Australian Muslim Social Services Inc v Roy
[2011] VCC 296
•21 February 2011
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
Case No CI-09-02249
| AUSTRALIAN MUSLIM SOCIAL SERVICES | Plaintiff |
| AGENCY INC | |
| v | |
| JANICE ANNE ROY (as Executrix of the | Defendants |
| Estate of the late John Howard Philip Roy) & JANICE ANNE ROY |
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| JUDGE: | HER HONOUR JUDGE COHEN |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 30 & 31 August, 16 & 17 November 2010 |
| DATE OF JUDGMENT: | 21 February 2011 |
| CASE MAY BE CITED AS: | Australian Muslim Social Services Inc v Roy & Anor |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 296 |
REASONS FOR JUDGMENT
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Catchwords: Contract for sale of land; claim for return of deposit after purported termination by purchaser in reliance on special condition; whether purchaser entitled to bring contract to end; vendors accepted repudiation; counterclaim for losses on resale.
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S Wilmoth | Logie-Smith Lanyon Lawyers |
| For the Defendants | Mr J Evans | Rockman & Rockman |
| HER HONOUR: |
1 In December 2008, the plaintiff signed a contract to purchase a property known as 135-157 Racecourse Road, Kensington (“the property”) for $3,050,000. It paid a deposit of $305,000. The contract contained special conditions, including some directed to the property’s history of contamination. On 6 March 2009, the plaintiff’s then solicitors wrote to the vendors’ solicitors, and in reliance on special condition 23 advised that the purchaser was bringing the contract to an end, and requested return of the deposit. The vendors did not accept the basis of the termination, and did not return the deposit, but advised that they accepted repudiation of the contract by the purchaser.
2 This proceeding was issued by the plaintiff against the vendors, Mr and Mrs Roy, seeking a declaration that the Contract of Sale was at an end, and an order that the deposit be returned. The defendants[1] counterclaimed for damages in respect of losses on resale of the property.
[1] Mr Roy passed away after the proceeding was issued and before the trial. Probate of his Estate was granted to the second defendant on 26 August 2010, and a certified copy of the Probate was produced to the court and an order substituting his estate as first defendant was made at the outset of the trial on 30 August 2010.
3 This case turns on whether the Contract of Sale was validly terminated by the plaintiff, and that issue rests on the construction of Special Condition 23 and whether it applied in the circumstances to entitle the plaintiff to rely on it to bring the contract to an end and require return of the deposit.
4 Special Condition 23 provided as follows:
“Subject to this Special Condition this Contract is subject to and conditional upon the Purchaser obtaining at its own cost an environmental report from an expert body accredited by the National Association of Testing Authorities (NATA)(“the Expert”) which does not disclose any facts that would prohibit the property being properly used as a place of assembly ( “Complying Report”) within 150 days from the date of this Contract. The Purchaser shall within 48 hours of retaining the Expert notify the Vendor of the same. The Purchaser shall immediately retain the Expert to provide the environmental report within the said 150 days and instruct the Expert to provide a copy of the report to the Vendor and Purchaser simultaneously. Subject to the Purchaser complying with its obligations under this Special Condition, if a Complying Report is not obtained within 150 days from the date of this Contract then this Contract will be at an end and the Vendor will refund all monies paid to it in respect of the purchase to the Purchaser.”
The facts
5 The Contract of Sale[2] was dated 17 December 2008, and a deposit of $305,000 was paid by the plaintiff to the vendors’ agent, Knight Frank, on 19 December 2008. It followed some months of negotiations in relation to the terms of sale, involving estate agents and solicitors acting for each party. Special conditions 22 and 23 had been included as requirements of the purchaser[3]. However, the final wording of special condition 23 was in terms drawn by the vendors’ solicitor and differed from the less specific version of the condition contained in correspondence as to the purchaser’s requirements[4].
[2] Exhibit C
[3] Exhibit 5 – letter of Galilee to Rockman & Rockman, 26 November 2008
[4] Exhibit 5 – emails Rockman & Rockman to Sara.Abelardo@galilee , 3 December 2008, and 4 December 2008.
6 On 11 January 2009, Mr Peter Ramsay of Peter J Ramsay & Associates was engaged by the plaintiff to provide an environmental report on the property. He provided a written report dated 3 March 2009 (“the Ramsay report”).[5] On 6 March 2009, Galilee Lawyers, the plaintiff’s then solicitors, wrote to the vendors’ solicitors enclosing a copy of the Ramsay report, and relying upon it as “disclosing that the site cannot be properly used as a place of assembly”, and bringing the contract to an end. The letter called for return of the full deposit.[6] On 24 March 2009 the vendors’ solicitors wrote to the purchaser’s solicitors disputing that the report entitled the purchaser to bring the contract to an end under special condition 23, but accepting that the plaintiff had repudiated the contract, and declining to authorise the agent to return the deposit[7].
[5] Exhibit A
[6] Exhibit D
[7] Exhibit E
7 It was not until January 2010 that the property was resold. On 27 January 2010 a contract was signed – unconditional as to finance or as to further investigation or a complying report related to contamination – for a sale price of $2,400,000, and a 120 days settlement. That left a shortfall of $650,000 between the price under the contract between the plaintiff and defendants and the resale price. The defendants were charged $33,000 commission by the selling agent on the resale, and $1660 in legal fees.
8 It is common ground that at the time of the contract there were buildings on most of the site, and that the entire site was covered by concrete, including outdoor and indoor areas. There is no evidence as to the plaintiff’s intended use of any particular part of the site, nor of any alterations planned, although the valuation evidence describes parts of the property as in basic condition and needing work. I accept that some alteration of buildings (subject to constraints imposed on outsides of buildings by the Heritage Overlay), might have been intended, and that those alterations and from time to time repairs would have required breaching the concrete. However, there is no evidence to indicate that the plaintiff’s intention was to permanently remove concrete covering on any extensive portion of the premises which was to be regularly used.
[8] T 3, l16-21
[9] The soil samples for his report were tested by a NATA approved laboratory.
Issues 9
Although originally raised in the Defence, the defendants no longer take issue with whether the date of retention of Mr Ramsay complied with the contractual expression “immediately”[8]. Further, it is common ground that NATA accreditation is only given to testing laboratories, and not to individual environmental experts, so the special condition could not technically have been fulfilled in that regard. The defendants no longer challenge that Mr Ramsay was an “expert” for the purposes of special condition 23[9]. No issue has been taken as to whether the expert report was supplied at the same time to vendor and purchaser.
10
The Issues which remain in contention in relation to construction of special condition 23 are:
(i)
what was the converse of a “complying report” ie what was needed in an environmental report to permit the purchaser to bring the contract to an end?
(ii)
whether as a “preliminary site investigation” (“PSI”), the Ramsay report was capable of being a “complying report” or not one - the defendants arguing that it was not;
(ii)
whether the expression “disclose any fact” refers to a new disclosure, and whether of pure fact or opinion or interpretation;
(iii)
whether the word “prohibit” means legally prohibit or something less absolute such as “prevent” in a practical sense;
General issues and principles in construction of Special Condition 23
11 I have considered whether in construing words of ambiguity an approach of “contra preferentum” should be applied. However, as I am satisfied that the condition was included for the benefit of the purchaser, but that the wording was proffered by the vendors’ solicitors, there is no clear basis for that principle to be applied to assist one or other party.
12 I agree with the defendants’ submission that as a principle of construction relevant to the circumstances of this case, to give it context and to shed light on the intentions of the parties, this condition should be read with the rest of the contract, in particular Special Conditions 21 and 22.
13 Special Condition 21 starts with definitions of “contamination” and of “Environmental Laws”, and specifies that “the purchaser is deemed to buy and expressly acknowledges that it does buy the property subject to any restrictions imposed by all Environmental Laws”.[10] Further, the purchaser expressly acknowledged that it, together with such experts, consultants and/or advisers of any nature which it may have required, had examined or had opportunity to examine the property prior to signing the contract of purchase. The purchaser also acknowledged receipt of five previous reports specified[11], and acknowledged that those were provided to it solely for the purpose of assisting it to assess the state and condition of the property and that the vendor did not warrant that the information in the reports was sufficient to enable the vendor to make any warranties about the state or condition of the property. The purchaser also expressly acknowledged that it could not claim compensation or refuse or delay payment of the whole or any part of the purchase price because of the existence of any Contaminant either on, in, under or emanating from the property or because of any works required to be undertaken to comply with any environmental law and further that the vendor was not required to remove or treat any Contaminant either on, in, under or emanating from the property.[12]
[10] Special Condition 21(b)
[11] Special Condition 21(g)
[12] Special Condition 21(h)
14 Further, a necessary pre-condition to the signing of the contract was a vendor’s statement[13], and that included copies (on disk) of the same five previous reports as were listed in special condition 21.
[13] Required under section 32 Sale of Land Act
15 It is clear from the content and presence in the contract of special condition 21, that the plaintiff had been informed before it signed the contract, that there had been contamination of parts of the site due to previous industrial uses, and the five previous reports had been provided. It is also clear from special condition 23 that the intention of the parties was to allow the purchaser to have further investigation carried out of the contamination of the site and whether it would interfere with the intended use, but within certain confines, including a time limit (150 days). In this context I infer that special condition 23 was not intended to give the purchaser a right to bring the contract to an end merely on the basis that there was a history of contamination at the site, nor on the basis solely of the content of the 5 previous reports, but that it was intended to allow withdrawal from the contract if some new information were obtained which was serious enough that of itself or together with what was already known it would “prohibit” the proper use of the property as a place of assembly.
16 In my view special condition 23 is inherently difficult to construe and to apply because it involves multiple negatives. This results from the drafting which is attributable to the defendants. The condition starts by making the contract subject to the obtaining of a “complying report”, although it later imposes on the purchaser a positive obligation to request and receive a report within a time limit before it could seek to rely on the condition to end the contract. The description of a “complying report” involves two negatives – a report “which does not disclose any facts that would prohibit the property being properly used as a place of assembly”. The question then raised is - what is the converse – or negative - of obtaining of a “complying report”? In other words, what is required of an environmental report to entitle the purchaser to bring the contract to an end?
17 Both parties referred at times to a “non-complying report”, as the opposite of a “complying report”, but in my view that does not answer the question.
18 The defendants argue that the right of the purchaser to terminate the contract only would have arisen if an environmental report were obtained which did disclose facts which would prohibit the property being properly used as a place of assembly. That seems also to have been the meaning adopted by the plaintiff’s original solicitors at the time of terminating the contract, who described the Ramsay report as ““disclosing that the site cannot be properly used as a place of assembly”. The submissions of the plaintiff’s counsel during this case did not go that far. Rather, as I understand Mr Wilmoth’s submissions, it is contended for the plaintiff that it was enough to invoke the condition if an environmental report were obtained which did not positively support the proper use as intended; that is, a report which raised issues which might prohibit the intended use, albeit requiring further investigation to confirm or exclude that possibility, but which in the meantime (and within the 150 day time limit under the contract) failed to give the property a clean bill of health for the intended use.
19 After some hesitation, I am satisfied that in the context of this contract the construction that gives sensible and practical application to this condition is that for the purchaser to bring the contract to an end, there needed to be obtained an environmental report which did disclose facts that would prohibit the stated intended use. That is, I construe it as requiring a report which positively disclosed facts which would prohibit the property being properly used as a place of assembly, and not one which raised facts that might prevent such use but required further investigation. I reach this construction from the fact that the contract disclosed 5 previous reports on historical contamination issues, including some remedial work, and also gave the purchaser the opportunity to bring experts onto the property to give advice before signing the contract. If special condition 23 enabled the purchaser to bring the contract to an end because it obtained a report that more investigation of contamination was required before it could be ascertained whether the property could be properly used for the intended purpose, it would have had the effect of really only being an offer to purchase subject to further investigation, while binding the vendors to the purchaser’s offer exclusively for 150 days. Given that the purchaser had been given opportunity to have experts inspect (although probably not take soil samples as they would have required breaching concrete), in my view that is not the intention to be inferred from the detailed content of special condition 21. Nor in my view does it sit well with giving business efficacy to the point that had been reached when the plaintiff signed the contract to purchase. In my view on its proper construction special condition 23 allowed for further investigation within the 150 day time limit, but only to allow the purchaser to withdraw if facts were disclosed that did prohibit the proper use of the property as a place of assembly, and not just leave that open as a possibility.
Was the Ramsay report of a type capable of being relied upon to bring the contract to an end?
20 The defendants’ first contention is that because Mr Ramsay’s report is described as a preliminary site report (“PSI”), expresses “potential environment impacts,”[14] points to “possible” impacts on the suitability of the site for ongoing commercial industrial use, and recommends a detailed site investigation (“DSI”), a detailed groundwater assessment, and a hazardous building materials survey, it was not capable of being or not being a complying report. The plaintiff argues that the requirement for it to retain an expert to provide an environmental report within 150 days of the date of the contract meant that there could not be a DSI carried out within that time, and the report provided by Mr Ramsay on a fair construction does disclose facts that would prohibit the property being properly used as a place of assembly.
[14] Part 13
21 I accept Mr Ramsay’s evidence that a “PSI” is one of the forms of environmental report for which protocols are set out in the National Environment Protection Measure of 1999, which also sets out what is involved in a DSI. I accept that a PSI, as was performed here, is an accepted form of report to be obtained when a purchaser is investigating a site for purchase, and further, that a DSI was likely not only to cost a great deal more (potentially between $50,000 and $100,000), but also to take around six months for the work to be done.[15] Therefore, as the type of report envisaged by Special Condition 23 allowed only 150 days for the report to be commissioned and finalised, I am satisfied that it was not a DSI that was envisaged by the clause if indeed either party knew the specific types of investigations then available.
[15] T 31, lines 10 – 13.
22 I am satisfied that a PSI was sufficient to qualify as an environmental report under Special Condition 23. However its content still needed to meet the description that it disclosed any fact that would prohibit the proper use of the property as a place of assembly.
23 In my view this special condition did not require definitive opinion from the expert. It requires that there be an environmental report from an expert which does not disclose facts that would prohibit the property being properly used as a place of assembly. In my view that calls for an environmental report from an appropriate expert, and a PSI would qualify, but whether the right to bring the contract to an end is activated is not determined by the expert’s opinion – if given in the report. In my view there needed to be an examination of the content of the report as to whether it disclosed facts which prohibited the intended use. The expert’s opinion is likely to be very helpful to the purchaser – if given at the time - or to the Court, in interpreting the consequences of the facts disclosed, but in my view the report itself does not need to reach definitive opinion expressed by the expert, and to the extent it did then that opinion may well be helpful but does not itself answer the question of whether the conditions in the special condition were met.
24 Therefore, the supplementary report of Mr Ramsay dated 15 May 2009, the content of his expert witness statement dated 18 December 2009 and his oral evidence, in my view is all admissible and able to be used to the extent of assisting in the understanding of what was disclosed in the original report of March 2009, but cannot be used to supplement facts going to whether or not the initial report entitled the plaintiff to withdraw from the contract. Further, I note that the purchaser acted in reliance on the special condition before having those supplementary reports available.
25 Similarly the expert evidence, both report and oral evidence, of the defendant’s expert, Mr Pump, is relevant to inform and assist in the understanding of the court and interpretation of what was disclosed in the March 2009 Ramsay report.
26 This is not a case of the Court deciding whether to prefer one expert’s opinion over another’s. Although they urge different conclusions, I have taken both into account to assist me in deciding the meaning and consequences of the March 2009 report.
Meaning of “disclose any fact”
27 Both of the words “disclose” and “fact” require construction in the circumstances that eventuated. Both in my view take context from other terms of the contract.
28 It is clear from Special Condition 21 and the documentation contained in the vendor’s statement, that before signing the contract the plaintiff had been informed that there were issues in relation to contamination of the site, had been given the five previous reports on the subject, and had been given some opportunity to obtain advice about the implications for its intended use of the property, including to bring its own experts or consultants to inspect the site before the contract was entered into. While that may not have entitled the taking of soil samples – which as I understand involved breaching the concrete surface – there was at least opportunity to consider what had previously been found and tested.
29 In my view that background gives context to special condition 23 and makes it clear that it was not intended to give the purchaser a right to withdraw from the contract based only on repetition or even further consideration of information contained in the previous reports. In my view the word “disclose” should be taken to mean only newly obtained information, rather than to be read as synonymous with “contain”. I consider that “disclose” was intended to mean more than the interpretation of what was previously known or reported in relation to contaminants on the property.
30 Further, the word “facts” should be given its ordinary meaning and not be read as meaning opinion or interpretation. In my view the provision of previous reports and opportunity to have experts and advisers not only view them but also inspect the property, all before the contract was signed, should not be read so as to allow new interpretation or opinion about the contamination based only on facts already known and disclosed in the earlier reports.
Meaning of “Prohibit”
31 As it relates to the proper use of the property as a place of assembly, I do not consider that the expression “prohibits” refers only to a legal prohibition, as urged by the defendants. In my view it should be construed as meaning “prevents” in a practical sense. However, the expression in my view conveys a need for there to be a strong or definite reason why the property could not properly be used as a place of assembly, rather than a possible contraindication. In my view, that embraces the prospect that a disclosed fact would not prohibit the proper use of the property if reasonably practicable works could be carried out, or precautions taken to enable the proper use as a place of assembly.
Meaning of “place of assembly”
32 I note that Special Condition 22 was framed in structure similarly to Special Condition 23 and made the contract conditional on the purchaser obtaining, from Moonee Valley City Council, a permit to use the property as a place of assembly within 150 days from the date of the contract. There was no evidence before me of any application for such a permit and the plaintiff did not purport to bring the contract to an end and reclaim the deposit on that basis. Nevertheless, I note the presence of that clause partly because of its structure, and partly because it relates to the intended use of the property as a place of assembly.
33 In relation to the expressed intended use of the premises “as a place of assembly”, it is conceded by the plaintiff that there is no evidence of further explanation of the intended use to the vendors or vendors’ agent.[16] Mr Ramsay said in his oral evidence that he did obtain some further information by asking questions and receiving answers from his client[17], but the details of that further information did not emerge, and in particular no one was called from the plaintiff to explain more specifically how it had intended the property to be used. Both Mr Ramsay and Mr Pump, the defendant’s environmental expert, formed the view that the appropriate category of use as against which to consider contaminant levels, was the category known as commercial/industrial use, in the various standards considered. That categorisation assumes presence of people - and therefore exposure - for up to eight hours per day, but not for up to 24 hours a day as is the assumption behind the standard set for residential use.
[16] T 279 – 280, line 28.
[17] T 39.
34 I take the intended use to have been non-residential, and that various parts of the property would be used for different periods but measured by up to some hours rather than a day or more. I take it to have been intended for groups of people of differing ages and for differing activities, from meetings, study, discussion, prayers, or other activity groups. In any event, I am satisfied that the application of the standard for commercial/industrial exposure was appropriate.
What did the Ramsay Report disclose?
35 The Ramsay report reached the conclusion that the soil and groundwater at the site had been impacted at a level which could affect the suitability of the site for an ongoing commercial/industrial use, and recommended that a DSI be undertaken, and also a detailed groundwater assessment, and (hazardous building materials survey)[18] before a more comprehensive assessment of the potential environmental liabilities associated with the site, and need for remediation, could be made[19].
[18] P43 – to ascertain whether asbestos was present.
[19] From Executive summary
36 Mr Ramsay described the process his firm’s investigation took. The content of the previous reports was analysed, and so as to optimize coverage, it was decided that 12 soil samples his team was to take should be from different areas on the site where given the history of installations contaminants might be expected to be found but which had not previously been tested. The Ramsay report took into consideration the previous findings as well as the results of the samples it took.
37 The first matter relied upon by the plaintiff as affecting the proper use of the site as a place of assembly is the finding of the presence of copper contamination. A copper concentration of 9,700 mg/kg was measured in sample 6381/7A, above the Health Investigation Levels for a commercial industrial use (“HIL F”)[20] criterion of 5,000 mg/kg. That sample together with sample 6381/2A in which copper concentration was 740 mg/kg, were above the Ecological Investigation Level (“EIL”) criterion of 100 mg/kg.[21]
[20] Commercial /industrial use category is F,compared with A for residential
[21] Exhibit C – Ramsay report – para 11.2.
38 Mr Ramsay said in oral evidence that in relation to this copper concentration it was a fact which meant that the site potentially could not be used for the proposed use[22], and that it would require a DSI involving additional sampling to determine whether this was isolated or whether there were more or even higher concentrations elsewhere on the site. He said, however, that were a DSI to be pursued and find no higher copper concentrations on the site, then the 9,700 mg/kg reading in one sample would not alone prevent the site from being used as a place of assembly.[23] Absent a DSI or other tests showing higher copper concentration, therefore, it must follow that Mr Ramsay’s opinion is that the finding referred to in his PSI would not prevent the proper use of the site as a place of assembly. In other words, this test result in his report, and his finding that it was higher than recommendations for this type of use, was not a fact that prevented the intended use of the property. Further, although in my view not strictly part of the inquiry I should make on this issue, in relation to this finding he said that he asked about whether there would be exposed soil such as outside playgrounds for children, and his instructions were that the intended use was for a site being built on without open areas.[24]
[22] T 35, lines 24 – 26.
[23] T 36, lines 8 – 18.
[24] T 36, T 39, lines 10 – 11, line 30; T 40, line 11.
39 The next element of contamination was BENZO(a)pyrene, abbreviated as B(a)P. Concentrations up to 14 mg/kg were measured in four samples above the HIL F criteria of 5 mg/kg.
40 In addition there were polycyclic aromatic hydrocarbons (PAH). That is a term which incorporates a number of hydrocarbons from which there have been residues from coal town gas manufacturing. Some are carcinogens so care about the extent is needed. An elevated total PAH concentration of 160 mg/kg was measured in one fill sample, this being above the HIL F criteria of 100 mg/kg. Mr Ramsay regarded the B(a)P as more serious as it is carcinogenic and if ingested risks causing the development of cancer. He explained that B(a)Ps are a subset of PAHs but are separated by the laboratories because the B(a)P is the “nastiest chemical” because it is a carcinogen and the other PAHs total would include the B(a)P.
41 Mr Ramsay also referred to lead concentration of up to 21,000 mg/kg in the vicinity of the former polypropylene area in the eastern portion of the site. That finding was above the HIL F criterion for lead which is 1,500 mg so it is described by Mr Ramsay as a “gross exceedence”.[25] He said that if that lead concentration were extended it would be a significant risk and pose a significant risk to anyone exposed to it. This finding however was made by ACMA engineering in a report in March 2003 which was one of the previous reports disclosed and provided by the vendors. No retesting of the area where it had been found was done, so the defendants challenge whether it can be inferred to still be present. No sampling taken by Mr Ramsay’s team disclosed elevated lead levels.
[25] T 43, line 9.
42 Another contaminant considered relevant by Mr Ramsay was elevated phthalate which he said is a chemical used in plastics manufacturing and quite high concentrations up to 490 mg/kg were found. Further, total petroleum hydrocarbon (TPH) was found with readings of up to 20,500 mg/kg which Mr Ramsay also said was quite high and indicates issues relating to leaching from under the underground tanks or from the aboveground tank. These findings were from the EES March 2003 investigation. Mr Ramsay’s evidence was that this contamination could not be removed due to the proximity to the southern wall of the factory, and he said it was likely to still be there, although there could be some lessening through natural biodegradation through bacteria which eat petroleum hydrocarbons, so there could have been a little bit of reduction but he expected the concentrations to remain slightly elevated. However, this was not a new disclosure. He did not test again for those elements in these areas and derived the information on them from reviewing the previous reports.
43 As to the reference in the EES report that a liquid or product was noted emanating from the spaces between the bricks of the southern wall of the factory in the vicinity of the former product dispenser, there was no evidence that that was still visible at the time of the Ramsay report. Mr Ramsay interpreted its description as there having been leakage from the concrete bunded bowser – bunded being a concrete structure to contain any leakage – and he noted that in the EES report the investigator had observed this viscous liquid seeping for approximately five minutes after exposure at which point it ceased. He said that highlighted the potential for soil and groundwater contamination, there having been spillages across the site and the potential.
44 In his oral evidence Mr Ramsay was asked whether, if the levels of contamination discovered in 2003 were still present, together with the contaminate levels found of copper he found, there were overall consequences in terms of use of the site as a place of assembly[26]. Mr Ramsay said they could significantly impact on the use, and prevent it without remediation, particularly the lead level as it was extremely high[27] and its presence a direct threat to human health. However, he said that the direct threat to human health posed was during construction or ongoing maintenance if there needed to be breach of the sealed surfaces, and for that a specific health risk assessment would be needed, to indicate whether one needed to remediate or whether some concentration could remain on site under specific circumstances but that would be a much greater body of work to be done. If the lead level remained the same as it had been found in the ATMA 2003 testing, a DSI would be needed before a health risk assessment ,because a health risk assessment would need to have the site adequately characterised. He said that the previous assessment tells you it is a very high number, a significant issue that needed to be addressed.
[26] T 50.
[27] This was if the ATMA March 2003 reading of 21,000 mg/kg were still present.
45 As to the findings from Mr Ramsay’s own samples, the copper finding above the HIL was one, and also the PAHs and the B(a)P were higher than the HIL recommendations. He said that irrespective of the earlier studies, the PSI showed that there were some high concentrations of those chemicals on the site[28] and that those “could preclude the proposed use”. His team did test for phthalates, which were found present in two out of ten samples but in each instance the concentration was below a relevant standard.
[28] T 52, line 26 to T53, line 1.
46 In May 2009 – after the contract had been terminated – Mr Ramsay was asked for an opinion on the application of Special Condition 23. That of itself was not part of his expertise, but I am assisted by his expert opinion going to the issue I must decide. Mr Ramsay had stated that the conclusion from his report was that there was potential for human health risk to occur for a commercial/industrial land use, including a place of assembly, and it was his view, based on the data presented in the PSI, that the site should not be used as a place of assembly until the magnitude and extent of contamination had been investigated. His view was that it had been demonstrated that the contamination would be significant for a commercial/industrial land use.
47 He clarified[29] potential risk - that is for unacceptable exposure to occur – to relate to exposure during construction works, or, if during use as a place of assembly there were exposure to the soil”.[30] Exposure would be through inhaling dust in which there were the heavy metals or the soil containing the benzopyrene. So far as use after any construction phase was concerned, Mr Ramsay said that the remaining potential issue was groundwater which required further assessment. Here there had only been some initial work done in earlier assessments. He said there was always potential for vapour from chemicals to come up through the soil on the site, but agreed that that would be satisfactorily contained by concrete covering the ground. Further, groundwater moving off the site, if polluted, would require the owner to clean it up. He noted that there had been six underground tanks and potentially another tank used on the site in the past, and that an earlier study had identified some contamination, but the extent and magnitude had not been identified. If it was significant enough that the plume was going offsite it could, according the Environment Protection Act, require cleanup by the owner. I do not take this potential problem to be a fact which would prevent the intended use of the site, although it may have cost the purchasers in money terms. In any event, this opinion was based solely on the content of a previous report and did not include any new facts.
[29] T54, line 9.
[30] T54, lines 22 to 23.
48 Taking each of the issues as to contamination into account that were discussed in the Ramsay report, I consider those which were included as having been shown in previous reports as outside the description “disclose any fact”. The findings as to copper, PAHs and B(a)Ps above HIL F or other accepted standards, were newly disclosed facts. However, whether taken individually or even in combination with each other and all that had come from previous reports, I am not satisfied that what the Ramsay report did was disclose any facts which would prohibit or prevent the intended use as a place of assembly. What it did was point to there being facts, some newly disclosed through its own soil sampling and the laboratory testing, and some shown in previous reports, which “could preclude the proposed use”, and which required further investigation through a variety of reports and assessments.
49 I am therefore satisfied that the Ramsay report could not be properly described as having disclosed any facts which would prohibit the proper use of the property as a place of assembly. It follows that the Plaintiff was not entitled to bring the contract to an end under special condition 23 of the contract. Its claim for return of the deposit fails.
Counterclaim
50 It follows from my finding that the plaintiff breached the contract by trying to bring it to an end in reliance on special condition 23, that the defendants are entitled to recover from the plaintiff their losses consequent on that breach.
51 The defendants claim their losses on resale of the property as follows:
(i) difference between contract price and resale price; (ii) commission payable to estate agent on second sale; (iii) legal costs on resale; (iv) interest to compensate for loss of use of funds up until judgement. It concedes that the forfeited deposit reduces its losses by that amount, namely $305,000.
52 The main item in contention is the difference in the resale price achieved, the plaintiff arguing that it was lower than market value. Each party called a well qualified and experienced valuer to give evidence, having produced a valuation report. The plaintiff relied on the evidence of Mr Brian Dudakov[31], who made his valuations in October 2010, but concluded that the value has been fairly stable over the preceding two years, and valued the property as at March 2009, January 2010 and October 2010 at $2,550,000. In addition, he considered it not unreasonable that a purchaser might pay a premium above market value to obtain the benefit of special conditions such as special condition 23. The defendants relied upon the evidence of Mr David Tunbridge, who valued the property as at 10 March, 2010 at $2,400,000.
[31] He was engaged after an earlier valuer became unavailable to attend and be cross-examined.
53 Both valuers considered relevant the following features of the property. It is contained on one title, is slightly irregular in shape, and has two street frontages, one being Racecourse Road, giving direct connection with the Princes Highway. It has close access to CityLink. Its planning zoning is “Industrial 1”, and it is situated in a mixed use area. The property is subject in part to Heritage Overlay, Inundation Overlay, and is covered by the Incorporated Plan Overlay relating to the Moonee Ponds Creek Concept Plan.
54 Most of the site is covered by buildings. One of those is on the Victorian Heritage Register, being the former Burge Bros factory which is architecturally important for its laminated timber arched roof. The other buildings are more recently built warehousing, including storage and office areas. All were said to be in a basic state of repair, with roof leaks, cracks in brickwork and uneven floors evident. This meant that repair or conversion works would be necessary. There was also the question of contamination from prior industrial uses. Mr Tunbridge believed there was asbestos present whereas Mr Dudakov thought it possible but not confirmed. At the time of the contract, the breach of contract (March 2009), and the eventual resale, the property was unoccupied, and each sale was with vacant possession.
55 It was also known that the property had been on the market through Knight Frank, estate agents, since 2007. It had been advertised for auction in November 2007, with an expected price up to $3,500,000, but was withdrawn from auction. It was on the market for private sale throughout 2008, with the plaintiff finally signing a contract at the price of $3,050,000 in December 2008.
56 Both valuers took into account that during 2008/09 the Global Financial Crisis had had some adverse impact on the Australian and Victorian property markets, but said that that varied according to the nature of the property and its risks.
57 Both valuers approached the same methodology methods. They looked at other sales in the area but both noted that there had been no really comparable sales in the area for about 2 years, because no other properties had equivalent combinations of size, types of improvements, restrictions from Heritage and Inundation overlays, with possible contamination issues. Mr Tunbridge therefore thought it acceptable to use the actual sale price achieved (the resale in January 2010) on the subject property as a reliable market test [32]. Mr Dudakov did not include the resale price on the subject land in his data.
[32] Exhibit 4 – Report dated 12 March 2010, p16.
58 In my view, a detailed examination of each valuation can give rise to some questions or scope to quibble, about the precise variations, but overall they reach a value in a similar range. In my view the very fact that Mr Dudakov reaches the same value for three different “dates” over a period of 18 months, and that Mr Tunbridge applies just one value a year after the date of the breach, indicates that valuations in these circumstances must be seen as imprecise and subject to some margin for variation. Mr Tunbridge on cross- examination acknowledged that.
59 Both reach a price considerably below the contract price to which the plaintiff had agreed in December 2008. I note that the plaintiff had engaged solicitors and an estate agent to assist it in the negotiation processes. It is no part of my decision to consider whether their advice was sound, nor who recommended or decided upon the price of $3, 050,000.
60 Mr Tunbridge said that his valuation was without regard to there being contamination, although his written report assumed the presence of asbestos. He also had not seen any contract and made his valuation without regard to the terms of any contract, in particular any special conditions as to the obtaining of a permit for a specific use. He said that he would not recommend to a client paying a premium on market value to obtain the incorporation of a special condition[33] if the intended use was within the uses permitted in general terms under the zoning. He did concede that a special condition may result in a higher or a lower price depending on the conditions[34].
[33] T 265,l16-24
[34] T 272, lines 3-11
61 The plaintiff relies on Mr Dudkov’s opinion[35] that it was not unreasonable for a premium to be added to market value to achieve special conditions of the type that the plaintiff had in special conditions 22 &23. What Mr Dudakov wrote in his report was that although the purchase price for which the plaintiff contracted for this property was not supported by the available comparable evidence of properties purchased for factory or warehouse use, it is reasonable to conclude that there was a premium for incorporation of special conditions 22 & 23, and his conclusion – “while the premium in this instance represents 27% over our valuation, given the heritage/inundation/ environmental limitations imposed, such a premium is not unreasonable.” He explained this in his evidence as comparable with a special condition for the obtaining of a permit for a specific change of use.
[35] Exhibit F, section 9 (p 22)
62 I accept Mr Dudakov’s opinion that the inclusion of such a special condition could warrant a premium in purchase price, and to the extent that Mr Tunbridge rejected that proposition I accept the opinion of Mr Dudakov as to the general principle. However, if he was in fact purporting to use his valuation expertise to quantify such a premium, rather than comment on the arithmetical result with hindsight, I do not accept that the figure of 27% is based on valuation expertise.
63 What I have to decide is what loss was suffered by the defendants by reason of the plaintiff breaching its contract to purchase the property for $3,050,000. I am not convinced that Mr Tunbridge’s valuation figure of $2,400,000 was sufficiently independent for the purpose of this issue, as he accepted the actual resale sale price of the subject property into his data as “evidence of current market value”[36]. For that reason I am satisfied that I should prefer the figure of $2,550,000 from Mr Dudakov as the market valuation of the property at the time of the breach.
[36] Exhibit 4, p 16 – last sentence.
64 I am also satisfied on the balance of probabilities that there was some premium in the price agreed to be paid by the plaintiff to obtain the inclusion of special conditions 22 and 23, compared with the unconditional contract which is the basis of a market valuation. I reach that view from the preceding correspondence[37]. However, as already stated I do not accept that that premium was 27%. The only indication of quantification of such a premium which I can infer from the preliminary correspondence tendered is that between the price of $3,000,000 on an “expression of interest” dated 25/8/08 - which did not specify conditions as to an expert report on contamination or obtaining a permit for the use as a place of assembly – and the final offer of $3,050,000 subject to those terms. I have taken into account that when the request for such conditions was first added by the plaintiff the price offered was still $3million, but note that the wording at that stage was “subject to receiving a satisfactory environmental report on the subject property”[38] . With no other evidence as a guide to quantification of the premium, I find that $50,000 was a premium in price offered by the plaintiff to achieve the inclusion of special conditions 22 and 23.
[37] Exhibit 5
[38] Email from Alan Stubbings to Ben Hackworthy, dated Monday 27 October 2008 – contained in exhibit 5.
65 It seems to me that the appropriate way to take that premium into account, is to regard the lost value of the contract with the plaintiff as of $3,000,000 rather than $3,050,000. Taking Mr Dudakov’s assessment of market value at the time of the breach, of $2,550,000, the difference is $500,000.
66 Further items of loss were the commission payable on the second sale, $33,000, and $1,660 in legal costs on it.
67 I am satisfied that lost use of the purchase price should be allowed at bank borrowing rates, as there was a registered mortgage on the property, up until the filing of the counterclaim, and thereafter at the penalty interest rate. The precise calculations will need to be made.
68 The amount of the deposit will be deducted from the damages. If it has been in an interest-bearing account in the names of the parties, that interest will be released with the deposit to the defendants and will also need to be deducted from total damages, but if it has been held in an account from which interest accrues to a statutory guarantee fund, then it will not be available to the defendants and should not be deducted.
69 Total damages on the counterclaim are therefore $534,660 less $305,000, being $229,660 plus interest calculated as outlined above.
Australian Muslim Social Services Agency Inc –v- ROY (CI-09-02249)
Schedule of Exhibits
| Number and | Short Description of Exhibit | Tendered by |
Identifying Mark
on Exhibit
A Report on preliminary site investigation by Peter Ramsay Plaintiff & Assoc date 3 March 2009 and supplementary report
dated 15 May 2009B Report from Peter J Ramsay & Assoc dated Dec 2009 Plaintiff (excluding 42-47) C Contract of sale of 135-137 Racecourse Rd Kensington Plaintiff dated 17 Dec 2008 D Letter from Plaintiff’s solicitor to Defendant’s solicitors Plaintiff dated 6 March 2009 E Letter from Defendant’s solicitors to Plaintiff’s solicitor Plaintiff dated 24 March 2009 F Valuation report by Mr Bryan Dudakov dated Oct 2010 Plaintiff
| Number and | Short Description of Exhibit | Tendered by |
Identifying Mark
on Exhibit
1 Extract from National Environmental Protection Measure Defence - Health Based soil investigation levels 2 National environment protection (assessment of site) Defence measure of 1999 with Schedules B1 B2 B3 B4 B5 B6
B7A B7B B8 B9 B103 Report and attachments of Warren Pump URS Australia Defence Pty Ltd 4 Valuation report of Mr David Tunbridge dated 12 March Defence 2010 5 Bundle of documents preceding contract of sale Defence including;
(i) expression of interest form dated 25 Oct 2008
(ii) emails between agents dated 21& 22 October 2008
(iii) emails from plaintiff’s agent to defendant’s agent with
defendant’s notations dated 27 Oct 2008
(iv) Letter from defendant’s agent to plaintiff’s agent
dated 6 Nov 2008
(v) letter from plaintiff’s solicitor to defendant’s solicitor
dated 26 Nov 2008
(vi) file note of Christina Michael of the defendant’s
solicitor dated 1 Dec 2008
(vii) email from defendant’s solicitor to plaintiff’s solicitor
with 3 pages attachments dated 3 December 2008
(viii) file note of Christina Michael of the defendant’s
solicitor dated 3 Dec 2008
(ix) file note of Christina Michael of the defendant’s
solicitor dated 4 Dec 2008
(x) email from defendant’s solicitors to plaintiff’s solicitors
dated 4 Dec 2008
(xi) file notes of Christina Michael of the defendant’s
solicitor dated 4,5, 9 & 15 Dec 20086 Copy of exclusive sale authority by defendant s to Knight Defendant Frank dated 31 Aug 2009. 7 Copy invoice from Knight Frank to defendants dated 28 Defendant Jan 2010 in respect of commission on sale 8 Statement of adjustments as at 27 May 2010 of Defendant Defendant 9 Invoice from defendants solicitors to defendants as to Defendant costs on acting on resale dated 7 June 2010 10 Copy of contract of sale between defendants and Defendant Auswise Pty Ltd dated 22 Jan 2010 11 Exclusive Auction Authority from the defendants to Defendant Knight Frank Australia Pty Ltd dated 17 October 2007
0
0
0