notices.
• Vendor should have sought an order under s 74MA
of the RPA to prevent the lodgment of further
successive caveats.
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20. Actall Pty Ltd v Pacific Bay Development Pty Ltd
[2006] NSWCA 190
• Clauses 28.2 and 28.3 of the Contract provided:
• “28.2 The vendor must do everything reasonable to have
the plan registered within 6 months after the contract
date …
• 28.3 If the plan is not registered within that time and in
that manner –
• 28.3.1 the purchaser can rescind; and
• 28.3.2 the vendor can rescind, but only if the vendor has
complied with clause 28.2.”
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21. Actall Pty Ltd v Pacific Bay Development Pty Ltd
[2006] NSWCA 190
• Allegation that the Vendor had an ulterior motive
“as an excuse to enable themselves to get rid
of the contract for some ulterior purpose, such
as to obtain a higher price for the land from
some other purchaser”
• The condition precedent to the right to rescind
contained in cl 28.2 is a significant protection to the
purchaser
• No need for equity to intervene.
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22. Cordon Investments Pty Ltd v Lesdor Properties Pty
Ltd (2013) 29 BCL 329
• Lesdor owned certain property.
• It contracted with Cordon for Cordon to develop the
property. Cordon was responsible for obtaining all
necessary approvals and for all construction costs, and
was to be reimbursed its actual costs from a loan it had
obtained to fund the development.
• Cordon’s profit was to be derived from the sale of certain
units in the project to the extent the proceeds exceeded
the development costs. Lesdor was entitled to retain the
balance of the units.
• Works were allegedly defective and Lesdor refused to
sign the strata plan
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23. Cordon Investments Pty Ltd v Lesdor Properties Pty
Ltd (2013) 29 BCL 329
• Lesdor repaid the loan out of another loan and
purported to terminate the contract relying upon
Cordon’s alleged renunciation in insisting on other
than defect-free completion.
• Lesdor took possession of the units that would have
gone to Cordon
• Cordon sued for damages for breach of contract.
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24. Cordon Investments Pty Ltd v Lesdor Properties Pty
Ltd (2013) 29 BCL 329
• It was appropriate to imply into the contract an
obligation that the parties would act in good faith
towards each other.
• No breach.
• Obligation could not be inconsistent with the terms
of the contract.
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25. Johnson v Perez (1988) 166 CLR 351 at 355
• The normal measure is the contract price less the
market price at the contractual time fixed for
completion.
• If the market price at the time fixed for completion
exceeds the contract price the vendor has not
suffered any damage by the loss of the bargain:
Carpenter v McGrath (1996) 40 NSWLR 39 at 59.
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26. HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd
(2004) 217 CLR 640 at 667
• Where there is no readily available market a later
date may be appropriate.
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27. HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd
(2004) 217 CLR 640 at 657[36]
• A key qualification which prevents the ordinary rule
from being inflexible is that the test does not depend
upon the difference between price and market value
but instead depends on the difference between price
and real value or fair value or fair or real value or
intrinsic value or true value or actual value or what
the asset was truly worth or really worth or what
would have been a fair price to be paid in the
circumstances.
• The distinction is an old and fundamental one.
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28. HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd
(2004) 217 CLR 640 at 657-8 [37]
• Other reasons why the law does not limit recovery
by reference to market value is that subject to
mitigation issues, the plaintiff is ‘not bound to sell
them’.
• Another is that there may not be a market or if for
some other reason the plaintiff is “locked in” to
holding the asset. In each of these circumstances,
the plaintiff may not have acted unreasonably in
retaining the asset.
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29. HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd
(2004) 217 CLR 640 at 657-8 [37]
• market value may be disregarded if they are
‘delusive or fictitious’ because they are the result of
‘a fraudulent prospectus, manipulation of the market
or some other improper practice on the part of the
defendant’
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30. HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd
(2004) 217 CLR 640 at 668
• The comparison of price and value at the date of
acquisition (which was the date of loss in the instant
case) as a test may produce a fair result ‘if the asset
acquired is a readily marketable asset and there is
no special feature (such as a continuing
misrepresentation or the purchaser being locked into
a business that he has acquired)’
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31. Filmlock Pty Ltd v Nissi Investments Pty Ltd (No 2)
[2013] NSWSC 959
• Damages assessed at date of resale rather than date of
breach
• Ng v Filmlock Pty Ltd (2014) 88 NSWLR 146 – appeal on
quantum
• NSWSC erred in concluding that difference between
price payable under sale contract and price realised
under resale contract represented appropriate measure
of damages
• In an appropriate case, damages could be quantified at a
time other than the date of breach
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