Besser v Alma Homes Pty Ltd
[2012] VSC 460
•5 October 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. S CI 05294 of 2012
IN THE MATTER of an application in respect of s 9AC and s 9AF Sale of Land Act 1962 (Vic)
IN THE MATTER of an application under s 49 of the Property Law Act 1958 (Vic)
| BELLA BESSER | Plaintiff |
| v | |
| ALMA HOMES PTY LTD (ACN 123 681 363) | Defendant |
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JUDGE: | PAGONE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 3 October 2012 | |
DATE OF JUDGMENT: | 5 October 2012 | |
CASE MAY BE CITED AS: | Bella Besser v Alma Homes Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 460 | |
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SALE OF LAND – Amendment of plan of subdivision – Whether amendment of subdivision materially affected the lot – Whether purchaser entitled to rescind the contract – Whether purchaser entitled to repayment of deposit from vendor – Sale of Land Act 1962 (Vic) ss 9AC, 9AF.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Panna S.C. | Jessop and Komesaroff Pty |
| For the Defendant | Mr W Stark | Hassall’s Litigation Services |
HIS HONOUR:
The plaintiff (“Ms Besser”) seeks a declaration that pursuant to s 9AC of the Sale of Land Act 1962 (Vic) she has validly rescinded a Contract of Sale between herself and the defendant (“Alma Homes”) on the grounds that Alma Homes has amended the plan of subdivision in a manner that will materially affect the lot she had agreed to purchase. Ms Besser also seeks a consequential order pursuant to s 9AF(1)(b) of the Sale of Land Act 1962 (Vic) for the repayment of the deposit of $125,000 which she had paid to Alma Homes pursuant to the Contract of Sale.
On 11 April 2011 Ms Besser and Alma Homes contracted for the sale of a property described as “Lot 4 on proposed plan of subdivision PS638257D”. The sale was an “off the plan” sale in respect of a property which was the subject of subdivision. The contract provided for a purchase price of $1,250,000 of which a deposit of $125,000 was paid on or about 11 April 2011. The contract for the sale was in the standard form and included a Vendor’s Statement given pursuant to s 32 of the Sale of Land Act 1962 (Vic) to which was attached, amongst other documents and information, a copy of the proposed plan of subdivision.
The document identified by Ms Besser as the plan of subdivision comprised of four pages. Each page bears the plan number PS638257D. The fourth page is headed “Owners Corporation Schedule” and identifies the lot entitlements and lot liabilities for each of the four lots in the plan. The second page contains drawings showing the location of the properties within the title boundaries and the area set aside as common property. The fourth page of the plan of subdivision stated that there was to be an equal 25 per cent entitlement and liability to each of the four lots (consisting of 100 each totalling 400).
On 21 August 2012 Ms Besser’s solicitors received correspondence from the solicitors for Alma Homes advising that the plan of subdivision had been registered at Land Victoria on 20 August 2012. The correspondence enclosed a copy of the registered plan of subdivision. The plan of subdivision as approved was of three pages but was forwarded by the solicitors for Alma Homes to the solicitors for Ms Besser with a document on the stationery of the Department of Sustainability and Environment headed “Owners Corporation Search Report (Premium)” produced 21 August 2012 in relation to registered plan number PS638257D. That document identified the entitlement and liability for the lots differently from the way it had appeared on the fourth page of the proposed plan of subdivision which had been attached to the Vendor’s Statement. The Owners Corporation Search Report showed the lot entitlements and liabilities as totalling 202 (and not 400) in respect of which Lot 1 and Lot 4 each had an entitlement of one (of the 202) and not 100 (of the 400).
Ms Besser contends that the registered plan of subdivision would give her Lot an entitlement and liability of one out of 202 rather than the one quarter entitlement and liability of 100 out of 400 which had been proposed. Ms Besser maintains this amendment to be an amendment materially affecting the lot to which her contract with Alma Homes related. On 3 September 2012 Ms Besser’s solicitors notified the solicitors for Alma Homes that Ms Besser had rescinded the contract pursuant to s 9AC of the Sale of Land Act 1962 (Vic) and demanded repayment of the deposit she had paid. Alma Homes rejected the contention that the change entitled Ms Besser to rescind the contract and has refused to refund the deposit.
Section 9AC of the Sale of Land Act 1962 (Vic) entitles a purchaser to rescind a prescribed contract within 14 days of being advised of “an amendment to the plan of subdivision which will materially affect the lot to which the contract relates”. Section 9AC provides:
(1)If after a prescribed contract has been entered into and before the registration of the relevant plan of subdivision an amendment to the plan is required by the Registrar or requested by the vendor, the vendor shall within 14 days after the receipt of the requirement of the Registrar or the making of the request by the vendor (as the case requires) advise the purchaser in writing of the proposed amendment.
(2)The purchaser may rescind a prescribed contract of sale within 14 days after being advised by the vendor under subsection (1) of an amendment to the plan of subdivision which will materially affect the lot to which the contract relates.
There is no dispute between the parties concerning the application of the provision apart from whether the amendment in the lot entitlements and liabilities is to “the plan of subdivision”, and, if it is, whether the amendment will “materially affect the lot” to which the contract relates.
It was contended for Alma Homes that the amendment in the lot entitlement and liability was not an amendment to the plan of subdivision because the change did not affect the boundaries of the property or its physical features. Neither “plan” nor “plan of subdivision” is specifically defined in the Sale of Land Act 1962 (Vic) but both are defined in s 3 of the Subdivision Act 1988 (Vic). There “plan of subdivision” is defined to mean “a plan showing the subdivision of land” and “plan” is defined to mean:
a plan under section 24A, 32B or 37 or Division 3 of Part 5 or a plan of -
(a) subdivision; or
(b) consolidation; or
(c) creation, variation or removal of an easement or restriction.
I am unable to accept the submission for Alma Homes which would exclude from the meaning of the words “plan of subdivision” in s 9AC the provisions for lot entitlements and liabilities. The word “plan” is not used in the section to mean only the design or layout of the physical boundaries of real estate but is used in its ordinary meaning to include the totality of the scheme and arrangement by which property is to be subdivided. The “plan” for the subdivision of the land in question included the respective rights and obligations which were to attach to each of the lots. The proposed plan of subdivision comprised all four of the pages which had been provided in the contract, and “the s 32 statement”, including the fourth page setting out the respective entitlements and liabilities. Part of the plan of the specific subdivision which was proposed was the proportionate allocation of the entitlements and liabilities attaching to each of the lots. It is not to the point that an amendment may benefit the party seeking rescission. That fact may be relevant to whether it materially affects the lot but not to whether it is an amendment to the plan itself. The form in which the plan of subdivision was subsequently registered requires no different conclusion. The plan of subdivision is expressed to be three pages but expressly refers to and incorporates the Owners Corporation Search Report identifying the respective entitlements and liabilities. That may be seen from the first page of the registered plan of subdivision which contains a section in bold with the words “LOTS ON THIS PLAN MAY BE AFFECTED BY ONE OR MORE OWNERS CORPORATIONS”. In this case those words were followed by a reference to the Owners Corporation Search Report for details. It was that Search Report which accompanied the documents forwarded to Ms Besser’s solicitors by the solicitors for Alma Homes and which showed the entitlement and liability attaching to Lot 4 to be one of 202 and not 100 of 400.
The reason for the amendment was explained by counsel for Alma Homes as intending to benefit the owners of Lots 1 and 4. An examination of the map forming part of the plan of subdivision shows that the common property may be thought substantially to serve and benefit the owners of Lots 2 and 3. Lots 1 and 4 have direct access from Bambra Road, whilst Lots 2 and 3 are accessible through the common property driveway running between Lots 1 and 4. Lots 1 and 4 are front units and may have less reason to use the common property than the owners of Lots 2 and 3 and, for that reason, it may be thought that the owners of Lots 1 and 4 should not be subject to the same liability for the maintenance and upkeep of the common property in the same proportions as the owners of Lots 2 and 3.
Whether an amendment will materially affect the lot to which the contract relates is something to be determined objectively. A change in entitlement and liability is something which may materially affect the lot to which a contract relates. In Deming No 456 Pty Ltd v Brisbane Unit Development Corporation Pty Ltd[1] Wilson J considered whether a change in lot entitlement and liability between the date of contract and the date of registration of a building plan could materially affect a person’s rights as the proprietor of land. In that case the change resulted in an alteration in the proportionate lot entitlement and liability of Deming from 1/41 of the aggregate of lot entitlements and liabilities to 1/37. His Honour considered that the circumstance of an increase of almost 11 per cent in Deming’s proportionate liability in respect of levies made by the body corporate was capable of materially affecting its rights as a purchaser:[2]
With all respect to the learned primary judge, I think an 11 per cent increase in contributions is capable of materially affecting the rights of Deming. The development was clearly a luxury one. The brochure which was tendered in evidence suggests that the grounds are spacious and it refers to a heated pool, spa, saunas and gym. Having regard to the provisions of ss. 32 and 38 of the Act, the expenses of the body corporate in fulfilling its responsibilities with respect to the property could well be substantial. They would require to be met by contributions from the proprietors of the lots comprising the project in proportion to their lot entitlement. But no doubt it is true that mere quantum is not the only criterion. Its significance must be judged in the light of all the circumstances and the higher the contract price the less may be the impact which an increase in lot entitlement, even of 11 per cent, would have on a prudent purchaser. In an earlier case, Bassingthwaighte v Butt, McPherson J offers an objective test of materiality, namely, whether the possibility that the purchaser might not have purchased is a reasonable supposition. His Honour refers to Stonham, Vendor and Purchaser, pars. 373 and 374. If that is an appropriate test, then I would agree with his Honour that the possibility that Deming might not have purchased the property had its lot entitlement been represented as 1/37 instead of 1/41 is not a reasonable supposition. However, we are not applying equitable doctrines. We are construing a statute which reflects a firm resolve on the part of the legislature to protect the purchasers of home units with quite specific statutory remedies. Section 49(4) contemplates that there will be circumstances which are capable of materially affecting the rights of purchasers. These circumstances encompass the entry into or variation of a management agreement or service agreement, the making or variation of a by-law or a change in the lot entitlement of any lot or the aggregate lot entitlement. Of course, it would be quite unjust if minor changes or adjustments in these areas were to entitle a purchaser to avoid a contract. On the other hand, if the changes are not insignificant and have the effect of changing the substance of that contracted for, the intention of the legislature would seem to be plain. In the present case, Deming was clearly entitled to be informed promptly of the change in lot entitlement and the question of material affectation could reasonably have been raised by Deming had it wished them to avoid the contract on that ground.[3]
Whether an amendment will materially affect the lot is not to be judged by reference to the reason the amendment is made but by objective facts and circumstances. Nor is it to be judged by reference to whether a person in the position of the party affected by the amendment might not, or that some might think the party affected should not, elect to rescind. The amendment of the entitlements and liabilities of the lot owners affects them in various ways. The rights of the owners in this subdivision are governed by the Owners Corporation Act 2006 (Vic). Section 74 provides that a lot owner with more than 25% lot entitlements has the right to call a special general meeting and, by s 83, the right to call a ballot. One of the ways to obtain a quorum under that Act for the purposes of decision-making by owner corporations can be by “at least 50% of the total lot entitlement”.[4] A special resolution can be placed by ballot or poll passed by “75% of the total lot entitlements of all of the lots affected by the owners corporation”.[5] Lot entitlement also affects votes at a standard meeting.[6] It is not possible to forsee the issues that may arise in relation to the property in the subdivision and, in particular, to the common property. However the change does have an effect upon Lot 4 by reducing the entitlements and liabilities attaching to the lot.
[1](1984) 155 CLR 129.
[2]Ibid 168.
[3]Ibid 168-9 (citations omitted).
[4] Owners Corporation Act 2006 (Vic) s 77.
[5] Owners Corporation Act 2006 (Vic) s 96.
[6]Owners Corporation Act 2006 (Vic) s 92.
The amendments to the lot entitlements is not insignificant however well intentioned its justification may be. The practical entitlements and liabilities attaching to Lots 1 and 4 are materially affected by the amendment. The justification may have been to ensure that the burdens attaching to the common property fell upon the owners of Lots 2 and 3 but a necessary aspect of that change was to affect the entitlements as between the two categories of lot holders. The effect upon the lot is material by altering the proportionate entitlements and liabilities of the lot as against those attaching to Lots 2 and 3.
Accordingly I propose to make the declaration sought by Ms Besser and order the repayment of the sum of $125,000 which she had paid to Alma Homes by way of deposit.
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