Betts v Harman
[2021] VCC 1349
•20 September 2021
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-20-00549
| GABRIELLA BETTS | Plaintiff |
| v | |
| CHERYL ANN HARMAN | Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 11, 12 and 16 August 2021 | |
DATE OF JUDGMENT: | 20 September 2021 | |
CASE MAY BE CITED AS: | Betts v Harman | |
MEDIUM NEUTRAL CITATION: | [2021] VCC 1349 | |
REASONS FOR JUDGMENT
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Subject:SALE OF LAND
Catchwords: Sale of land; sale by owner builder; failure to annex required insurance as provided by s137B of the Building Act 1993; whether parties contracted out of the purchaser’s entitlement to rescind; whether purchaser elected to affirm contract; whether precluded from rescission by waiver estoppel; whether time for provision of insurance material extended by terms of contract; whether purchaser’s failure to settle on time precludes purchaser from rescinding.
Legislation Cited: Sale of Land Act 1962 ; Building Act 1993
Cases Cited:Sargent v ASL Developments Ltd (1974) 131 CLR 634; Astill & Anor v South Esplanade Developments Pty Ltd [2007] SASC 231; Tudor Developments Pty Ltd v Makeig (2008) 72 NSWLR 624; Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd (2011) 35 VR 1; Solid Investments Australia Pty Ltd v Clifford (2010) 27 VR 41; Everest Project Developments Pty Ltd v Mendoza [2009] VSC 366; Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993; Imerva Corporation Pty Ltd v Kuna [2016] VSC 461; Sargent v ASL Developments Ltd (1974) 131 CLR 634; Peyman v Lanjani [1985] Ch 457; Coastal Estates Pty Ltd v Melevende [1965] VR 433; Re Hoffman; ex parte Worrell v Schilling (1989) 85 ALR 145; O’Connor v S.P. Bray Limited (1936) 36 SR (NSW) 248 Elder’s Trustee and Executor Company Limited v Commonwealth Homes and Investment Co Ltd (1941) 65 CLR 603; Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305; Grundt v Great Boulder Proprietary Gold Mines Limited ((1937) 59 CLR 641; Motor Oil Hellas (Corinth) Refineries S.A. v Shipping Corp of India (the Kanchenjunga) [1990] 1 Lloyd’s Rep 391; Thompson v Palmer (1993) 49 CLR 507; McHutchison v Asli [2017] VSC 258; Foran v Wight (1989) 168 CLR 385;
Judgment: 1. Within 14 days the parties to bring in short minutes to give effect to these reasons 2. Costs reserved.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr E Moon | Hone Legal & Conveyancing |
| For the Defendant | Mr A T Schlicht | Duffy & Simon Lawyers |
HIS HONOUR:
Background
1On 3 September 2009, the defendant, Mrs Harman, became registered proprietor of the fee simple interest in a property at 35 Leppitt Road, Pakenham. (Court Book (“CB”) 93) The property is said to consist of 6.8 hectares (Plaintiff’s Closing submissions, [6]). On 14 June 2011, building surveyor Gary Gommers issued a building permit for the construction of a dwelling and garage for which Planning Permit T080476 had been issued, dated 21 October 2008. The total floor area of the structures was said to be 1,041.4 square metres with an estimated building cost of $900,000. Mrs Harman was shown as the “builder” and so for statutory and other purposes would be regarded an “owner builder”. (CB 49-50) Mr Gommers issued an occupancy certificate for the dwelling dated 30 January 2015. (CB 54) Work had previously been carried out on the property for the construction of a dam pursuant to Planning Permit T080680, the plans for which were approved 21 May 2009. Works entailed movement of a large volume of soil and the spreading of fill over a substantial area. (CB 43)
2In March 2019, Mrs Harman was offering the property for sale via Kaye Charles Real Estate. Sales Manager, Jeanine Presley, emailed what was described as “a copy of the section 32 for your perusal” by email dated 26 March 2019 to the plaintiff, Ms Betts. (CB 72) The reference to “section 32” is to a section in the Sale of Land Act 1962 requiring wide ranging pre-sale disclosure of pertinent information by vendors of real estate. The document in question might more appropriately have been described as a “draft”. It was not signed by the vendor as required by the statute, though it was “substantially similar to what was subsequently signed.” (Transcript (“T”) 116), L14-22) The section 32 statement was prepared on Mrs Harman’s behalf by a firm known as “Cardinia Conveyancing” (“Cardinia”) which was described on the face sheet of the statement as “Vendors Representative”(sic). One of the large number of documents attached to the statement, whether in its signed or unsigned form, was a document styled “Property Report” which included details of planning restrictions on use and development of the land. The report showed that the property in question was affected by the following planning zones:
Green Wedge Zone (“GWZ”)
Green Wedge Zone – Schedule 1 (“GWZ1”)
Public Use Zone – Service and Utility (“PUZ1”)
Schedule to Public Use Zone – Service and Utility (“PUZ1”)
3The property was also subject to the following planning overlays:
Shire Management Overlay (“PMO”)
Environmental Significance Overlay (“ESO”)
Environmental Significance Overlay – Schedule (“ESO1”)
Floodway Overlay (“FO”)
Floodway Overlay Schedule (“FOS”)
4The report also stated: “All or part of this property is ‘an area of cultural heritage sensitivity’”. (CB 80)
5Ms Betts signed a contract to purchase the property on 2 April 2019 showing the purchasers as “Gabriella Betts and or nominee” for a price of $5.5 million with a deposit of $550,000 payable on 9 April 2019 and a balance of $4,950,000 payable at settlement on 12 December 2019. There was a handwritten special condition stating: “This contract is subject to and conditional upon a Section 27 of the Sale of Land Act being released in 35 days of the signed contracts.” The vendor, Mrs Harman, signed the contract on the same day. (CB 97-99) There was a series of printed special conditions extending over four pages of the contract commencing at clause 1 headed “Whole Agreement” and concluding with an Electronic Conveyancing Special Condition 7.1-7.10. (CB 100-103) Also included were general conditions said to be as prescribed by the Estate Agents (Contracts) Regulations 2008. General Condition 2.6 provided:
“If sections 137B and 137C of the Building Act 1993 apply to this contract, the vendor warrants that:
(a)all domestic building work carried out in relation to the construction by or on behalf of the vendor of the home was carried out in a proper and workmanlike manner; and
(b)all materials used in that domestic building work were good and suitable for the purpose for which they were used and that, unless otherwise stated in the contract, those materials were new; and
(c)domestic building work was carried out in accordance with all laws and legal requirements, including, without limiting the generality of this warranty, the Building Act 1993 and regulations made under the Building Act 1993.” (CB 105)
6Section 137B of the Building Act 1993 provides and provided in 2019 that it was an offence for an owner-builder “to sell building without report or insurance”. As previously noted, Mrs Harman seems, for the purposes of the statute, to be an “owner-builder”. Section 137C states that certain warranties were “part of every contract to which s137B applies.” General Condition 8 of the contract provided:
“Builder Warranty and Insurance
The vendor warrants that the vendor will provide at settlement details of any current building warranty insurance in the vendors possession relating to the property if requested in writing to do so at least 21 days before settlement.” (CB 105-107)
7Clause 16.1 of the general conditions provided that time was “of the essence of this contract”. (CB 109) General Condition 27 dealt with default, providing (at clause 27.1) that a party was not entitled to exercise any rights arising from another party’s default other than to receive interest or to sue for money owing “until the other party is given and fails to comply with a written default notice.” General Condition 27.2 provided for default notices which must specify the particulars of the default and state an intention to exercise powers and rights arising from the default “unless, within 14 days of notice being given that the default is remedied and reasonable costs are paid. Clause 28.2 provided that the contract “ends immediately” if the default is not remedied. Clause 28.3 provided:
“If the contract ends by default notice given by the purchaser:
(a)the purchaser must be repaid any money paid under the contract and be paid any interest and reasonable costs payable under the contract; and
(b)all those amounts are a charge on the land until payment; and
(c)the purchaser may also recover any loss otherwise recoverable.”
(CB 110-111)
8General Condition 24, reversing the situation which the common law and the principles of equity would have established, provided:
“24.1
The vendor carries the risk of loss or damage to the property until settlement.”
(CB 110)
9Contemporaneously with the execution of the contract, the parties signed the statement under s32 of the Sale of Land Act. (CB 76) That statement at paragraph 32B under the heading “Insurance” provided:
“(a)Where the Contract does not provide for the land to remain at the risk of the Vendor, particulars of any policy of insurance maintained by the Vendor in respect of damage to or destruction of the land are as follows: - Not Applicable.” (CB 74)
10In light of General Condition 24.1 of the contract, this designation “Not Applicable” appears to be correct. There were, however, other insurance issues which it might be thought were not dealt with, a matter to which I will turn presently. The only insurance material forming part of the s32 Statement was a tax invoice and client coverage summary from Aon Risk Services Australia Ltd issued in the name of Phil Harman, the husband of Mrs Harman, the defendant in this proceeding. The class of insurance was said to be “HIA Owner Builder” and the period of insurance was 15 November 2012 to 15 December 2012. The coverage was summarised as follows:
“The Insurer will pay to or on behalf of the Insured all sums which the Insured shall become legally liable to pay as compensation in respect of:
(a) Personal Injury
(b) Property Damage
(c) Advertising Injury
caused by an occurrence within the geographical limits in connection with the Insured’s business.”
(CB 84-88)
11Also included in the s32 Statement was a report from Allied Building Services Pty Ltd (Mr Trevor Miles) addressed to Mr and Mrs Harman and dated 23 January 2019. It was described as “Report on domestic building work under section 137B of the Building Act 1993 (Owner Builder Construction)”. According to the report, the dwelling and garage were estimated at four years old. Mr Miles said:
“The dwelling and garage combination was neat and tidy at time of inspection, with the house being well maintained and clean. The house was on the southern side of the road, and was a single storey construction.
… Only a small number of items were found to be noteworthy given the side of the project, and these were generally considered to be of a minor nature. They do not interfere with the function of the structure.
A specific design of house and character has been created and suits the nature of the property. The fixtures and fittings were of good quality as part of the new works. Most of the items noted relates to the finishing touches of the project, though these were only few.
The house enhanced the area with the other buildings in the street. Quality landscaping has been carried out including some gardens and driveway. Gravel driveway provided from the road to the house.
A substantial dwelling has been developed, which can be moved into without having to do any additional works, other than personal touches.”
(CB 91)
12Four main defects were noted. (CB 90)
13Ms Betts was represented in the purchase transaction by Rivendell Conveyancing Pty Ltd (“Rivendell”). This firm wrote a letter dated 4 April 2019 which announced that they represented Ms Betts. The letter dealt first with issues relative to the release of the deposit paid in accordance with s27 of the Sale of Land Act 1962. It raised other technical conveyancing issues and concluded as follows:
“Builder Warranty Insurance
As per General Condition 8 we request any current builder warranty insurance relating to the property to be supplied prior to or at settlement.”
(CB 135-6)
14By email of 8 April 2019, Cardinia forwarded a statement under s27 of the Sale of Land Act 1962 requesting the statement’s early signature and return by the purchaser. The email concluded with the following text in bold:
“Please note the Vendor(s) are reliant upon release of deposit monies and accordingly, we look forward to the early return of the signed Deposit Release.”
(CB 138)
15The statement itself disclosed that the property was subject to a mortgage in favour of Westpac Banking Corporation. An attached letter from that bank of the same date showed that the mortgage secured $3,535,000 and that payment of $2,975,000 was required to obtain a discharge of the mortgage. (CB 139-41) Vendor’s conveyancer, Cardinia, sought and obtained confirmation on 10 April that the vendor’s agent, Kaye Charles, was holding the full deposit of $550,000. (CB 144) A further s27 statement was forwarded by Cardinia on behalf of the vendor to Rivendell on behalf of the purchaser on 15 April 2019. (CB 148-150) Rivendell forwarded the statement to Ms Betts the same day, remarking:
“It would appear that the vendor has adequate equity in the property; these are circumstances that are envisaged by the legislation as appropriate for release of the deposit. If you agree, you should sign the authority included in the statement and return it to us.”
(CB 151)
16By an email of 7 May 2019, Cardinia requested Kaye Charles Real Estate to deduct its commission and forward the balance of the deposit to an account in the name of Mr and Mrs Harman. (CB 152)
17The s27 Statement signed by Ms Betts was eventually forwarded to Cardinia by Rivendell under cover of email dated 11 October 2019. (CB 162) Betts obtained a building report on the property but its terms were not disclosed to the Harmans. (T100-101) The full text of the report was in evidence as Exhibit A. It discloses an inspection carried out on 8 April 2019. The report advised that certain information should be “requested from the building contractor” (in the present case from the owner-builder). This meant the information had to be obtained from the Harmans. Amongst the items to be sought was “Home Building Warranty Insurance with specific reference to building contractor and this project”. Mr Harman responded in an email to Ms Betts dated 15 April 2019 (Exhibit C). This email stated inter alia, “Home Building Warranty insurance for construction – included in s32”. In the same email, Mr Harman said that he would carry out the following cosmetic work on the dwelling:
“1. Fill and paint a plaster crack over meals alcove
2. Fill and paint a plaster crack over family room alcove
3. Re silicone a small area behind bath in guest ensuite.”
18He said that he would also “arrange for the external surface areas to be resprayed for termites prior to settlement.” He said the painting work was to be done by the original painter and that access would be given to you and Jonathon [the author of the Allcheck building report]. By email dated 10 May 2019, Mr Harman furnished photographs of the repaired plaster finishes (Exhibit D). Meanwhile, the Harmans took an overseas trip, departing Australia in mid-May and returning at the end of August 2019. (T128, L28 – 129, L2)
19At some stage between 15 April, when Mr Harman asserted in an email, as we have noted, that the home warranty insurance material was part of the s32 Statement and the Harmans’ departure on their overseas trip in mid-May, Mr Harman became aware that what had been furnished in the s32 Statement was not the home warranty insurance which had been sought by Rivendell on behalf of Ms Betts. He said that he believed he had “dialogue with the insurance underwriter either late April or early May, as to inquiring about getting the proper owner/builder warranty insurance.” (T129, L17-19) The first step necessary to obtain the insurance, he was told, “was a fresh building inspection report.” (ibid L26-27)
20In light of the advice which he had received from the underwriter before his departure overseas, on his return, Mr Harman obtained from Allied Building Services Pty Ltd (Mr Trevor Miles) a further “Report on Domestic Building Work under section 137B of the Building Act 1993 (Owner Builder Construction).” This report was dated 14 October 2019 and was generally to the same effect as the earlier report. It described the dwelling and associated buildings now as being five years old and added an additional defect.
“The window in the laundry adjacent to the sink was not seen to be sealed to the laundry bench top.”
(CB 165-168)
21A Certificate of Insurance, Owner-Builder was issued in the name of Mrs Harman, No C470825, by Vmia Risk Management and Insurance, HIA Insurance Services Pty Ltd. The insurance was said to be in compliance with “the Ministerial Order for Domestic Building Insurance issued under Section 135 of the Building Act 1993 (Vic) …” The insurer was said to be “Victorian Managed Insurance Authority a Statutory Corporation established under the Victorian Managed Insurance Authority Act 1996.” The insurance was said to exclude the defects noted in the Inspection Report by Trevor Miles on 14 October 2019. The premium payable was $2,359.50. (CB 169-70) By email of 23 October 2019, Mr Harman forwarded the insurance documentation to Cardinia remarking, “given there is still approx. 12 months left to run on our insurance post settlement.” The following day, Cardinia forward the certificate of insurance to Rivendell, Ms Betts’ insurer. (CB 171)
22Matters then seemed to be proceeding to settlement as scheduled. Cardinia proposed a settlement at 10:30am 12 December. (CB 176) Rivendell responded later the same day indicating a preference for settlement at 11:00am “at the earliest to ensure all matters are completed without the morning rush.” (CB 178) The revised settlement date was accepted by the PEXA system. (CB 179-80) Rivendell submitted a statement of adjustments to Cardinia by email on 26 November. (CB 184-5) Cardinia confirmed that the adjustments were “in order” in an email 28 November 2019. (CB 186) In November Ms Betts carried out a final inspection. She agreed that the matters which had been raised in her building report from Allcheck had been dealt with. (T76, L23-29) As will appear, from approximately October Ms Betts was seeking to escape from the purchase. Therefore, had she found anything of significance at the final inspection in November, she would most certainly have raised it. (T76, L30 – T77, L7).
23The settlement appointment as part of the PEXA system was confirmed at 11:00am 12 December 2019. (CB 263) On 12 December, law firm Frenkel Partners (“Frenkels”) sent an email to Cardinia announcing that they now acted for Ms Betts. They noted the settlement appointment and continued:
“As our client is still in the process of finalising her finance arrangements, and given the pending Christmas vacation period, we are instructed to seek an extension of settlement to 17 January 2020.”
(CB 270-1)
24That afternoon Cardinia sent an email to Frenkels copied to Ms Presley of Kaye Charles, the selling agents, stating:
“Our client instructs they do NOT agree to extend the settlement date to 17 January 2020. Should settlement not take place today penalty interest will apply. We also have instructions to issue a Recission Notice tomorrow morning.”
(CB 272) [bolding and underlining in the original]
25On 18 December 2019, Mr Bromby of Frenkels forwarded a joint Memorandum of Advice of that date signed by Mr Mark Robins QC and Mr Brian J McCullagh of counsel advising on available options for Ms Betts to avoid the contract to purchase the property. Mr Bromby said in his covering note, inter alia:
“Their [viz counsel’s] advice is quite clear and there seems that nothing will be achieved in serving a notice of recission on the vendor, in fact it would be counterproductive and simply against your interests.”
(CB 724)
26The memorandum consisting of some 26 paragraphs advocated Ms Betts “mitigate her damage by settling her purchase under the Contract, as undesirable a course as that may seem to her.” (CB 730, paragraph 26) At paragraph 20, counsel stated:
“The client appears to be unable to point to any false information provided or an omission of requisite information to be provided by the vendor to her in the Section 32 Statement.”
(CB 728)
27Counsel stated that they seemed to take as Ms Betts’ rationale for seeking to escape the contract as follows:
“The client is now firmly of the opinion that she paid between one million five hundred thousand dollars ($1,500,000) and two million dollars ($2,000,000) too much for the property.”
(CB 725 paragraph 7)
28To reach this point Ms Betts said:
“…I had exhausted all those - a QC, how many solicitors, I had gone through the journey of the last almost three months trying to see about Aboriginal permit sites and the illegal works that I thought were done on the property, … I have full respect for Mark Robins and McCullagh and Sam Holt [the legal practitioner who had also advised her], and I pretty much believed in their verdict”
(T69, L7-14)
29Meanwhile on 13 December 2019, which also happened to be a Friday, Cardinia despatched a recission notice to Ms Betts and her solicitors Frenkel Partners alleging default on Ms Betts’ part for her failure to settle on 12 December and threatening recission of the contract absent remediation of the default “within 14 days of the service of this notice upon you”; and payment of legal costs of $660 and interest at the rate of 12 per cent per annum. (CB 278-9) On the evening of 19 December, Mr Bromby of Frenkels sent an email to Ms Betts copied to Mr Holt stating:
“We think there may be a defect with the owner builder insurance certificate attached to the vendor’s statement. We cannot be sure at this stage and need to make some inquiries.
If that is the case you would have the right to avoid the contract and be reimbursed with your full deposit. You would avoid the contract simply by us notifying to the vendor’s conveyancer and advising them that you elect to avoid the contract and requesting reimbursement of the deposit.
We want to make inquiries about this but we need your instructions to do so. [bolding in the original]
Time is of the essence!
Can you advise whether your former conveyancer notified you of any problem regarding the certificate of insurance attached to the section 32 statement?”
(CB 732)
30When Ms Betts received this email, she thought it was “a joke”. She was still in Queensland with her family. She continued:
“So when this popped up the next day after 40 degrees and being with my autistic son and daughters at Dreamworld and Movie World, and fulfilling their school holidays I just didn’t believe it.”
(T69, L16-20)
31In the email covering the recission notice despatched on Friday the 13th, Cardinia had advised:
“1. Our client will agree to the request of extension of the settlement date to 17 January as requested subject to the following: -
(a) The purchase price in the Contract being varied to $5,560,000;
(b)The deposit payable under the Contract being varied to $1,300,000;
(c)The Variation of Contract being signed by your client and provided to us with fourteen days of the date hereof;
(d)The additional deposit being paid to the credit of our trust account for immediate release to our client within fourteen days of the date hereof.
2. Subject to your client paying an additional $1,000,000 to our client within fourteen days of the date hereof our client will release your client from all further claims pursuant to the Contract.”
(CB 278)
32On 18 December Cardinia sent a follow up email noting that Frenkels and Cardinia would both be closing for the Christmas break on 20 December and continuing:
“Should your client wish to accept either of those options, our client now requires the conditions thereof to be satisfied by 4:00pm Friday, 20 December 2019.”
(CB 283)
33At 7 minutes to 4pm, the following day, 20 December 2019, Frenkel Partners said in an email to Cardinia copied Mrs Harman: “We are instructed to advise that our client elects to avoid the contract of sale dated 2 April 2019 pursuant to section 137B(3) of the Building Act 1993.” The letter continued, stating that the insurance material attached to the section 32 statement “Clearly … does not comply with the mandatory requirement of section 137B(2).” It also observed that under Item 32B which was designated “not applicable” required “the vendor to detail particulars of any required insurance (as that term is defined in the [Building] Act) when a residence was constructed on the land within the preceding 6 years of the date of sale.” The letter concluded by observing that the contract of sale was “at an end” and the deposit of $550,000 should be refunded. (CB 284-5)
34On 23 December 2019, law firm Brand Partners, commercial lawyers, lodged a caveat on behalf of Ms Betts claiming “interest as lienee” on the ground of “purchasers’ lien to secure repayment of money paid under a contract of sale …” (CB 660)
This Proceeding
35On 12 September 2020, solicitors acting for Ms Betts commenced the present proceeding.
Statement of Claim
36By her Amended Statement of Claim dated 28 July 2020, (hereafter referred to as “the Statement of Claim”), Ms Betts alleged that by reason of the work done by the defendant, Mrs Harman, as owner-builder, and by the date on which she contracted to sell her property, Mrs Harman was obliged to obtain owner-builder insurance pursuant to s137C of the Building Act 1993, and in breach of s137B(2) of that Act, she did not provide Ms Betts, as purchaser, with a certificate evidencing that insurance. It was said that these matters constituted a contravention of s137B(2) of the Building Act and sub-s(3) of that section rendered the contract voidable at the option of the purchaser at any time before completion.
37It was said that the power of avoidance was exercised and return of the deposit was demanded.
38Alternatively, the Statement under section 32 of the Sale of Land Act provided by Mrs Harman
“supplied false information to [Ms Betts] or failed to supply all the information required to be supplied by section 32 of the [Sale of Land Act 1962] in that she failed to comply with section 32B(b) of the [Sale of Land Act] which required her to prove particulars of the insurance required by section 137B of the Building Act.”
39It was said that: “by reason of section 32K(2) of the [Sale of Land Act]” Ms Betts may “rescind the contract at any time before she accepted title and became entitled to possession or the receipt of rents and profits” and that power of avoidance had been exercised.
40The Statement of Claim sought a declaration that Ms Betts “lawfully rescinded the Contract on 20 December 2019”, payment of $550,000 together with interest and costs.
Defence and Counterclaim
41By her Further Amended Defence and Counterclaim (hereafter referred to as “the Defence and Counterclaim”), Mrs Harman contended that in the circumstances Ms Betts was not entitled to rely on sub-ss137B(2) and (3) of the Building Act 1993. This was said to be, first, because of the inclusion in the contract of General Condition (“GC”) 8 which was said to constitute an agreement by Ms Betts “that a certificate of warranty insurance was able to be provided on or before settlement” and, secondly, because of the section on “building warranty assurance” in the letter from Rivendell Conveyancing of 4 April 2019 to Cardinia.
42Next, it was said that on 24 October 2019, prior to the settlement date, the necessary domestic warranty insurance was provided to Ms Betts. In the particulars to paragraph 11 of the Defence and Counterclaim various steps leading up to settlement including the finance section and so forth were recited together with the failure to settle on 12 December and an agreement in Frenkel Partners’ letter to pay default interest until final settlement.
43It was said that being in default herself, Ms Betts was not entitled to avoid the contract pursuant to sub-s137B(3) of the Act, or, alternatively, she had waived her right to avoid the contract of sale, affirmed the contract and was estopped from relying on sub-s137B(2) of the Building Act.
44Next, it was said that by reason of those matters, Mrs Harman had relied on representations made by Ms Betts to her detriment and it would be unconscionable for Ms Betts “to rely on s137B(2) of the [Building] Act.”
45Alternatively, it was said that Ms Betts had agreed to extend time for the provision of the insurance until settlement and thereby waived her right to avoid the contract under the relevant section of the Building Act.
46Mrs Harman denied that Ms Betts was entitled to a refund of the deposit paid.
47The Defence admitted that the s32 Statement “did not contain particulars of the insurance required by s137B of the Building Act as it [presumably the insurance policy] did not exist.” It referred to the attachment of the certificate of compliance, the occupancy permit, the earlier insurance and the independent report.
48If there was a breach of s32, which was denied, then Mrs Harman said that in the circumstances she had acted reasonably and honestly and ought fairly to be excused for the contravention and that Ms Betts was substantially in as good a position as if all the relevant provisions had been complied with. Accordingly, pursuant to s32K(4) Ms Betts was not entitled to rescind the contract of sale.
49In her Counterclaim, Mrs Harman asserted that she was entitled to issue the rescission notice. She claimed damages and consequential relief for breach of the contract and a declaration she was entitled to retain the deposit.
Reply and Defence to Counterclaim
50By her Reply and Defence to Further Amended Defence and Counterclaim dated 24 August 2020 (referred to as “the Reply”), Ms Betts joined issue and denied that the matters relied on by Mrs Harman occurred after the entry into the relevant contract and therefore did not concern Ms Betts’ “rights under s137B of the Building Act”.
51She denied that Mrs Harman had acted reasonably and ought reasonably to be excused for her contravention of s32 of the Sale of Land Act, or that she, Ms Betts, was “in substantially as good a position as if all the relevant provisions” of the Sale of Land Act had been complied with.
Legislative provisions
52The provisions of both the Building Act 1993 and the Sale of Land Act 1962 arise for consideration.
Building Act 1993
53Section 137B is headed “Offence for owner-builder to sell building without report or insurance”. Sub‑section (2) provides:
“(2)A person who constructs a building must not enter into a contract to sell the building under which the purchaser will become entitled to possess the building (or to receive the rent and profits from the building) within the prescribed period unless—
(a)in the case of a person other than a registered building practitioner—
(i) the person has obtained a report on the building from a prescribed building practitioner that contains the matters that are required by the Minister by notice published in the Government Gazette; and
(ii) the person obtained the report not more than 6 months before the person enters into the contract to sell the building; and
(iii) the person has given a copy of the report to the intending purchaser; and
(b)the person is covered by the required insurance (if any); and
(c)the person has given the purchaser a certificate evidencing the existence of that insurance; and
(d)in the case of a contract for the sale of a home, the contract sets out the warranties implied into the contract by section 137C.
Penalty: 100 penalty units.”
54The civil consequences of contravention are set out in sub‑s(3), which provides:
“(3)A contract entered into in contravention of subsection (2) is not void by reason only of the contravention but is voidable at the option of the purchaser at any time before completion of the contract.”
55Sub-section (7) provides that the “prescribed period” means:
“6 years and 6 months ... after the completion date for the construction of the building”.
56The same sub-section defines “completion date” as being:
“the date of issue of the occupancy permit ...”
57Also relevant is s137C, headed “Warranties for purposes of homes under section 137B”, which provides:
“(1)The following warranties are part of every contract to which section 137B applies which relates to the sale of a home—
(a)the vendor warrants that all domestic building work carried out in relation to the construction by or on behalf of the vendor of the home was carried out in a proper and workmanlike manner; and
(b)the vendor warrants that all materials used in that domestic building work were good and suitable for the purpose for which they were used and that, unless otherwise stated in the contract, those materials were new; and
(c)the vendor warrants that that domestic building work was carried out in accordance with all laws and legal requirements, including, without limiting the generality of this warranty, this Act and the regulations.
(2) In addition to the purchaser under a contract to which section 137B applies, any person who is a successor in title to the purchaser may take proceedings for a breach of the warranties listed in subsection (1) as if that person were a party to the contract.
(3) A provision of an agreement or instrument that purports to restrict or remove the right of a person to take proceedings for a breach of any of the warranties listed in subsection (1) is void to the extent that it applies to a breach other than a breach that was known or ought reasonably to have been known to the person to exist at the time the agreement or instrument was executed.”
58It will be noted that s137C in sub‑s(3) includes a prohibition on “contracting out”. There is no such provision expressed to prohibit “contracting out” of s137B.
Sale of Land Act 1962
59The following provisions of the Sale of Land Act 1962 are relevant to the parties’ dispute. The first is s32B, which provides, inter alia:
“A section 32 statement must contain the following insurance details in respect of the land—
...
(b) if there is a residence on the land which was constructed within the preceding 6 years and section 137B of the Building Act 1993 applies to the residence, particulars of any required insurance under that Act applying to that residence.”
60The factual circumstances of the present sale transaction would render this provision applicable. Also relevant are s32J and s32K, which provide:
“32JInformation required for a section 32 statement contained in a certificate, notice, policy of insurance or other document
(1)If any information required to be contained in a section 32 statement is specified in a certificate, notice or other document issued by a relevant authority, the vendor may attach that certificate, notice or other document (or a copy of that certificate, notice or other document) to the section 32 statement for the purpose of complying with the relevant provision of this Division requiring the information.
(2)If the information required under section 32B is contained in a policy of insurance, the vendor may attach a copy of the policy or an extract of the policy to the statement for the purpose of complying with that section.
32KSupply of false information or failure to supply information in section 32 statement or failure to supply section 32 statement may result in rescission
(1)This section applies if a vendor—
(a) supplies false information to a purchaser in a section 32 statement or in any certificates, notices, policies or other documents attached to a section 32 statement for the purposes of complying with the requirements of this Division; or
(b) fails to supply all the information required to be supplied to a purchaser, either in a section 32 statement or attached to the section 32 statement, as required by this Division; or
(c) fails to give a purchaser a section 32 statement signed by the vendor before the purchaser signs the contract for the sale of land.
(2)The purchaser may rescind any contract for the sale of land which has been entered into on the basis of information contained in the section 32 statement or attached to the section 32 statement at any time before the purchaser accepts title and becomes entitled to possession or to the receipt of rents and profits.
(3)The purchaser may rescind any contract for the sale of land where the vendor fails to give the purchaser a section 32 statement before the purchaser signs the contract at any time before the purchaser accepts title and becomes entitled to possession or to the receipt of rents and profits.
(4)Despite subsection (2) and (3), the purchaser may not rescind a contract for the sale of land if the court is satisfied that—
(a) the vendor has acted honestly and reasonably and ought fairly to be excused for the contravention; and
(b) the purchaser is substantially in as good a position as if all the relevant provisions of this Division had been complied with.”
Conclusions
61The parties were agreed that the trial which has been conducted should deal only with issues of liability. Questions of damages or other final relief arising under the plaintiff’s claim and the defendant’s counterclaim should be put over, pending publication of the Court’s determination on liability.
62Under the occupancy permit issued 30 January 2015 (see [1] above), the “prescribed period” referred to in s137B had not elapsed at the date of the contract. Therefore, Mrs Harman was in contravention of s137B(2) of the Building Act 1993 by entering into the contract of sale with Ms Betts. Subject to considerations of waiver estoppel, election or “contracting out”, s137B(3) entitles Ms Betts to avoid the contract as she purported to do by a letter from her solicitor (see [33] above).
63Mr Moon, counsel for the plaintiff, suggested a series of questions, the answers to which, he said, would resolve the questions of liability in dispute between the parties. The first of those questions was as follows:
Is the right to avoid a contract of sale conferred by section 137B(3) of the Building Act 1993 unqualified or subject to waiver, affirmation and estoppel ...?
64As I understood the submissions by Mr Schlicht, counsel for Mrs Harman, the answer to this question was “Yes”, whilst Mr Moon’s primary contention on behalf of Ms Betts was “No”. Mr Schlicht submitted:
“It is a well-known principle of law that a man may by his conduct waive a provision of an Act of Parliament intended for his benefit. This principle has been affirmed by the Privy Council in Wilson v. McIntosh.”
He was quoting from a dissenting judgment of Isaacs J in Sandringham Corporation v Rayment (1928) 40 CLR 510, 527. Whilst his Honour was in dissent, it is not suggested that the other members of the Court disagreed with him on this point.
65Mr Schlicht next referred to D & J Evans Pty Ltd v City of Hawthorn [1967] VR 212 where, he said, requirements to give notice to a municipal council were treated as waived. The Court of Appeal, Barry, Gillard and McInerney JJ, said with respect to the procedure for rating appeals:
“since the procedure of giving notice [to the municipal council] is given for the benefit of the municipality and no public interest is involved, the municipality may by its conduct waive the observance of the requirements of sub-section(3)” ([1967] VR 212, 218)
66Mr Schlicht next referred to the well-known decision of the High Court of Australia in Sargent v ASL Developments Ltd (1974) 131 CLR 634, where, he said, the trial judge had found a right of rescission given under a contract for the sale of land had been waived with the purchaser affirming the contract or contracts after acquisition of knowledge of the zoning of the subject land.
67He said Ms Betts’ conveyancers, Rivendell:
“were aware of the provisions of s.137B and the requirements for certificates of insurance to be attached to the contract of sale and [the contravention] was waived by:
(a) Betts by signing the contract of sale;
(b) Rivendell by requesting the certificate of insurance at or prior to settlement.” (Closing submissions, [28])
68Mr Schlicht then referred to the following passage from the judgment of Stephen J in Sargent v ASL Developments Ltd (1974) 131 CLR 634, 649, where his Honour said:
“Again, where a vendor so arranges matters that his solicitor undertakes on his behalf the carrying out of a conveyancing transaction as a whole he thereby not only authorises his solicitor to perform all necessary steps but also places the solicitor in the position of acquiring at first hand knowledge of relevant facts, at the same time depriving himself of the opportunity of acquiring such first hand knowledge. If any such steps taken by the solicitor happen to constitute acts of affirmation of the continued existence of the contract they will be binding upon the client (Provincial Insurance Co. of Canada v. Leduc (1874) LR 6 PC 224, at p 239). If they be unequicoval [sic] and are performed at a time when the solicitor has himself acquired knowledge of facts giving rise to a right to rescind the contract the client will, without the need to attribute to him the knowledge of his solicitor, be bound by those acts of affirmation as on an election; the duly authorized conduct of the solicitor, who has acquired the relevant knowledge, will, without either conduct or knowledge on the client’s part, constitute an effective election not to rescind the contract (Hough v. Guardian Fire and Life Assurance Co. Ltd. (1902) 18 TLR 273; Ayrey’s Case (1918) 1 KB, at p 142). (at p649).)” ([37])
69Next, Mr Schlicht referred to a decision of the Full Court of the Supreme Court of South Australia, Astill & Anor v South Esplanade Developments Pty Ltd [2007] SASC 231. The Full Court was there concerned with the operation of the Land and Business (Sale and Conveyancing) Act 1994. Doyle CJ said:
“The Act gives a purchaser under a contract for the sale of land a right to given [sic] written notice rescinding the contract.
The issue is whether that statutory right to rescind can be waived or lost as a result of conduct by the purchaser that, but for the operation of provisions of the Act, would amount to a binding election to affirm the contract; or to a binding election to proceed with the contract, or that would give rise to an estoppel which prevented the purchaser from exercising the right to rescind.” ([2]−[3])
70Section 5 of the statute created a “cooling-off” period. Sub‑section (7) of that section stated a number of circumstances and transaction features which excluded the operation of the cooling-off period in certain circumstances and relative to certain transactions. The prescribed time as defined in sub‑s(8) concluded on the second clear business day after the contract where the required vendor’s statement was served before the contract was made, or, if not served before the contract was made, the second clear business day from the day on which that vendor’s statement was served. In any other case, the right to rescind existed until the settlement date. Doyle CJ, deciding that the right to rescind had not been lost, said:
“The scheme of the Act is to specify in s 5(7)(b) how the right to rescind can be surrendered or lost, other than by the arrival of the prescribed time.
The scheme of the Act is to protect the vendor by enabling the vendor to trigger the prescribed time, by delivering an accurate vendor’s statement before the contract is signed, or after the contract is signed. A vendor who fails to do so must be taken to know that the prescribed time will not arrive until settlement takes place.” ([61]−[62])
71Accordingly, his Honour favoured allowing the appeal from the District Court judgment. The majority of the Court, however, Bleby and Sulan JJ, concluded that the appeal should be dismissed. Their Honours said at [85]:
“The cooling-off provisions concern a purchaser’s right to elect. Before the expiry of the prescribed time the purchaser may elect to rescind the contract by delivering a notice of rescission. Conversely, the purchaser may elect to affirm the contract and not give the notice.”
72A Master of the District Court had entered summary judgment for the plaintiff purchasers. A judge of the Court had set that determination aside. [110] As a result, it would be a matter for trial as to whether the vendor could establish a waiver of the statutory right to rescind or an election to affirm the contract by the defendant vendor. [109] Mr Schlicht noted that the majority reached its conclusion despite a provision in the Land and Business (Sale and Conveyancing) Act, s33, prohibiting contracting out in the following terms:
“Subject to this Act, a purported exclusion, limitation, modification or waiver of a right conferred, or contractual condition implied or applied, by this Act is void.”
73Mr Schlicht next referred to a decision of the New South Wales Court of Appeal in Tudor Developments Pty Ltd v Makeig (2008) 72 NSWLR 624, which he said bore a significant resemblance to the present dispute. The Court was there concerned with the operation of s96A of the Home Building Act 1989. That section prohibited a developer from entering into a contract for sale of land:
“on which residential building work ... is to be done, on the developer’s behalf unless a certificate of insurance evidencing the contract of insurance required under section 92 by the person who did or does the work for the developer, in a form prescribed by the regulations, is attached to the contract of sale.” (Sub‑s (1))
74Sub‑s(3) provided that if a person contravened sub‑s(1):
“the contract is voidable at the option of the purchaser before the completion of the contract.”
75The Court held that estoppel could not be relied upon by a vendor to preclude a purchaser rescinding a contract in reliance on sub‑s(3). The majority of the Court also held that the principles of election could not operate to preclude a rescission under sub‑s(3). Notably, s103D of the relevant statute provided:
“A provision of a contract or another agreement that purports to restrict or remove the rights of a person under this Part [including s96A] is void.”
76Basten JA noted that the primary judge had rejected an argument that the right of rescission could be lost by the operation of the doctrine of estoppel, which, he said, could not operate in the face of a statute, referring to a decision of the Privy Council in Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993, 1017, per Viscount Radcliffe. His Honour said:
“This is not a case in which the statute clearly depends upon the continued operation of the general law to be effective. Section 96A expressly qualifies general law provisions which might otherwise have operated with respect to a contract for the sale of land. Where the statute further provides for the consequence of contravention, that provision should be allowed to operate in its terms, which do not import equitable principles from the general law.” ((2008) 72 NSWLR 624, 642 [76])
77Beazley JA (as her Honour then was) concurred with Basten JA. As to the decision in Astill’s case, Basten JA and, therefore, Beazley JA preferred the dissenting opinion of Doyle CJ to the reasoning of the majority. Basten JA remarked:
“However, the statutory scheme in the South Australian legislation is sufficiently removed from that presently under consideration that the reasoning is of no direct application.” ((2008) 72 NSWLR 624, 641 [69])
78Handley AJA, speaking of s96A of the relevant statute, said:
“However unlike other legislation giving effect to a social policy, s 96A(3) does not appear to be intended to protect purchasers from themselves. The option to avoid the contract conferred by s 96A(3) may be lost by post-contractual conduct because the purchaser may elect to complete. A right or power or option to avoid a contract has a double aspect. It necessarily includes a right or power to affirm the contract. This is the fundamental difference between a contract which is voidable by a party and one that is void.” ((2008) 72 NSWLR 624, 644 [93])
79His Honour observed that the absence of the annexure required by the statute was obvious, and the purchaser must be taken to have had full knowledge of it. He continued:
“An election to affirm a contract can occur under the general law if the person concerned, with knowledge of the relevant facts, but without being aware of his or her right or power to elect, asserts a right under the contract, or does some other unequivocal act which he or she is only entitled to do under the contract.” ((2008) 72 NSWLR 624, 644−5 [96])
80His Honour continued:
“However a right or option of election under a statute may be different, and knowledge of its existence may be required before the elector’s conduct can affirm the contract so as to preclude a later election to avoid.” ((2008) 72 NSWLR 624, 645 [97])
81He noted that in workers compensation cases no election was regarded as occurring unless both the facts and the existence of the right to elect were known to the worker: Latter v Council of the Shire of Muswellbrook (1936) 56 CLR 422, 433, per Latham CJ; Young v Bristol Aeroplane Co Ltd [1946] AC 163, 173, per Viscount Simon. Based on these considerations, he said, s96A(3) should be construed so that a purchaser would be regarded as electing to affirm rather than avoid a contract if the purchaser was “aware of the alternatives and intended to choose between them” viz, knew of the facts and the right. ((2008) 72 NSWLR 624, 646 [103]) His Honour concluded that whilst the argument based on estoppel was correctly rejected by the three judges of the Court, the vendor should be allowed to replead alleging an election by the purchaser.
82Mr Schlicht noted that Dixon J in Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd (2011) 35 VR 1 had favoured the approach adopted in Tudor Developments by Handley AJA. In that case, his Honour was concerned with the exercise of a power of rescission alleged to be granted by s29O of the Sale of Land Act 1962 with respect to a contract for sale of land. His Honour had before him an application for summary judgment by the plaintiff to recover moneys paid under a contract which, it claimed, had been rescinded pursuant to the powers granted by that section. His Honour dismissed the application, but also considered whether the power of rescission under s29O could validly be waived by the purchaser so as thereafter not to be exercisable. His Honour considered, as noted previously, that the approach of Handley AJA in the Tudor Developments case was to be preferred to the approach adopted by the majority. ((2011) 35 VR 1, 23 [79]) In the following paragraph he continued:
“There was no difference between the members of the court as to the basic principle. Principles relating to estoppel do not apply universally to statutory prohibitions or rights to rescind or avoid contracts. Whether they can operate in a particular case will depend upon the construction of the particular statutory provision in its context, and informed by an understanding of its purpose.”
83His Honour also noted that in Solid Investments Australia Pty Ltd v Clifford (2010) 27 VR 41, 50 [36], the Victorian Court of Appeal found it unnecessary to pronounce on the correctness of Tudor Developments because there was no case of waiver or election available on the facts of the case before them, and it was unnecessary to decide the point. Section 29O gave a purchaser the option to avoid a terms contract where provision was made for a mortgage affecting that land to be discharged relative to the land “before the purchaser becomes ... entitled under the contract to possession”. Since, in the circumstances, the right to avoid under s29O was not made out as to the primary requirements of the section, the issue of waiver or estoppel did not ultimately arise for decision.
84Mr Schlicht drew attention to the presence in s137C of the Building Act of a “no contracting out” provision, viz sub‑s(3) and its absence from s137B.
85In Everest Project Developments Pty Ltd v Mendoza [2009] VSC 366, Hargrave J, as he then was, dealt with a sale of land “off-the-plan” as governed by s9AA of the Sale of Land Act 1962. Section 9AE(1) of the Act gave a right of rescission to a purchaser where the vendor contravened s9AA(2), which required the deposit money, pending registration of the relevant plan, to be held on trust by a legal practitioner, conveyancer, or estate agent, or in a special purpose account. His Honour said:
“In my view, the Act, upon its proper interpretation, excludes reliance upon doctrines of election, waiver and estoppel to defeat the right of a purchaser to rescind under s 9AE(1). The clear purpose and social policy underlying ss 9AA to 9AH of the Act is the protection of the section of the public comprising purchasers of lots in unregistered plans of subdivision. It would be inconsistent with that purpose and social policy to allow vendors to rely upon the conduct of purchasers as depriving them of their unqualified right to rescind under s 9AE(1).”
My conclusion in this regard is supported by s 14(3) of the Act, which provides:
(3)Any agreement whereby a person purports to waive any right which he may have under this Act to avoid a contract shall be void and of no effect.
Sub-sections 14(1), (2) and (4) of the Act are expressly limited in their operation to terms contracts. However, s 14(3) is not so limited.
Further, my conclusion in this regard is supported by the approach adopted by Doyle CJ in dissent in Astill & Anor v South Esplanade Developments Pty Ltd, whose reasoning I prefer to that of the majority.” ([2009] VSC 366 [98]−[101])
86Finally, I should note the decision of the Judicial Committee of the Privy Council in Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993. Their Lordships were concerned in that case, on appeal from the Supreme Court of the Federation of Malaya, with the effectiveness as an estoppel by way of res judicata of a default judgment in favour of a financier. It was contended that the default judgment could not create a relevant estoppel because it stood in contradiction of the rules laid down by the Moneylenders Ordinance and the Bills of Sale Ordinance. The Malayan Court of Appeal held that no estoppel arose, and the Judicial Committee dismissed an appeal from its decision. Viscount Radcliffe, speaking for himself, Lord Morris of Borth-y-Gest and Lord Guest said:
“It has been said that the question whether an estoppel is to be allowed or not depends on whether the enactment or rule of law relied upon is imposed in the public interest or “on grounds of general public policy” (see In re A Bankruptcy Notice, per Atkin L.J.). But a principle as widely stated as this might prove to be rather an elusive guide, since there is no statute, at least public general statute, for which this claim might not be made. In their Lordships’ opinion a more direct test to apply in any case such as the present, where the laws of moneylending or monetary security are involved, is to ask whether the law that confronts the estoppel can be seen to represent a social policy to which the court must give effect in the interests of the public generally or some section of the public, despite any rules of evidence as between themselves that the parties may have created by their conduct or otherwise. Thus the laws of gaming or usury (Carter v. James) override an estoppel: so do the provisions of the Rent Restriction Acts with regard to orders for possession of controlled tenancies (Welch v. Nagy).
General social policy does from time to time require the denial of legal validity to certain transactions by certain persons. This may be for their own protection, as in the case of the infant or other category of persons enjoying what is to some extent a protected status, or for the protection of others who may come to be engaged in dealings with them, as, for instance, the creditors of a bankrupt. In all such cases there is no room for the application of another general and familiar principle of the law that a man may, if he wishes, disclaim a statutory provision enacted for his benefit, for what is for a man’s benefit and what is for his protection are not synonymous terms. Nor is it open to the court to give its sanction to departures from any law that reflects such a policy, even though the party concerned has himself behaved in such a way as would otherwise tie his hands.” ([1964] AC 993, 1016−7)
87In the present case, as Handley AJA in Tudor Developments observed, since it is open to a purchaser under a contract in the circumstances described in s137B(3) of the Building Act to complete or not complete a contravening contract at his or her option, it cannot have been Parliament’s intention to protect such a person from himself or herself. The absence of such a policy in terms of the formulation by their Lordships, which has over the years been treated as authoritative in this area of the law, would tend to exclude the view that s137B should override doctrines such as waiver, estoppel, and election. Further, in cases where such a conclusion has been reached relative to similar, though by no means identical, entitlements to avoid land purchase contracts such as the Tudor Developments case and Mendoza’s case, the relevant court has regarded it as significant that the statute included a “no contracting out” provision relative to the contravention giving rise to the right to avoid. There is no such provision in s137B, though there is in s137C.
88After a review of the authorities on rescission under various provisions of the Sale of Land Act, Mr Moon observed:
“There is no provision of the SLA which has been construed so as to import general law principles [of waiver, election or estoppel].” (Closing submissions, [32])
89He referred to a decision of McDonald J in Imerva Corporation Pty Ltd v Kuna [2016] VSC 461. His Honour considered s40 of the Domestic Building Contracts Act 1995 which controlled the amount chargeable at various stages of a major domestic building contract. There was a provision allowing contracting out, but his Honour concluded that such provision had not properly been availed of. His Honour rejected an argument that the purchasers were estopped from relying on the statutory prohibition. He was influenced in this regard by noting the penalty for contravention of the section, viz 50 penalty units, which Mr Moon observed was half the penalty imposed for contravention of s137B of the Building Act. He concluded that the Domestic Building Contracts Act intended to protect purchasers from themselves. An appeal to the Court of Appeal was dismissed. ([2017] VSCA 168) Tate JA, with whom Kyrou and McLeish JJA concurred, said:
“In my view, the Kunas are correct and no error was made by the judge. I consider that the statutory language indicates an intention that there is no scope for estoppel in the context of a breach of s 40(2). Although the prohibition can be avoided, this is only so where there has been compliance with s 40(4) and reg 12(a). The stringency of those requirements, already discussed, reinforces rather than detracts from the proposition that other means of avoiding the strictures of s 40(2) are not permitted.” ([2017] VSCA 168 [108])
90The Imerva case does not provide a close analogy with the present situation. Whilst the Court of Appeal was influenced by the decision of its New South Wales counterpart in the Tudor Developments case, the scheme of sections 137B and 137C is not analogous with the scheme considered by the Court of Appeal in the Domestic Building Contracts Act, where a regime was rendered mandatory in circumstances where there was a single tightly-prescribed escape hatch available. It is unsurprising that the Court did not accept the existence of some broader and unspecified escape route from the statutory regime. Again, the view expressed by the trial judge that the statute in question sought to protect consumers from themselves cannot be regarded as applicable in the present case, where the statute gives consumers the option to perform contravening contracts or avoid them at their option.
91The decisions under the Sale of Land Act were given in circumstances where there were provisions prohibiting contracting out, unlike the present situation.
92Astill & Anor v South Esplanade Developments Pty Ltd [2007] SASC 231, a decision of the Full Court of the Supreme Court of South Australia, is a decision of an Australian intermediate Court of Appeal. In accordance with the principles of precedent stated by the High Court of Australia, it should be followed and applied, if not distinguished, unless it is plainly wrong. It is an instance where the doctrines of waiver, election and so forth, have been held applicable and capable of removing a statutory power to avoid a contract, even in circumstances where the statute in question included a prohibition on contracting out.
93Section 137B of the Building Act is an important piece of consumer protection law. It is not an instance of Parliament seeking to protect consumers from themselves, however. There is no prohibition on contracting out of its terms. In those circumstances, the answer to the first question posed should be “Yes”.
94I now turn to the second question posed by the plaintiff’s counsel, Mr Moon.
Has the defendant made out her claims of waiver, affirmation and/or estoppel?
95As to election, counsel were agreed that the classic statement of the doctrine was to be found in the decision of the High Court in Sargent v ASL Developments Ltd (1974) 131 CLR 634. Mason J, as he then was, said:
“A person is said to have a right of election when events occur which enable him to exercise alternative and inconsistent rights, i.e. when he has the right to determine an estate or terminate a contract for breach of covenant or contract and the alternative right to insist on the continuation of the estate or the performance of the contract. It matters not whether the right to terminate the contract is conferred by the contract or arises at common law for fundamental breach – in each instance the alternative right to insist on performance creates a right of election.” ((1974) 131 CLR 634, 655)
96Later in his judgment his Honour said:
“A person confronted with a choice between the exercise of alternative and inconsistent rights is not bound to elect at once. He may keep the question open, so long as he does not affirm the contract or continuance of the estate and so long as the delay does not cause prejudice to the other side. An election takes place when the conduct of the party is such that it would be justifiable only if an election had been made one way or the other (Tropical Traders Ltd. v. Goonan (1964) 111 CLR 41 ). So, words or conduct which do not constitute the exercise of a right conferred by or under a contract and merely involve a recognition of the contract may not amount to an election to affirm the contract.” ((1974) 131 CLR 634, 656)
97In a later passage, his Honour said:
“If a party to a contract, aware of a breach going to the root of the contract, or of other circumstances entitling him to terminate the contract, though unaware of the existence of the right to terminate the contract, exercises rights under the contract, he must be held to have made a binding election to affirm. Such conduct is justifiable only on the footing that an election has been made to affirm the contract; the conduct is adverse to the other party and may therefore be considered unequivocal in its effect. The justification for imputing to the affirming party a binding election in these circumstances, though he be unaware of his alternative right, is that, having a knowledge of the facts sufficient to alert him to the possibility of the existence of his alternative right, he has acted adversely to the other party and that, by so doing, he has induced the other party to believe that performance of the contract is insisted upon. It is with these considerations in mind that the law attributes to the party the making of a choice, though he be ignorant of his alternative right. For reasons stated earlier the affirming party cannot be permitted to change his position once he has elected. ((1974) 131 CLR 634, 658)
98Stephen J said:
“The nature of the knowledge which an elector must possess is a matter upon which the authorities are somewhat at variance. An elector must at least know of the facts which give rise to those legal rights, as between which an election must be made; without that knowledge the doctrine of election will not be available to make irrevocable his choice of one particular right, although in appropriate circumstances an estoppel may still arise which produces that very consequence and this without any such requirement of knowledge on the part of the party who is estopped. The extent of knowledge of relevant facts necessary for the doctrine of election to apply has been described as “full knowledge of the material facts” (Bennett v. L. & W. Whitehead Ltd. (1926) 2 KB 380, at p 410). In Elder’s Trustee & Executor Co. Ltd. v. Commonwealth Homes & Investment Co. Ltd. (1941) 65 CLR 603 a knowledge of circumstances such as will provide information from which the decisive fact giving rise to the legal right is “a clear if not a necessary inference” was held to be sufficient (1941) 65 CLR, at p 617.” ((1974) 131 CLR 634, 642)
99Mr Moon submitted that the evidence showed that Ms Betts only became aware of her right of avoidance on 19 December 2019, “and promptly terminated the contract on 20 December 2019.” (Closing submissions, [44]). Without proof of an earlier awareness of the right to terminate, there could be no election. In contrast, on behalf of Mrs Harman, Mr Schlicht said that Ms Betts evinced an intention to affirm the contract by receiving the certificate of warranty insurance on 23 October 2019, and then took further steps thereafter to “confirm the contract of sale”. (Closing submissions, [43]−[44]) He said her conveyancers were aware of the provisions of s137B at material times.
100These contentions give rise to a need to make further findings of fact and to resolve some difficult legal issues.
101At all material times, Ms Betts was aware of the factual matters which gave her the right to avoid the contract pursuant to sub-s137B(3) of the Building Act. She signed both the sale contract and the s32 Statement, and must necessarily therefore have been aware of what was and was not annexed: in particular, no insurance policy as required by s137B, nor any extract or certificate relative to such policy. Her knowledge of the legal basis for the right to avoid the contract is less clear. If consideration is restricted to her own personal knowledge, as distinct from what might be imputed to her, it is clear that she became aware of the right to avoid the contract only in the period 19−20 December when she purported to exercise it. Her evidence was that she was informed of the right to avoid in an email from Frenkels at the 11th hour, and that she initially regarded it as a “joke”. It was not put to her in cross-examination that her recollection was faulty, nor that she was seeking to mislead in giving that evidence. Her account is, in any event, plausible. She had wished to escape from the contract, suffering what is popularly described as “buyer’s remorse”. She sought legal advice from a number of sources, including Mr Sam Holt and both senior and junior counsel, obtaining joint advice from senior and junior counsel which canvassed a number of possible “escape” strategies but did not mention s137B.
102Mr Schlicht, in closing submissions, as recorded above, asserted that Ms Betts’ conveyancers, Rivendell, were well aware of s137B of the Building Act. He did not elaborate on the basis for that assertion, but presumably it derives from an early letter which they wrote enquiring as to the warranty insurer. Mr Moon sought to diminish the significance of that letter, which is relied on in a number of respects by the defendant, describing it as a mere “pro forma” piece of correspondence. The letter indicates, to my mind, no more than a general awareness on the conveyancers’ part that warranty insurance was a matter which needed to be dealt with as part of the transaction. I am not satisfied that the conveyancers were aware that, in the events that occurred, the purchaser, Ms Betts, had a right to avoid the contract.
103It follows that if knowledge of the legal right, as distinct from the factual basis, for the purchaser’s right of avoidance is required before the purchaser is put to her election, Ms Betts elected to avoid the purchase contract forthwith upon becoming aware of the factual basis and her legal right of avoidance, and no election to affirm occurred. Should the true view be that knowledge of the factual basis is sufficient to put a purchaser to election in these circumstances, the question as to whether Ms Betts elected to affirm the contract so as to preclude her from relying on the right under sub-s137B(3) is more problematic.
104Writing in 1987, Professor D W Greig and Mr J L R Davis in their work The Law of Contract stated:
“A person will not, in general, be regarded as having elected to affirm unless he was aware of his legal right to do so. However, this proposition must be qualified in two respects. First, if the injured party, although he does not know of his rights, acts in such a way as to lead the other party to believe that he is affirming the contract, he will be estopped from later denying the effect of those actions. Secondly, if the right to affirm or disaffirm is expressly given by the contract, he will be taken to know the content and effect of such a term, and of the choices open to him.” (p.1257)
105The learned authors referred to a decision of the English Court of Appeal in Peyman v Lanjani [1985] Ch 457. That case entailed purchase of the leasehold of a restaurant where assignment of the leasehold was subject to the landlord’s consent which could not be obtained. The question was whether the purchaser had affirmed the contract by taking possession of the leasehold premises. Having referred to earlier authority, Stephenson LJ concluded that an effective election required knowledge both of the factual basis upon which the elector might avoid a contract as well as the legal right to do so. His Lordship said:
“The plaintiff can therefore rely on his own unchallenged ignorance of the law, unless he is precluded from doing so either by what he has done or by his solicitor’s knowledge of the law. [The earlier decisions] lay down what a person in his position must know before he loses his right to rescind; they do not go far into what he must not do if he is to keep the right, or what the effect on it of his having legal advice may be.” ([1985], Ch 457, 487)
106Having referred to this decision and a number of other English authorities, the learned authors state:
“There is little doubt that this decision represents the law in Australia as well.”
107They referred to a decision of the Full Court of the Supreme Court of Victoria in Coastal Estates Pty Ltd v Melevende [1965] VR 433, which was cited with approval by the English Court of Appeal in Peyman v Lanjani. This question arose for consideration in the Federal Court of Australia before Pincus J in Re Hoffman; ex parte Worrell v Schilling (1989) 85 ALR 145. His Honour referred to what he described as the “weighty authority” of Sir Frederick Jordan CJ in O’Connor v S.P. Bray Limited (1936) 36 SR (NSW) 248, 262−4, where his Honour determined that knowledge of the legal consequences of the fact upon which a right of avoidance is based was not necessary for an effective election. His Honour said:
“I respectfully disagree with the view expressed by Greig and Davis ... that the law as laid down in the English Court of Appeal in Peyman v. Lanjani (1985) Ch 457 “represents the law in Australia as well”.” ((1989) 85 ALR 145, 151.
108Writing in 2019, former High Court Justice J D Heydon in his book Heydon on Contract gave a more nuanced view on what level of knowledge of a right to rescind or to determine a contract was necessary to regard a party to a contract to be held to an election to affirm. At [31.730] 1158−9, the learned author stated:
“Can affirmation of a voidable contract take place if the innocent party is not aware of the right [italics in the original] to rescind as distinct from being aware of the facts [italics in the original] justifying a right to rescind? For an affirmative answer there are three groups of authorities. One comprises “negative” authority – that is, cases requiring knowledge of the facts but not of the right to rescind as a precondition to affirmation. This is necessarily at most a fragile and indecisive guide to the law. A second group comprises authorities largely dealing with other, albeit arguably related fields. A third group comprises authorities many, though not all, of which contain dicta. But there is authority for a negative answer. The following points of principle and convenience suggest an affirmative answer. To adopt a rule that knowledge of the right to rescind is necessary would make affirmation hard to prove, whether or not legal professional privilege were claimed. Short of an admission, it might not be possible to demonstrate affirmation. The proposed rule might encourage perjury. The proposed rule would be out of line with the general principle that ignorance of the law is irrelevant. It would be out of line with the objective tests for contract formation, construction, repudiation, estoppel by representation, and imputation of an agent’s knowledge to the principal. And it would make it hard for the non-innocent party to decide whether it was safe to rely on an apparent affirmation.
However, there is authority that otherwise equivocal conduct may be construed as an affirmation if the innocent party was aware of the right to rescind and chose consciously to affirm the contract. There is also authority that knowledge of rights is needed if the affirming conduct is not adverse to the other party. Both the latter lines of authority have been criticised.”
109This analysis is copiously footnoted with reported and unreported authorities from Australia, England, and as far away as Canada.
110In the loose-leaf service Carter on Contract, Professor Carter states at [26−050] 60,097, Service 16:
“The question of election does not arise until the plaintiff has acquired knowledge of the facts which give rise to the right of rescission, for example, that a representation was false. Words or conduct, if unequivocal, may amount to affirmation. In cases of misrepresentation, the representee is entitled to believe the representation at least until there is some cause for suspicion, and usually beyond that stage. Accordingly, mere partial information giving some cause for suspicion will not suffice, and a right to rescind may exist notwithstanding the lapse of a considerable time since the making of the contract.
The issue may then arise whether it is sufficient for the representee to have knowledge of the falsity of the representation, or whether the representee must know also of the alternative (and inconsistent) rights to which the misrepresentation gave rise. Whatever the source of the right to rescind or, in cases of misrepresentation, the nature of the misrepresentation, if the plaintiff has knowledge of both the facts and of the right to rescind, an affirmation may be found to have occurred. Where the right to rescind arises under an express term of the contract, it is sufficient for the plaintiff to know of the facts: words or conduct, if unequivocal, may then amount to affirmation.
However, is it sufficient, where the right arises under the general law, that the representee has become aware of the facts [italics in the original] which falsified the representation, or is it also necessary that the representee should know of the right [italics in the original] to rescind? The issue is a general one, arising in respect of all cases of election (or waiver), and in principle the answer given in the context of rescission for misrepresentation should not differ from the answer given in other contexts, such as the right to terminate for breach or repudiation.”
111The learned author then referred to the decision of the Full Court of the Supreme Court of Victoria in Coastal Estates Pty Ltd v Melevende [1965] VR 433 and the decision of Pincus J in Ex parte Worrell. Professor Carter continues:
“More generally, the analysis in Melevende relies on a distinction between two sources for a right to elect, namely the general law (of misrepresentation) and the express terms of the contract. In relation to the latter, the view was expressed that knowledge sufficient to justify a finding of affirmation is knowledge of the facts which activate the term in the contract. In the former, knowledge of the right to rescind was said to be essential.” ([26−050] 60,098, Service 16)
112I will confine myself to a consideration of certain leading Australian appellate authorities. In Elder’s Trustee and Executor Company Limited v Commonwealth Homes and Investment Co Ltd, the plaintiff, a Mr Marshall, claimed a declaration that an allotment to him of 2,040 shares was not binding on him for failure by the company to comply with the requirements of s226 of the South Australian Companies Act 1892. Before trial Mr Marshall died, and the case was continued by his executor, Elder’s Trustee and Executor Co Ltd. The Full Court of the Supreme Court of South Australia dismissed the claim on the basis that Mr Marshall had elected to affirm the share allotment to him. The High Court of Australia on appeal reversed that determination. ((1941) 65 CLR 603) The Court, Rich ACJ, Dixon and McTiernan JJ, said:
“The decision of the Full Court in respect of the 40 shares is based upon the view that the plaintiff could not rely upon his ignorance of the existence and effect of sec. 226 as an answer to what otherwise would be the legal consequence of his conduct. The doctrine upon which the Court acted is that, as a general rule, in order that a party may be precluded by his conduct from exercising an election, it is not necessary that he should have knowledge of the existence of his right to avoid the transaction, as well as of the facts upon which that right arises. This accords with the opinion of Jordan C.J. expressed in the course of his judgment in O’Connor v. S. P. Bray Ltd., where the general subject of election is discussed in a very full and informative manner. His Honour said:— “It has been urged that there must also be knowledge of the legal consequences of the facts and of the legal rights involved ; but this is not borne out by the authorities, and the contention is, I think, based upon an attempt to import into ordinary cases of election rules which are peculiar to the equitable doctrine of election. This doctrine is referable to the principle that a person is not permitted both to approbate and to reprobate an instrument”.” ((1941) 65 CLR 603, 617−8)
113Their Honours referred to a text by J S Ewart which distinguished three species of knowledge relevant to when a party to a contract or arrangement is pushed to his or her election, namely: 1. Knowledge as to the existence of a right to elect. 2. Knowledge as to the happening of the circumstances which warrant the exercise of the right. 3. Knowledge as to the existence of circumstances which would affect the choice. The author said that in the case of election between estates all three types of knowledge were required, but that in the law of contracts only the second species of knowledge, viz of the underlying facts giving the right to elect, was necessary. Their Honours continued:
“But a distinction must be drawn between cases where the party’s conduct is unequivocal in its effect and cases where this conduct does not necessarily amount to a waiver but is merely some evidence that he has in fact elected to affirm. Where rights are exercised, either in virtue of an estate or interest in property, or by virtue of a contract, which would not exist unless the estate, interest or contract endured or remained in force, it may well be that the party exercising them loses the right to determine the estate or interest on breach of condition or the contract for breach of some term going to the root of it, unless he is able to show not merely that he was unaware of the existence of his right but of the facts amounting to breach of condition or of contract. But in the present case the plaintiff did not exercise any rights adversely to the company. He did nothing inconsistent with renunciation or disaffirmance. He merely acted as if he were a shareholder and failed to disclaim that character. He so conducted himself that it might be considered a natural inference, if he knew that he had a right of election, that he had resolved to affirm. Further, it is possible that his conduct, if he had had that knowledge, might be regarded as raising an equity against allowing him to rescind at so late a stage. But in the absence of knowledge of his rights we do not think that in the actual circumstances any equity arose from his conduct, and clearly it could not be inferred that he made an actual election.” ((1941) 65 CLR 603, 618)
114In Coastal Estates Pty Ltd v Melevende [1965] VR 433 the Full Court of the Supreme Court of Victoria heard an appeal from a judgment in favour of Mr Melevende for £1,000 as moneys had and received on a consideration that had totally failed. Mr Melevende claimed successfully before this court that his contract to purchase certain property from Coastal Estates had been rescinded for fraudulent misrepresentation and that the moneys paid by him under the rescinded contract could be recovered as moneys had and received. The contention on appeal was that no rescission was permissible in circumstances where it was said Mr Melevende had elected to affirm. The Full Court, Herring CJ, Sholl and Adam JJ, concluded that Mr Melevende had not elected to affirm the contract and no election from him was called for until he was not only aware of the fact of the misrepresentation but of the legal right to rescind, of which he became aware only after consulting a solicitor.
115Herring CJ referred to the same textbook by Ewart quoted by the High Court in the Elder’s Trustee case, stating:
“[I]t would seem that the parties to a contract are to be deemed aware of the elections that the terms of their contract give them or at any rate are to be precluded from denying knowledge of them.”
Viz, knowledge of the facts is sufficient. ([1965] VR 433, 435) His Honour continued on the same page of the report:
“A right of election by one party to a contract to affirm or disaffirm it stemming from the fraud of the other party stands, however, I think on a very different footing and is governed by the general principle, to which I have already referred, namely, that an election cannot be exercised by the party concerned until he has knowledge of the right to elect. It follows, therefore, that in a case of fraud if the fraudulent party sets up the defence of affirmation, on the ground that the defrauded party has actually elected to affirm the contract, the burden rests on him to establish not only that the party defrauded knew the facts about the fraud but also that he knew of his right to elect.” (Ibid)
116Sholl J was of the view that the trial judge’s conclusion that Mr Melevende was not fully acquainted with the facts of the alleged fraudulent misrepresentation when he did the things alleged to be an affirmation of the contract could not be supported. ([1965] VR 433, 442) Mr Melevende had, in answer to interrogatories and in oral evidence, said that by January 1962 he was “completely satisfied in his own mind that [the representations] were lies”, yet he paid further instalments of principal and interest under the property, and paid the rates on the property for several months after that. It followed that a finding that Mr Melevende had not affirmed the contract could only be made based on his lack of knowledge of the right to rescind. His Honour was of the opinion that an effective election required not merely knowledge of the facts, but also of the right to rescind ([1965] VR 433, 444), despite thereby differing from Sir Frederick Jordan. He described the treatment of the issue by the High Court in the Elder’s Trustee case as being “elliptical”. His Honour continued on the same page:
“If the law in this field has developed in a manner which requires compliance with a stricter test in order to establish affirmation on the part of the victim of a fraud, that is not something of which society should complain. In other fields also, e.g., that of workers compensation, the courts have come to insist on knowledge of rights as a condition of a binding exercise of an option or election.”
117The third member of the Court, Adam J, said:
“Because the making of an election necessarily presupposes a knowledge that a choice between alternative courses is open, in general, no question of affirmation can arise in the absence of such knowledge. There appears, however, to be one important qualification upon this. If a representee, after discovery of the facts which entitle him to avoid a contract, exercises, in an unequivocal manner, rights under the contract adversely to the other party he will in general be deemed to have elected to affirm it, although not aware of his right to elect. In the case of a representee unaware of his right of election there is, I consider, a distinction to be drawn between acts done by him in exercise of rights under the contract adversely to the other party which, were the contract not on foot, could not be justified, and acts which do no more than show that the representee recognized the contract as still subsisting, but are not prejudicial or adverse to the other party. Such a distinction may be explained as an application of the doctrine of estoppel, or of the rule against approbating and reprobating, or perhaps more broadly on general considerations of justice. Strictly speaking I would think that the so-called affirmation without knowledge of any right to elect should be regarded as an example of the loss of a right to rescind apart from the principle of election, and that it tends only to confusion to treat it as of the same species as a true election to affirm.” [1965] VR 433, 453
118His Honour said this analysis was supported by the passages quoted above from the High Court in the Elder’s Trustee case.
119In Sargent’s case, two of the High Court justices (Stephen J and Mason J, as he then was) dealt with this question. McTiernan ACJ concurred with Stephen J. Stephen J reviewed the authorities to which I have already made reference, including the Elder’s Trustee case and the Coastal Estates case. As to American authority, he said a consideration of the American cases disclosed “a similar absence of unanimity concerning the knowledge necessary to create an irrevocable election, although the clear weight of opinion appears to require knowledge only of the relevant facts and not of the legal rights”. His Honour continued:
“The present appeals are concerned only with the vendor’s choice between rescission of the contracts under cl. 16 and affirmation of the contracts. The right of rescission here in issue is, therefore, quite different from that under consideration in the Coastal Estates Case (1965) VR 433, a distinction made by Herring C.J. who refers to the view of Mr Ewart concerning an express right of rescission conferred by the contract and concludes that in such a case “the parties to a contract are to be deemed aware of the elections that the terms of their contract give them or at any rate are to be precluded from denying knowledge of them”.
Not only is this distinction, with respect, well founded but it provides a measure of reconciliation of conflicting authority as well as resolving the matter so far as concerns the present appeals. Where election is in question between contracting parties and, as in these appeals, the contract itself confers the inconsistent rights there can be no question whether a party had knowledge of his choice of rights. He is deemed to know the terms of his own contract and the rights it confers, at all events he cannot take advantage of his own ignorance ...; moreover he must take his contract as bearing whatever meaning the court will assign to it when it is called upon to interpret it ...
... I am not to be taken as concluding that where contractually conferred rights are not in issue there can be no binding election without knowledge of the right to elect. It is not necessary for me to decide the point and I do no more than draw attention to the distinction made by Herring C.J. in the Coastal Estates Case (1965) VR 433 as explanatory of some of the conflict of authority on this topic.” (1974) 131 CLR 634, 644−5
120Mason J said:
“If a party to a contract, aware of a breach going to the root of the contract, or of other circumstances entitling him to terminate the contract, though unaware of the existence of the right to terminate the contract, exercises rights under the contract, he must be held to have made a binding election to affirm. Such conduct is justifiable only on the footing that an election has been made to affirm the contract; the conduct is adverse to the other party and may therefore be considered unequivocal in its effect. The justification for imputing to the affirming party a binding election in these circumstances, though he be unaware of his alternative right, is that, having a knowledge of the facts sufficient to alert him to the possibility of the existence of his alternative right, he has acted adversely to the other party and that, by so doing, he has induced the other party to believe that performance of the contract is insisted upon. It is with these considerations in mind that the law attributes to the party the making of a choice, though he be ignorant of his alternative right. For reasons stated earlier the affirming party cannot be permitted to change his position once he has elected.” ((1974) 131 CLR 634, 658)
121What I take from that review of appellate authority is that whether or not there is a special rule applicable to rescission rights deriving from fraudulent misrepresentation as suggested by Herring CJ in the Coastal Estates case, an effective election may be made on the basis of knowledge of the underlying facts as exists here without knowledge of the legal right to rescind only if the acknowledgment of the continuing effect of the contact allegedly affirmed entails acts adverse to the other party such as demanding the payment of money, taking possession of property, and so forth. Merely continuing upon the assumption that the contract remains in force, as was the case in the Elder’s Trustee case, is insufficient to put a party to election in the absence of knowledge of the legal right so to do.
122Turning to the present case, therefore, for reasons already explained, Ms Betts knew of the underlying facts since they derive from the contract and s32 Statement which she signed. She elected to avoid the contract forthwith upon becoming aware of her legal right so to do. The question therefore as to whether there has been an effective election or not depends upon the nature of Ms Betts’ activities relative to the contract from its formation when she became aware of the underlying facts giving the right to avoid until the letter of avoidance from her solicitor. In the nature of things, she demanded no money from the defendant vendor nor did she take possession of property. Her conveyancers did call for production of insurance documentation, and she did insist upon an inspection of the premises and obtained a building report. In the way in which this proceeding was argued, neither party interpreted the conflicting authorities on election in the manner which I have ultimately adopted, and so their submissions did not direct themselves to the distinction which I now believe is key. With some hesitation, I conclude that what Ms Betts did, whilst acknowledging the continued existence of the contract, did not constitute adverse steps in the relevant sense such that she could be regarded as having made an effective election to affirm before her solicitor’s letter seeking to avoid the contract.
123As to the operation of the doctrines of waiver, Mr Moon said the principles governing it were to be found in the joint judgment of Knox CJ, Isaacs and Starke JJ in Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305, 326. That passage is as follows:
“A waiver must be an intentional act with knowledge” (per Lord Chelmsford L.C. in Earl of Darnley v. Proprietors &c. of London, Chatham and Dover Railway). First “some distinct act ought to be done to constitute a waiver” (per Parke B. in Doe d. Nash v, Birch and per Williams J. in Perry v. Davis); next, it must be “intentional,” that is, such as either expressly or by imputation of law indicates intention to treat the matter as if the condition did not exist or as if the forfeiture or breach of condition had not occurred; and, lastly, it must be “with knowledge,” an essential supported by many authorities, from Pennant’s Case and down to Matthews v. Smallwood. “Waiver” is a doctrine of some arbitrariness introduced by the law to prevent a man in certain circumstances from taking up two inconsistent positions (see per James L.J. in Pilcher v. Rawlins). It is a conclusion of law when the necessary facts are established. It looks, however, chiefly to the conduct and position of the person who is said to have waived, in order to see whether he has “approbated” so as to prevent him from “reprobating” —in English terms, whether he has elected to get some advantage to which he would not otherwise have been entitled, so as to deny to him a later election to the contrary (see per Lord Shaw in Pitman v. Crum Ewing). His knowledge is necessary, or he cannot be said to have approbated or elected.
124The same considerations which have led me to conclude that, in the circumstances, no binding election to affirm was made by Ms Betts prior to her solicitors’ letter seeking to avoid the contract, should negate any effective reliance on the doctrine of waiver by Mrs Harman. Moreover, merely to call for the warranty insurance material to be produced at or prior to settlement, as the conveyancers’ letter did, is too indirect and indefinite to constitute a waiver.
125As to the doctrine of estoppel, Mr Moon relied on the formulation of Dixon J (as he then was) in Grundt v Great Boulder Proprietary Gold Mines Limited ((1937) 59 CLR 641, 674−5, where Dixon J said:
“The principle upon which estoppel in pais is founded is that the law should not permit an unjust departure by a party from an assumption of fact which he has caused another party to adopt or accept for the purpose of their legal relations. This is, of course, a very general statement. But it is the basis of the rules governing estoppel. Those rules work out the more precise grounds upon which the law holds a party disentitled to depart from an assumption in the assertion of rights against another. One condition appears always to be indispensable. That other must have so acted or abstained from acting upon the footing of the state of affairs assumed that he would suffer a detriment if the opposite party were afterwards allowed to set up rights against him inconsistent with the assumption. In stating this essential condition, particularly where the estoppel flows from representation, it is often said simply that the party asserting the estoppel must have been induced to act to his detriment. Although substantially such a statement is correct and leads to no misunderstanding, it does not bring out clearly the basal purpose of the doctrine. That purpose is to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting. This means that the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted that led to it. So long as the assumption is adhered to, the party who altered his situation upon the faith of it cannot complain. His complaint is that when afterwards the other party makes a different state of affairs the basis of an assertion of right against him then, if it is allowed, his own original change of position will operate as a detriment. His action or inaction must be such that, if the assumption upon which he proceeded were shown to be wrong and an inconsistent state of affairs were accepted as the foundation of the rights and duties of himself and the opposite party, the consequence would be to make his original act or failure to act a source of prejudice.”
126The matters referred to as constituting the basis for the allegation that the plaintiff is estopped from relying on non-compliance with s137B of the Building Act are, according to the Further and Better Particulars of the Defence and Counterclaim (CB 29) were to be found in paragraphs 11, 12 and 14A of the Further Amended Defence and Counterclaim. Paragraph 14A of that document refers back to paragraph 11 which is therefore the source of the matters said to constitute the estoppel. Mr Moon correctly observed that of the matters numbered (a)−(k), all but the first three are normal steps taken in the performance of the sale and purchase contract and preparation for settlement. It is only the first three that can be regarded as specifically directed to the issue of warranty insurance: namely, the inclusion of General Condition 8 in the contract of sale, the letter of 4 April 2019 by Ms Betts’ conveyancer requesting warranty insurance “to be supplied prior to or at settlement”, and the provision on 24 October 2019 of the insurance. The acts which are relevant to creating an estoppel are those taken by the person relying upon the allegedly estopping representation. In this case, according to Sir Owen’s formulation, applied to the present fact situation, it must be shown that the estoppel induced Mrs Harman to act to her detriment. This detriment would be prevented by, again according to his Honour’s formulation, compelling Ms Betts to adhere to the assumption upon which Mrs Harman acted or abstained from acting.
127Turning again to the matters referred to in the Further Amended Defence and Counterclaim, most of the matters refer to steps taken by or on behalf of Ms Betts. Both parties are said to have signed a stamp duties form on 29 November 2019, and Mrs Harman and Mr Harman and their selling agent met Ms Betts for the final inspection of the property, where Ms Betts was alleged to have said that settlement would proceed as planned. I did not understand her to deny making such a statement. In submitting a statement of adjustments, Ms Betts’ conveyancer effectively invited her counterpart, acting on behalf of Mrs Harman, to consider the statement of adjustments.
128The doctrine of estoppel may operate to preclude a party exercising a right to disaffirm a contract or avoid it without the necessity for full knowledge of the facts relative to the right to disaffirm or avoid or the legal right to do so: Heydon on Contract [31.930] 1164, citing Motor Oil Hellas (Corinth) Refineries S.A. v Shipping Corp of India (the Kanchenjunga) [1990] 1 Lloyd’s Rep 391, 399, per Lord Goff of Chieveley.
129The basis of the operation of the doctrine of estoppel is to preclude a person from departing from an assumption by the other party which the first person’s actions have created. The doctrine will operate only where such departure would be unjust: Thompson v Palmer (1993) 49 CLR 507, 547, per Dixon J. His Honour continued:
“Whether a departure by a party from the assumption should be considered unjust and inadmissible depends on the part taken by him [the person said to be estopped] in occasioning its adoption by the other party. He may be required to abide by the assumption because it formed the conventional basis upon which the parties entered into contractual or other mutual relations, such as bailment; or because he has exercised against the other party rights which would exist only if the assumption were correct, ... or because knowing the mistake the other laboured under, he refrained from correcting him when it was his duty to do so; or because his imprudence, where care was required of him, was a proximate cause of the other party’s adopting and acting upon the faith of the assumption; or because he directly made representations upon which the other party founded the assumption. But, in each case, he is not bound to adhere to the assumption unless, as a result of adopting it as the basis of action or inaction, the other party will have placed himself in a position of material disadvantage if departure from the assumption be permitted.”
130In Coastal Estates Pty Ltd v Melevende, Sholl J, speaking of the actions of Mr Melevende, who, after he became aware of the falsity of the misrepresentations which had induced him to purchase the relevant land, sought unsuccessfully to resell the land or renegotiate his contract with the vendor as well as paying rates on the property, said:
“Acts of the defrauded party which are not adverse in the above sense, such as payments made by him to the other party, or to others (e.g., rates), or negotiations for sale, are some but not conclusive evidence of a binding election made with knowledge of his rights. They may be enough to pass to him the shifting onus of proof so that he has to show non-knowledge of his rights at the time, but they do not of themselves involve an estoppel. They may, however, form part of the foundation for an estoppel, e.g., if the opposite party, misled by such an act into supposing that the other is proceeding with the contract, refuses a more advantageous offer for the property the subject of the contract, or otherwise acts to his prejudice.” ([1965] VR 433, 443)
131As previously observed, tracing through the request for particulars on behalf of Ms Betts and the response on behalf of Mrs Harman, the facts said to be the basis of the estoppel are alleged in paragraph 11 of her Further Amended Defence and Counterclaim. None of these matters rises to the level of detriment of which Sholl J spoke in the Coastal Estates case in the passage quoted. In a different context, in cross-examination, Mr Harman said that if the issue of s137B had been raised earlier it may have been possible to negotiate a sale with other persons who had responded to the request for expressions of interest. There was no detail, and this matter was not further developed. In the circumstances, I am not satisfied that it has been shown that the actions of Ms Betts – or perhaps more accurately inactions, in failing until perhaps after the 11th hour to raise the issue of s137B – caused Mrs Harman to act to her detriment, at least in a manner which would create the injustice necessary to engage the doctrine of estoppel.
132The answer to Question 2 is “No”.
133I turn next to the third question posed.
Did the plaintiff agree to extend time for the provision of domestic warranty insurance up to and including settlement, whether by reason of General Condition 8 in the Contract of Sale of Land dated 2 April 2019 ... or otherwise?
134General Condition 8 of the contract is quoted at [6] above. The first thing to note is that this is not a special condition added to the contract following negotiation. It is a pro forma condition deriving from the Estate Agents (Contracts) Regulations 2008. Mr Moon said (Closing submissions, [54]) that this general condition was intended to operate with respect to warranty insurance provided by registered builders as required by s135 of the Building Act. This insurance, he said, was not site-specific, but rather, applied to the structures erected by the registered builder wherever located. Mr Moon continued:
“ GC 8 recognises that the vendor may not have been the owner of the property at the time when the warranty insurance was first taken out and may not be in possession of the policy. In that case, there is no obligation on the vendor to provide details of the warranty insurance; the obligation falls on the purchaser to obtain those details from the builder ...”
135He referred to the commentary by Messrs Lloyd and Rimmer, Victorian Land Contracts [GC12.30, p.160] where the learned authors state:
“General condition 12 recognises that the vendor may not have been the owner of the property at the time when the builder warranty insurance was first taken out, and hence may not be in possession of the relevant policy of insurance. If the vendor is not in possession of the builder warranty insurance, the obligation cast upon the vendor under general condition 12 to provide details of it does not arise.”
136The standard contract of sale with which the learned authors are dealing is a later version than the one involved in this case. General Condition 12 in that later standard form is in identical terms to General Condition 8 in the present contract.
137The fact that General Condition 8 is a standard form condition and not a “bespoken” special condition supports the view advanced by Mr Moon that it should be regarded as referable to the more typical situation where a dwelling house is constructed under contract by a registered builder rather than, as here, by an owner-builder. Alternatively, if the general condition were regarded, by reason of the generality of its language, as covering both situations, it should still not be regarded as constituting an agreement to dispense with the civil consequences of contravention of s137B. The parties to a contract of sale cannot dispense a vendor from the consequences of a criminal contravention. To say, as both parties agree can be said, that a party may dispense with a statutory benefit bestowed upon him, means the dispensation could only be regarded as extending to a dispensation from the right of avoidance until settlement given to the purchaser in circumstances such as these. Granted that statutory entitlements may be bargained away, in my view the language here is insufficiently precise to achieve the result. There is no mention of the right of avoidance at all.
138The same observation of lack of specificity may be made with respect to the conveyancers’ letter of 2 April 2019.
139The answer to Question 3 is “No”.
140This brings me to the fourth question posed.
In light of the admitted contravention of s32B(b) of the Sale of Land Act 1962 has Mrs Harman satisfied the requirements of s32K(4) of the Sale of Land Act, being:
(a) she acted honestly and reasonably and ought fairly to be excused for the contravention; and
(b) Ms Betts is substantially in as good a position as if all the relevant provisions of the Sale of Land Act had been complied with?
141As the narrative above indicates, there were no particulars of any required insurance under s137B of the Building Act 1993. Indeed, no particulars could have been given because none were then in existence.
142Mr Moon said that Mr Harman, who was the defendant’s sole witness, was evasive and gave inconsistent evidence as to why his wife did not comply with the provisions of the Building Act and the Sale of Land Act (Closing submissions, [61]).
143As I understood this contention, it was based on an invitation to disbelieve Mr Harman’s evidence that he was not acquainted with the requirements of s137B of the Building Act, despite his having served as an executive of home builder AV Jennings and as group general manager for another home builder, Simonds Homes. Experience in the law tells us that we frequently encounter legal practitioners, judges and others, who might, on the basis of their experience and the nature of their involvement with the legal system, be expected to be acquainted with particular rules, but turn out to be oblivious to them. In the circumstances, I am not persuaded that I should disbelieve Mr Harman’s explanations of ignorance on his own part. The tone of his evidence was that he “took the lead” in this transaction, and by refraining to make an adverse finding against him, and by implication, therefore, treating his involvement in the transaction as being “honest”, the same should go for his wife.
144Mr Moon referred to the decision of Digby J in McHutchison v Asli [2017] VSC 258, where his Honour was invited not to grant rescission of contract for non-compliance with s32 of the Sale of Land Act on the same basis as is relied on by Mrs Harman here under sub-s32K(4): namely, that she had acted honestly and reasonably, and the purchaser would be in substantially as good a position etc. On the facts before his Honour, he concluded that no finding could be made that the vendor in the dispute before him had acted honestly. He made this finding based on what he regarded as a lack of an adequate explanation as to how the s32 Statement came to furnish false information about the non-connection of sewerage to the subject property. Here, as I understood Mr Harman’s evidence, he said he was ignorant of the statutory requirement but was eventually made aware of it by his conveyancer. This explanation I have accepted as plausible and, therefore, honest.
145The criterion of reasonableness relative to Mrs Harman’s conduct is more problematic. Mr Moon correctly referred to the very serious statutory contravention with a very heavy fine which was involved on Mrs Harman’s part. How, one may ask, can someone who committed so serious a contravention, even if inadvertently and as a result of ignorance, be regarded as having acted “reasonably”? “Reasonableness” is an objective standard. When used in the law of tort, it usually marks the boundary between conduct which avoids the infliction of injury on the one hand, and conduct which leads to injury and very grave damage on the other. Yet one would never reach s32K(4) for analytical purposes unless the premise was that there had been a statutory contravention. Parliament, therefore, must be taken to have assumed that the contravention, in itself, could not be sufficient to exclude the possibility that the contravenor had acted reasonably.
146Again, accepting that human experience tells us that many people who might be expected to know particular legal rules, having regard to their occupations and experience, turn out to be oblivious to them, that fact in itself should not exclude a finding of reasonableness on the part of Mrs Harman. It is also clear that she relied on a conveyancer to prepare the s32 Statement, and a conveyancer’s front sheet appears on the document. I accept that she acted reasonably.
147Likewise, Ms Betts is now in as good a position as she would have been if the requirements of the Sale of Land Act 1962, and in particular s32 and s32B, had been observed. The policy of insurance required by s137B was required to be on the terms of a Ministerial Order published in Victorian Government Gazette S98, 23 May 2003. The cover becomes callable only if the owner-builder “dies, becomes insolvent or disappears.” (Clause 20(2)) Mrs Harman has not disappeared, died or become insolvent. She is alive and well and litigating.
148The policy, according to clause 23, extended to loss and damage occurring up to the period of six years after the completion date of the domestic building. This appears to depart from the provisions of s137B themselves, which in sub‑s(7) appear to prescribe a period of six years and six months. The occupancy certificate was issued 30 January 2015 ([1] above). Therefore, the policy of insurance which was obtained and provided in October 2019 on any view had expired before the trial in this proceeding commenced. There was no evidence of any major defect. Clause 37 of the Ministerial Order permitted the policy to exclude liability for fair wear and tear and maintenance issues. Ultimately, Mr Moon was prepared to concede that this exclusion extended to fair wear and tear whenever occurring during the period of six years, or six years and six months, following completion of the building. That being so, the date on which the policy was issued would not be material on this issue. A piece of fair wear and tear appearing for the first time three years after completion would have been excluded from coverage, whether the policy was issued before or contemporaneously with the contract of sale in the first half of 2019 or, as it ultimately was, in October 2019.
149Mr Moon drew attention to the difference between the two reports by Mr Trevor Miles. The second report identified one defect which, in accordance with the terms of the policy, would be excluded from coverage, which would not have been excluded based on a policy issued in pursuance of the first report by Mr Miles. The defect was “The window in the laundry adjacent to the sink was not seen to be sealed to the laundry bench top”. (See [20] above) Mr Harman said he attended to that defect and effected a seal with the use of silicon. Mr Moon suggested the possibility that this apparent cosmetic defect might have betokened some significant underlying defect in the structure; but the general comments in both of Mr Miles’ reports on the structure were very positive, which would tend to exclude any belief on his part that there was any underlying issue relative to the sealing matter. Ms Betts had her own independent building inspection report carried out by Allcheck Property Inspections, which identified no major defects. (Exhibit A)
150The conclusion, therefore, is that the owner-builder warranty insurance was, aside from legalities, in practical terms a “non event”. The policy would not have been called upon, and could not have been called upon, whether issued at the beginning of 2019 and before the contract and s32 Statement, as the statutory requirements would have had it, or in October 2019, as in fact occurred. Ms Betts, therefore, was in as good a position as she would have been had all of the provisions of s32 and s32B of the Sale of Land Act 1962 been observed punctiliously.
151The answer to Question 4 is “Yes”.
152I now turn to the final question posed.
Is Ms Betts precluded from exercising her statutory right to avoid and/or rescind because she failed to settle the contract on 12 December 2019 [viz, because she was in default]?
153Mr Schlicht said that at the time Ms Betts purported to avoid the contract, she herself was in breach by failing to settle on the due date and intimating via her solicitors that she would not be in a position to settle until a date in the following month. In cross-examination she said it would have been possible to deploy the settlement funds at very short notice indeed. Mr Schlicht said that since she was not ready, willing and able to perform her side of the contract, she was not entitled to exercise a power of avoidance or termination. (T159)
154In Foran v Wight (1989) 168 CLR 385, the purchasers brought a proceeding seeking a declaration that they had validly rescinded a contract for the purchase of land. They had issued a rescission notice following an intimation from the vendors’ solicitor that the vendors would not be able to settle on the due date because a right of way had not been registered. The vendors contended at trial that the rescission notice was invalid because the purchasers were not ready, willing and able to complete on the due date because of lack of funds. The majority of the High Court held that the rescission notice was not invalid: it was sufficient, in light of the vendors’ indication of inability to sell, for the purchasers to show that they were not incapacitated from raising the necessary funds. ((1989) 168 CLR 385) Mr Schlicht referred to passages in Cheshire and Fifoot’s Law of Contract (9th Australian edition), edited by N C Seddon and R A Bigwood, at [20.10] 995. The learned editors state:
“Non-fulfilment of a contingent condition of performance does not confer an unqualified right to terminate a contract, or to rely on its automatic termination. A party may be precluded from exercising a right to terminate or insisting on termination on a number of grounds ...”
155At [20.11] 996, the editors state:
“It is well established that a party not itself ready and willing to perform is not entitled to terminate a contract for breach by the other party.”
156There is then a reference to paragraph [21.26]. That paragraph, at 1037, states:
“A party itself unable or unwilling to perform a contract cannot complain of the other party’s breach. Readiness and willingness to perform `goes to the cause of action’. A party not ready and willing to perform therefore has no right to terminate for breach by the other party, even if the breach in question would otherwise justify termination.”
157Amongst the lengthy list of authorities cited in support of this last proposition is Foran v Wight (1989) 168 CLR 385, 397−402, 423, 451. In that case, however, Deane J differed from the other justices on this point. His Honour said:
“Absence of actual or potential readiness or willingness to perform a contract will prima facie preclude a successful action against the other party for specific enforcement of the contract or for the recovery of damages for its breach. It does not, of itself, preclude rescission of the contract by acceptance of the other party’s repudiation. Were it otherwise, the law would require the useless and futile expenditure by an innocent party of whatever time, effort or money was necessary to place himself in a position where he could positively demonstrate actual or potential ability to perform a contract in order to be able to bring it to an end on the ground that it had already been repudiated by the other party.” ((1989) 168 CLR 385, 437)
158This principle, however, exists in the context of discharge or termination by an innocent party for breach of an essential term of the contract by the other party. Ms Betts’ termination or avoidance of the contract was based not on any breach or alleged breach by Mrs Harman, but upon a statutory contravention. As Mr Moon correctly observed, the right of termination is absolute and unconditional.
159The answer to Question 5, therefore, is “No”.
Disposition
160This analysis leads to the conclusion that the plaintiff’s claim should succeed, and the defendant’s counterclaim should be dismissed.
161I will direct the parties to bring in short minutes to give effect to these reasons.
Costs
162I have heard no submissions on the question of costs, and so I will reserve them.
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