What are a developer vendor's obligations to use its best endeavours to obtain registration of a plan of subdivision in a timely fashion?

  • Author : Bill Stark - 03-08-2012

In Joseph Street Pty Ltd v Tan [2102] VSCA 113 (BC201203905), the Victorian Court of Appeal had to determine whether a developer was in breach of its obligations to use its best endeavours to register a plan of subdivision.

Facts  

The circumstances were that the developer /vendor entered into a contract for the sale of part of certain land in Mitcham, Victoria, that it proposed to develop. The contract included a term that it would use its best endeavours to register a plan of subdivision. The contract also provided that if the Plan of Subdivision was not registered within 15 months of the date of the contract, either party could rescind. If the developer was in breach of the 'best endeavours' term, it was then unable to rescind the contract.  

In the Supreme Court of Victoria, the appellant /purchaser unsuccessfully sought specific performance of the contract for sale. The appellant/purchaser had claimed that the respondent had failed to comply with its obligation to the purchaser to use its best endeavours to procure registration of relevant plan in a timely way.


Evidence was led that if the developer had entered into a section 173 agreement with the local council, ultimately the Plan of Subdivision would have been registered much more quickly. As a result of the developer's failure to do so, the appellant/purchaser claimed the developer was not entitled to rescind the contract.  

The decision

In Hospital Products Ltd v United States Surgical Corporation(1984) 156 CLR 41, the High Court decided, among other things, that "use best efforts" required a person just to take reasonable steps (although the Court did acknowledge that "the meaning of particular words in a contract must be determined in the light of the context provided by the contract as a whole and the circumstances in which it was made, and that decisions on the effect of the same words in different context must be viewed with caution - per Gibbs CJ). The developer argued that it had met that standard, and in fact it was unreasonable to expect it to enter into a section 173 agreement with the local council.

The Court of Appeal overturned the trial judge's findings, and held that on the evidence respondent / developer had breached its obligation to its use best endeavours to obtain registration of the plan in a timely fashion.

As a result, the developer dis-entitled itself from rescinding the contract and the trial judge erred in declining the relief of specific performance sought by appellant. The Court of Appeal ordered
specific performance of the contract of sale of land.

The Court of Appeal's decision turned on its holding that "best endeavours" required the developer to do more than just take reasonable steps to attempt to have the Plan of Subdivision registered. In the circumstances of the case, this meant that the developer should have entered into an agreement under section 173 of the Subdivision Act with the local authority, which in turn would have expedited the process of the local authority in approving the Plan of Subdivision.

About the Author

Bill Stark

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