Birch - v - Robek
[2014] VCC 68
•27 February 2014
| Revised | |
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE | Not Restricted |
CIVIL DIVISION
COMMERCIAL LIST
EXPEDITED CASES DIVISION
Case No. CI-12-05915
| AMANDA DEARNE BIRCH | Plaintiff / Defendant by Counterclaim |
| v | |
| ROBEK AUSTRALIA PTY LTD (ACN 006 308 961) | First Defendant / First Plaintiff by Counterclaim |
| v | |
| HAMPTON DEVELOPMENT PTY LTD (ACN 109 649 738) | Second Defendant / Second Plaintiff by Counterclaim |
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JUDGE: | HER HONOUR JUDGE KENNEDY | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 10, 11, 12 and 13 February 2014 | |
DATE OF JUDGMENT: | 27 February 2014 | |
CASE MAY BE CITED AS: | Birch – v – Robek & Anor | |
MEDIUM NEUTRAL CITATION: | [2014] VCC 68 | |
REASONS FOR JUDGMENT
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Catchwords: Contract of Sale for property “off the plan” – substantial variation in size of property – whether plaintiff entitled to return of deposit pursuant to the rule in Flight v Booth (1834) 131 ER 1160 – whether plaintiff alternatively entitled to return of deposit for misleading or deceptive conduct pursuant to the Competition and Consumer Act 2010 (Cth) sch 2 The Australian Consumer Law cl 4(1)(b), 18 and 30(1)(e).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J. McKay | Samuel Benjamin Bury |
| For the Defendants | Mr A. P. Downie | Kalus Kenny Commercial Lawyers |
HER HONOUR:
1 The plaintiff seeks the return of a deposit of $35,900 with respect to a Contract of Sale for the property at Unit 205, 2 Willis Lane, Hampton, Victoria (“the property”) which contract she terminated on 1 November 2012.
2 The plaintiff says that she received a substantially smaller apartment than what she contracted for and/or what was represented in the brochure given to her prior to sale (which was an “off the plan” sale).
3 The plaintiff therefore claims the return of the deposit on the basis of the principles in Flight v Booth.[1] Alternatively, she claims this deposit on the basis of the alleged misleading statements as to size and/or as to how the apartment could be furnished.
[1] (1834) 131 ER 1160.
4 As an alternative, the plaintiff also claims an entitlement to rescind on the basis that she did not receive notice of a material alteration to the proposed plan of subdivision pursuant to s9AC(1) of the Sale of Land Act1962 (Vic) (“the SLA”).
5 The defendants deny the plaintiff is entitled to the relief sought. They also counterclaim for an amount of $58,100 representing the difference between the purchase price stated in the Contract of Sale and the price obtained for the property on resale to a third party.
6 The plaintiff, in turn says that the vendor defendants were not ready willing and able to proceed such as to entitle them to rescind (given the absence of timber flooring).
7 There were therefore three main issues on the claim for the deposit:
· Whether the plaintiff is entitled to rescind based on the principles in Flight v Booth;
· Whether, alternatively, the plaintiff is entitled to rescind on the basis of misleading or deceptive conduct;
· Whether, alternatively, the plaintiff is entitled to rescind for breach of the SLA.
8 An earlier claim based on a separate breach of special condition 15 was abandoned in closing.
Background
Parties
9 The plaintiff was a 24 year old flight attendant at the time she entered the contract with no tertiary qualifications outside a performing arts course; in particular with no qualifications in law or architecture. This was her first purchase of property and she had saved $40,000 from living at home to purchase it.
10 The defendants are two property development companies. The director of the first defendant, Robek Australia Pty Ltd, was a Mr Feingold, who had been a solicitor for some 30 years before becoming a full time property developer in 2003.
Pre-contract
11 The plaintiff was looking for a apartment in early 2011 and came into contact with a Kate Warton, a marketing agent of the firm Knight Frank. The plaintiff’s evidence was that she advised Ms Warton that she was looking for an apartment with internal space that was over 40m² internally. This was because she had been advised that the bank needed this size in order to provide a bank guarantee “deposit bond” for the deposit and also to lend 80% of the value. She was also looking for an off-the-plan apartment because of the government grant.
12 She was taken to the Verge apartments but rejected them because the dining area/living area was in the one area and the display suite appeared “cheap”.
13 She subsequently received a call from Ms Warton about the Lido apartments in Hampton and inspected a display suite on Sunday 20 February 2011 at 10 am.
Inspection and signing of contract-20 February 2011
14 The plaintiff’s evidence was that Ms Warton handed the marketing brochure to her at the inspection of the property. That brochure shows a layout of a “type K” apartment (including apartment 205) and states (in bold) that the total area of the apartment was 48.5m² with an “internal area” of 40.5m². At the bottom of that brochure (in much smaller fainter print) a form of disclaimer appears which will be referred to further below.
15 The evidence of Mr Feingold was that the details in this brochure were taken from the architectural plans and that he checked that the areas shown in the brochure (or “promotional plan”) corresponded with the areas shown on the architect’s drawings.
16 After some further discussion, Ms Warton brought out the contracts for the plaintiff to sign. She did not discuss the terms with the plaintiff or explain the gist of the terms and conditions, nor did she refer her to the disclaimer in the cover page of Annexure A. The plaintiff was looking at the document on an “upside down angle” but saw the drawings for level 2 and that they contained the same outline as the marketing brochure.
17 The plaintiff then signed the contract that day (with the vendors signing it later on 22 February 2011) for a price of $359,000.
18 The detailed terms of the contract will be referred to below. However, the contract included 2 significant Annexures.
19 Firstly, it contained an Annexure A which were Architectural plans prepared by JAM architects. Consistent with the brochure, these contained a table which gives the measurements for apartment 2.5 as 40.5 for the area column and a figure 8 for the outdoor space column, giving a total of 48.5. They also contain a site plan picture for unit 2.5 which contains the figure of 40.49 printed within the depiction of the unit and the figure 8 printed within the balcony.
20 Secondly it contained an Annexure C which was the plan of subdivision; sheet 1 of which stated that the location of boundaries defined by buildings were to be defined by reference to the “interior face” and that “boundaries shown by thick continuous lines are defined by buildings and lie along the interior face of walls, floors and ceilings”.
21 However, despite the fact that the contract defined the title conveyed by measuring up to the “interior face” of the plaster walls, it was common ground that the Architectural plans were prepared by JAM on a different basis using the “Property Council of Australia guidelines” (“the PCAG”).[2] Pursuant to this latter measurement it will be seen, below, that parts of the actual wall-space are included with the result that the areas given in the plans are larger than that given by the “interior face” or “title” method actually specified in the contract.
[2] Signed Minute of Concessions dated 12 February 2014 bullet point 1.
22 Given it was also agreed that the apartment was built substantially in accordance with the plans,[3] it followed that the actual internal area or “airspace” conveyed would be smaller than that stated in the Architectural plans.
[3] Ibid., bullet point 2.
23 The plaintiff believed she had 14 days to cool off but then realised it was only 3 and read the contract further the evening she signed it. Because she had heard “horrendous stories” about buying apartments off the plan such that they did not match the internal areas shown on plans, she then made sure with a magnifying glass that the figures in the brochure matched the figures in the architectural plans.
Post contract
24 The plaintiff retained a conveyancing firm, Mount Alexander Conveyancing Services, and paid the deposit herself (without the bank guarantee given time pressures).
25 On 8 May 2012 the plaintiff and defendants executed a deed of variation to the contract to supply timber flooring for an extra $4,950.
26 By correspondence dated 10 September 2012 the plaintiff received conditional approval for finance of $291,160 subject to an acceptable valuation.
SLA notice
27 By notice dated 24 September the defendants notified the plaintiff’s conveyancer of a proposed amendment to the plan of subdivision. Although the correspondence annexed the plans containing the relevant change (to the kitchen area) the covering letter did not highlight this change (although it did refer to other changes).
28 According to the defendants’ expert, however, the change affected less than 2% of the internal area of the apartment.
October 2012
29 On 3 October 2012 the valuation obtained for the ANZ bank gave a value of $330,000 and described the living space of the apartment as 32m².
30 As a result, the evidence of the plaintiff was that the bank was unable to finance on the basis of 80%.
31 Given the apartment appeared to be “a lot” under the 40.5m² promised in the contract, the plaintiff thereupon sought legal advice.
32 Meanwhile, by letter dated 19 October the defendants notified of the issuing of an occupancy permit such that settlement was due on 1 November 2012.
33 After some difficulties arranging an inspection, the plaintiff subsequently inspected the property on 29 October 2012 with her surveyor, Mr Nobelius.
34 The plaintiff’s evidence was that, on viewing the apartment she found it so small as to be “unliveable” being smaller than hotels she stayed in (as part of her occupation).
35 As will be seen below, there was actually a 12.17% difference between the area given in the plans (48.5m²) and the actual “airspace” conveyed (42.6m²).
36 Following this inspection the plaintiff instructed her solicitor to rescind the contract.
Rescission notices
37 On 1 November 2012 the plaintiff’s solicitor terminated the contract in writing by fax to the defendants’ solicitors citing, inter alia, a “fundamental breach” such that the divergence in area meant the vendors “cannot deliver the property that the purchaser contracted to buy…”
38 By notice of 2 November, the defendants also served a rescission notice for failure to pay the residue due on 1 November.
39 The property was subsequently sold to a third party on 6 August 2013 for an amount of $265,000.
Witnesses
40 The plaintiff was called as well as her solicitor, Mr Samuel Bury. The plaintiff also added evidence of a joint expert report, which will be referred to, below.
41 Mr Bury gave evidence of documents and also some evidence about the measurements of furniture.
42 The plaintiff gave detailed evidence and was cross-examined. She was clearly inexperienced with property matters. However, she presented as an honest straightforward witness who was ready to make appropriate concessions. I have generally accepted her evidence.
43 The defendants called Mr Chris Manton, Ms Kate Warton, Mr Alan Norman and Mr Simon Feingold.
44 Mr Manton was the director of the architect firm, JAM Architects, which firm prepared the drawings contained in the contract. In the result he gave little evidence of consequence.
45 Ms Warton was the agent at Knight Frank. She did not recall all of her conversations with Ms Birch; only “some”. She did not discuss the brochure “in depth”. Although she suggested she “explained the contract” her evidence was that this related to the “process” of the 3 day cooling off period and how the plaintiff should take the contract to a solicitor to get it checked during which time the developer would sign.
46 Ms Warton did not remember the plaintiff mentioning her requirement that the internal area should be over 40m². However, given her memory was generally not strong, and given the plaintiff would be expected to remember more about her own transaction, I accept the plaintiff’s evidence that she did in fact make this requirement known.
47 Mr Feingold’s evidence was that he provided the plans to a builder, Walton Constructions, whom he retained to build the development, also retaining Mr Pozzebon as a supervisor. He further retained Kalus Kenny as solicitor to prepare the Contracts of Sale.
48 As indicated already, Mr Feingold’s evidence was that he had received the brochures and checked the areas were the same as in the architectural plans. However, insofar as the contract was concerned his evidence was that the vast majority of cases he had previously been involved in had the title boundary within the median walls of the apartment. He candidly conceded that he did not pay enough attention to the definitions on page 1 of the plan of subdivision in the contract in this case, but assumed it was in accordance with previous developments “without reading it carefully”. Had he seen the reference to interior face he would have gone back to the land surveyor to have it altered since, under subdivision regulations, you can choose where the boundary will be. He nevertheless returned the document to Kalus Kenny with his approval.
49 He fairly conceded that what was described in the marketing brochure and then ultimately in the town planning drawings did not actually represent what the purchaser was getting on title. Further that it was never intended that the exclusion of some of the internal walls from the title would make the apartment so “substantially smaller”. However, he speculated that it was because the builder did not build in accordance with the requirements he gave him.
50 The evidence of Mr Feingold was refreshingly candid and honest. However, his failure to check the reference in the contract is significant to the issue of “reasonable grounds”, below.
Expert evidence
51 A joint expert report was adduced dated 5 February 2014 prepared by Mr Alan David Norman and Mr Benjamin Stephen Nobelius.
52 In the report the authors helpfully agree on the measurements applicable to the apartment depending on the various methodologies of measurement as follows:
For the purposes of the court proceedings we recommend the following averaged values be adopted by both parties:
a) Property Council of Australia
Internal 39.3m²
Balcony 8.2m²
Total 47.5m²
b) Title 42.6m²
Internal 34.9m²
Balcony 7.7 m²
Total 42.6m²
c) Internal Finished Surface
Internal 33.8m²
Balcony 8.0m²
Total 41.8m²
d) Useable Floorspace
Internal 32.6m²
Balcony 7.8m²
Total 40.4m²
53 Mr Norman, the defendants’ expert, gave oral evidence wherein he explained the different methodologies the subject of the joint report above.
54 The first (a) is the PCAG which provide that a portion of a particular wall should be included within the calculated area. More particularly:
· The guidelines specify that for “common property” walls or “external to the Lot walls” the area is to be measured to the external face of the walls.
· For the “adjoining tenancy walls” the guidelines require the area to be measured to the midpoint of the wall.
55 The second is the “Title” – this is the title which Mr Norman accepted was defined on this plan of subdivision as the “interior face of the walls…” The measurements here related to the internal finished surface of the walls and extends to the perimeter of the balcony; including everything in the title.
56 The third is the “Internal Finished Surface”. This method is similar to the “Title” method above, the only difference being that the wall that separates the bedroom and balcony is excluded for the measured area as an exterior wall of the apartment.
57 The fourth is the “Useable Floor Space” which is measured by including all the internal finished surface area, but excluding all the internal walls. The analogy used by Mr Norman was to describe it as the “carpet area”.
58 All four “averaged values” provided for by the joint expert report are less than the overall apartment area quoted in the Plans and Brochure. The plaintiff’s calculations (which were not challenged) were as follows:
a. the “Property Council of Australia” total area is 2.07% less;
b. the “Title” total area is 12.17% less;
c. the “Internal Finished Surface” total area is 13.82% less; and
d. the “Useable Floorspace” total area is 16.71% less.
59 However, the defendants say that the apartment was built substantially in accordance with the Architectural plans prepared using the PCAG method which method was described by Mr Norman as a national standard and the method that architectural firms involved in significant apartment developments have commonly adopted.[4]
[4] Exhibit 4, Expert Report of Mr Norman dated 2 September 2013, 4.
Flight v Booth
principles
60 The case of Flight v Booth concerned the Contract of Sale of a lease of premises in Convent garden market London. The contract contained a description of the lease to be sold which description stated that the tenant was prohibited from carrying on any offensive trade as a “coffee house keeper or working hatter”. In reality the terms of the lease prohibited a great number of other useages.
61 The court found that the purchaser was entitled to rescind the contract with Tindal CJ laying down the following statement of principle:
In this state of discrepancy between the decided cases, we think it is, at all events, a safe rule to adopt, that where the misdescription, although not proceeding from fraud, is in a material and substantial point, so far affecting the subject-matter of the contract that it may reasonably be supposed, that, but for such misdescription, the purchaser might never have entered into the contract at all, in such case the contract is avoided altogether, and the purchaser is not bound to resort to the clause of compensation. Under such a state of facts, the purchaser may be considered as not having purchased the thing which was really the subject of the sale…[5]
[5] Flight v Booth (1864) 131 ER 1160, 1162 – 1163.
62 The essence of the principle is that the purchaser is not, in reality, obtaining the property which was really the subject matter of the contract.
63 It is therefore important to examine the contract to ascertain what was really the “subject matter of the contract.” [6]
subject matter
[6]See, for example, Buckley v Drk (Unreported, Supreme Court of Victoria, Teague J, 30 April 1993), 7; and Ventura v Maladale Pty Ltd (Unreported, 4 December 1986, Nathan J), 4.
64 Special condition 1.1 contained various definitions.
65 The “property” the subject of the contract was defined as “the property described in the Particulars of Sale”. The Particulars of Sale describe the land as Lot 205 on proposed Plan of Subdivision PS643612F being part of the land more particularly described in parent Certificate of Title Volume 8926 Folio 734.
66 The “Plan of Subdivision” was also defined as proposed Plan of Subdivision PS643612F a copy of which was contained in Annexure C.
67 Annexure C then contains the proposed Plan of Subdivision which includes a plan for apartment 205 (at sheet 5). As indicated already, at sheet 1 under notations it also states that the location of boundaries defined by buildings is at the “interior face” for “all boundaries” (i.e. according to the “Title” method, above). However, this Annexure contains no specific measurement for the property the subject of the contact.
68 As indicated already, the plans are also annexed as Annexure A (as also defined in special condition 1.1). Critically, they contain a table which gives the apartment’s measurements as 40.5 for the area column and a figure 8 for the outdoor space column. They also contain a site plan picture which contains the figure of 40.49 printed within the depiction of the unit and the figure 8 printed within the balcony.
69 Bearing in mind that the Lot was not yet in existence, it was crucial for the purchaser to know what was the subject of the purchase (beyond some unmeasured “airspace”). However, the inclusion of Annexures A and B provide the only basis for the purchaser to determine what was actually being purchased, namely, a Lot with a particular size (48.5) which was calculated on a particular basis (the “title” method measured from interior faces). The subject matter of the contract is therefore concerned with a Lot of a particular size measured in a particular way.
70 There are a number of clauses which also support this conclusion.
71 Thus, special condition 15.1.2 obliges the Vendor to enter a building contract for the construction of improvements upon the Land (which includes the Lot) “substantially in accordance with the Architectural Plans and Specifications attached and referred to as Annexures A and B respectively …”
72 Special Condition 15.10 is entitled “changes to Works”. Where there is a change to the size of the Lot, the Vendor is obliged to notify the purchaser as soon as reasonably practicable after any change which directly or substantially “affects the Property” (clause 15.10.1). Pursuant to clause 15.10.2(b) the Purchaser is obliged within 14 days of notification to state that the Amendment is acceptable, or else, to “request the Vendor to show to the reasonable satisfaction of the Purchaser that the Amendment does not cause a substantial detriment to the Purchaser arising from the variation to the size….”
73 Clause 6.7 which is entitled “Minor Changes” also contemplated that the property is to have a particular size. This clause provides that the Purchaser will not rescind the Contract on the grounds that the Plan of Subdivision as registered does not accord with the proposed Plan of Subdivision in a manner which materially affects the Property if any minor variation or discrepancy “is not greater than 5% variation or discrepancy in area” on the basis that the Purchaser agrees that such variation or discrepancy will not constitute a material variation or discrepancy.
74 Moreover, special condition 8 contains a specific clause making provision for the “Estimated Area of the Lot” as follows:
8. ESTIMATED AREA OF THE LOT
The Purchaser acknowledged and agrees that:
8.1 any statement made by, or on behalf of, the Vendor regarding the area of the Property represents the best estimate of the area of the Property noting that tolerances and allowances for construction set out of the Property, including, but without limitation, architectural and structural considerations, service ducts and cupboards, acoustic treatments, fire wall and column treatments and requirements imposed by responsible authorities may impact upon the area of the Property once constructed;
8.2 internal measurements may be taken using various methodologies which may produce different outcomes; and
8.3 the Purchaser must rely on its own enquiries in relation to the areas and dimensions of the Property having regard to the Architectural Plans, the Specifications, the Plan of Subdivision and any other information in this Contract and the Vendor’s Statement (emphasis added).
75 The defendants made much of this clause which will be referred to further, below. However, it is significant that the “area” of the property is something that is capable of measurement. Moreover, pursuant to clause 6.3 it is to be derived having regard to a number of matters including the “Architectural Plans”.
76 Overall, then, I consider that the subject matter of this sale was a Lot with a particular area as given in the Architectural plans which area was objectively intended by the parties to the contract to be measured in accordance with the “title method” (consistent with the explicit terms of the plan of subdivision). Given the “off the plan” nature of the purchase it is otherwise impossible to determine what the subject matter of the contract really was.
Defendants’ submissions
77 The defendants submitted various matters, the most significant being:
· that the cases suggested that any reference to area was a matter of description only which did not give the purchaser a right to rescind;
· that the plaintiff should have made her own measurements using the scale on the plan of subdivision at Annexure C;
· that the qualification at the commencement of Annexure A as well as clauses 8.2 and 8.3 were significant;
· that the proceeding was similar to Kannane & Ors v Demian Developments Pty Ltd;[7]
[7] [2005] NSWSC 1193.
· that the requisite reliance element was unsatisfied; and
· that there was an invalid rescission having regard to general condition 27.
Description only
78 Whether a reference to area is a matter of “description only” appears to depend on the case and whether the error is such that the purchaser may be considered as not having purchased the thing which was really the subject of the sale.
79 The cases cited by the defendants in this context were Gardiner v Orchard,[8] and Re Fawcett & Holmes’ Contract.[9] However, they are readily distinguishable from the current case given they did not concern “off the plan” purchases and were cases where purchasers were able to visually see what it was that they were getting.
Scale on plan of subdivision
[8] (1910) 10 CLR 722.
[9] (1889) 42 Ch D 150.
80 It was not appropriate for the purchaser to try to work with the scale given the Architectural plans already gave specific measurements for the area of the apartment and given special condition 8.3 specifically directed the Purchaser to those plans. There was moreover nothing in the contract to put the purchaser on notice that the amounts in the architect’s plans were different and/or or measured on a different basis to the method specifically provided for in the plan of subdivision.
81 In any event, there was no evidence adduced to suggest that an accurate measure could be derived using this method. In fact, Mr Norman fairly conceded that there was no document in the contract which allowed a person to work out the title area you would occupy if you completed it.
Qualifications/disclaimers
82 The defendants relied on the qualification at the cover page of Annexure A as follows:
Annexure “A”
Architectural Plans
All plans, dimensions, specifications and particulars herein whether by measurement or visual representation are for general information only and do not constitute any representation by the vendor or by its agent or representative. No warranty is given either expressly or implied and all interested parties should not rely on the information contained herein.
83 This generalised statement should be compared to the specific direction in clause 8.3 that in making an inquiry into “areas and dimensions of the Property” the purchaser is entitled to have regard to the plans. In my view, this specific provision therefore overrides any generalised qualification contained at the start of Annexure A, particularly given there is no other way to determine the subject matter of the sale.
84 I also do not consider that clause 8.2 assists the defendants. Although it is true (as this case highlights) that internal measurements may be taken using various methodologies, the clear intention in this contract was that the “title measurement” was to be utilised and, moreover, that “having regard to the Plans”, the area of the Lot, on the basis of the title measurement, was 48.5m².
Kannane decision
85 The Kannane case concerned a situation wherein the difference arose because the contract plans calculated the area of the relevant unit according to the PCAG approach; while the registered plan ultimately measured each unit according to the title method.
86 However, Brereton J found that, notwithstanding the calculation in the contract, the subject matter of the contract was, and could only ever be, the “inner service” of the unit excluding wall space, i.e., the area according to the title method. Given this was what was ultimately conveyed, there was no “inability to make title” and the claim based on Flight v Booth failed.[10]
[10] Kannane & Ors v Demian Developments Pty Ltd [2005] NSWSC 1193, [43] and [48].
87 There were however two important distinguishing features of the case.
88 Firstly, the relevant legislation in NSW imposed the “interior face” method such that no title could ever be given to the wall space based on the PCAG approach.
89 Secondly, the areas stated in the contract plan contained a specific annotation that made clear that dimensions were taken so as to include wall space, thereby putting the purchaser directly on notice that the “airspace” area (which was the area actually conveyed by the contract) would be necessarily smaller.
90 This is to be compared with the current case where there was nothing to put a purchaser on notice that the area given in the plans (Annexure A) was not properly calculated in accordance with the title method (Annexure C). Put another way, the purchaser was entitled to believe that she was receiving an area of 48.5m² of “airspace” excluding any wall space.
reliance
91 There is some doubt as to whether subjective reliance is really necessary.[11] However, I consider that reliance is established both on an objective basis and a subjective basis.
[11]See, for example, Kannane & Ors v Demian Developments Pty Ltd [2005] NSWSC 1193 [49]; Batey v Gifford (1997) 42 NSWLR 710,719; and cf Higgins v Statewide Developments Pty Ltd [2010] NSWSC 183 [52]; Buckley v Drk (Unreported, Supreme Court of Victoria, Teague J, 30 April 1993), 8
92 Firstly, I consider that it may reasonably be supposed that, but for the mis-description in size, the purchaser might never have entered this contract.
93 This is readily inferred from the size of the difference (12%) in the context of an apartment that was already relatively compact.
94 The defendants suggest that a prudent and vigilant purchaser would have made inquiries about the architectural plans to determine the meaning of the area numbers therein.
95 However, for reasons already discussed, I do not consider that it was necessary for a prudent purchaser to make such inquiries in this case. The areas given were apparently calculated properly in accordance with the methodology given in the contract. They were also consistent with the brochure. In my view there was nothing to cast an onus on a purchaser to contact the architect in this case.
96 Secondly, if subjective reliance be necessary, I am also satisfied that it is established in this case.
97 The plaintiff’s evidence was it was important to her that the area be above 40m² for financing reasons. Her evidence was also that the area stated in the brochure was a “tick” for her in the light of these financing requirements. Further that there was no discussion that some of the external walls should be included in the concept of “internal area” and if there was she would not have purchased it. Instead, she understood the “internal area” to be the area measured from the face of the plaster interior walls of the apartment and was not aware of the PCAG method at the time she signed the contract.
98 She also made sure with a magnifying glass that the figures in the brochure matched the figures in the architectural plans in the contract (while still in the cooling off period).
99 The defendants invited the court to reject this evidence on the basis that, inter alia, there were no emails or notes substantiating her area concerns; and that she knew the areas could be reduced by 5%.
100 However, the absence of notes is not surprising in the context of this transaction concerning a relatively young inexperienced person buying their first home.
101 Further, although the plaintiff conceded that the area could be reduced to 5%, she maintained that it was still important to her that the area was over 40m². I accept this evidence which was not directly challenged.
102 I am therefore satisfied that the plaintiff did subjectively rely on the description of the subject matter (being 48.5 m²).
Clause 27
103 The final matter raised by the defendants was that the default provision in clause 27 constituted a complete code. Since the plaintiff had not given 14 days notice in accordance with general condition 27 it followed that she could not seek to terminate the contract.
104 However, the principle in Flight v Booth has been utilised to overcome provisions which would otherwise limit a purchaser’s rights of rescission.[12] Given the purchaser was not receiving the fundamental subject matter of the contract, I do not consider that the vendors can rely on a failure to comply with a provision applicable to more ordinary “defaults”.
[12]See, for example, Tiplady & Anor v Gold Coast Carlton Pty Ltd (1984) 54 ALR 337, 356; Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1, 28; Dainford Ltd v Lam & Anor (1985) 3 NSWLR 255, 265 – 266; Batey v Gifford (1997) 42 NSWLR 710,717; PN Wirkramanayake SC, Voumard The Sale of Land (Thomson Reuters, Update 49, 2013) 9-70, 9140.
105 In any event, the inability to deliver the subject matter of the contract was in my view repudiatory such that the vendors evinced an intention to no longer be bound by the contract.[13] In such circumstances the purchaser is not confined to the remedies under clause 27 but was entitled to exercise her general law remedy of rescission (as she did ).[14]
Conclusion re whether breach of Flight v Booth
[13] R & A Cab Co Pty Ltd v Kotzman [2008] VSCA 68 [45] – [49].
[14]Nund v McWaters [1982] VR 575; and Poort v Development Underwriting (Victoria) Pty Ltd (No 2) [1977] VR 454; both state that the issuance of a 14 day notice under the general conditions was unnecessary in the case of repudiation.
106 In this case, the property ultimately purchased was some 12% smaller than that the vendor was obliged to convey.
107 There are a number of factors which suggest that this was a material and substantial difference in all the circumstances of this particular case.
108 Firstly, the contract itself suggests that 5% was a significant difference. This is also consistent with the comments of Teague J in Buckley,[15] that 5% was a material cut off point for a suburban allotment.
[15] Buckley v Drk (Unreported, Supreme Court of Victoria, Teague J, 30 April 1993), 10.
109 Secondly, the apartment was already relatively small. In such circumstances any difference in size could be expected to have a much larger impact.
110 Thirdly, the inability to visually inspect the property meant that the viability of any measurement took on some special significance. Contrary to some of the decided cases, the purchaser could not be said to have always understood what she was actually getting by inspecting the apartment and seeing for herself.
111 Although it is unnecessary to go further, I am also fortified in my conclusion by the surrounding circumstances. Thus there is authority that surrounding circumstances beyond the contract may be taken into account, for example, the purpose which the purchaser had in mind for buying the property if that purpose was known to the vendor.[16] In this case I am satisfied that the plaintiff made the vendor’s agent aware of the fact that the size of the property was important for her for financing reasons. Moreover, that the bank refused to provide 80% funding given the disparity in size. These circumstances strengthen a conclusion that what the purchaser would receive was something substantially different from that which she contracted to buy.
[16]See Tiplady & Anor v Gold Coast Carlton Pty Ltd (1984) 54 ALR 337, 354 and cases cited therein.
112 Overall, then, I am satisfied that the property sought to be conveyed was substantially different from that which the vendors were obliged to transfer under the contract.
113 I am also satisfied that the plaintiff would not have entered the contract had she known of the true area based on the “title” measurement. Moreover, that she relied on the measurements reflected in the contract which were most material in the light of her financing issues.
114 I am therefore satisfied that the plaintiff was entitled to terminate the contract and that she is entitled to the return of her deposit.
Other matters
115 In the light of my findings, above, it is unnecessary to consider any further bases upon which the plaintiff may be entitled to rescind the contract. In particular, it is unnecessary to consider her claims that there was misleading conduct in relation to the alleged representations about furniture in the brochure and/or that she was entitled to rescind under the SLA.
116 The plaintiff did however also rely on a claim that the defendants engaged in misleading or deceptive conduct in breach of clauses 18 and 30(1)(e) of the Australian Consumer Law,[17] by making misleading representations as to the size of the apartment. In particular, it was alleged that the defendants represented to the plaintiff that for the payment of $359,000 they would construct, or have constructed by their builder, an apartment which was 40.49m² (or 40.50m²).[18]
[17] Competition and Consumer Act 2010 (Cth) sch 2 The Australian Consumer Law.
[18] Second Further Amended Statement of Claim (“SFASOC”) [20(a)].
117 The plaintiff claims this representation (regarding the size of the apartment) was made in two ways: in the promotional brochure and in the contract itself.[19]
[19] Ibid., [8], [14] and [20].
118 Although it is possible that a representation may be contained in a contract for the purposes of the ACL,[20] there may be issues as to what flows in terms of reliance damages. However, it is unnecessary to consider this further since I am satisfied that the plaintiff is entitled to the deposit on the basis of the representation as to size contained in the brochure. Given it is strictly unnecessary for me to consider this alternative claim the following constitutes a summary only of my reasons for this finding.
representation
[20] Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 [35].
119 Firstly, I am satisfied that the representation alleged was made in the brochure, namely, that the vendors would have constructed an apartment with an internal area of 40.5 m² (and a total area of 48.5m²).
120 I am further satisfied that the representation was that the concept of “internal area” was to be understood in accordance with the ordinary concept of that term as understood by the world at large, namely, as the areas as measured with reference to the plaster interior walls of the apartment. This is because the flyer was addressed to purchasers buying a one bedroom “off the plan” apartment at the lower end of the property market. It was not addressed to surveyors or developers who might have a particular understanding of accepted industry practice.[21]
[21] Webster v Havyn Pty Ltd [2004] NSWSC 227 [46].
121 Accordingly, the representation that was made was that the apartment would be constructed with a total size of 48.5 square metres excluding wall-space.
122 I am further satisfied that this representation was made by the vendor defendants themselves given the evidence of Mr Feingold was that he specifically approved the form of the brochure/promotional plan for dissemination at the counter in the display suite.
123 I also reject the defendants’ submissions that the disclaimer on the brochure “negated” the effect of the representation taking into account all of the circumstances leading up to the payment of the deposit.[22]
[22] Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 [39]
124 The disclaimer on the brochure was in substantially identical generalised terms to the cover page of Annexure A in the contract as extracted and considered earlier. However, this disclaimer appears in very small pale font at the right hand section of the page. This is to be compared with the area in bold larger print at the top which clearly contains the “dominant message.” [23] Significantly as well, the information as to area measurements is actually repeated and reinforced in the Architectural plans contained in the contract. This all occurring in an “off the plan” purchase where a purchaser had no other way of checking the area dimensions other than in the information (relayed twice) by the vendors.
[23] And see ACCC v TPG Internet Pty Ltd [2013] HCA 54
125 In such circumstances, I consider that when the impugned conduct is viewed “as a whole”, it has a tendency to lead a person into error.[24]
[24] Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 [25].
126 Although contractual disclaimers are more usually considered in the context of causation,[25] I also do not consider that the generalised “no representation” clauses at 2.5 of the contract negate the representation.
[25] Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 [29], [31].
127 Some of these clauses appear to have no operation to the facts of this case.[26] In any event, many of them are to the effect that the contract itself should prevail over any representation (e.g. 2.5.1 and 2.5.2). This however cannot assist the defendants where the representation has actually been confirmed in the contract itself. To the extent they suggest figures are “indicative” or a “guide” (e.g. 2.5.5, 2.5.7) they also may allow for some errors in “approximating”. However, I do not consider that they operate to allow for the delivery of a completely different subject matter as is the case here. Finally, although clause 2.5.6 imposes an “enquiries” obligation on the purchaser, this must again be read in the light of clause 8.3 which directs specific attention to the Architectural plans (which repeat the information in the brochure).
[26] For example, clause 2.5.3 applies to the “Development” and clause 2.5.4 to the display suite.
128 The defendants cited the decision of Webster v Havyn Pty Ltd.[27] However in Webster the purchaser had an opportunity to measure the property before entering the contract. The property was also worth some $3M and likely to be of interest to more sophisticated investors and developer purchasers than in the case here. Moreover, it was held that the defendant had reasonable grounds in that particular case for the holding of the belief about the measurements. As will be seen below, this is not the present case.
[27][2004] NSWSC 227.
129 As outlined above, the representation was directed to a purchaser buying a one bedroom “off the plan” apartment for a relatively modest price. Such target audience had no way of verifying the size of the property they were purchasing other than by way of the information provided by the vendors. Notwithstanding the existence of the disclaimer in the brochure, the cover of Annexure A, and clause 2.5, I consider that any ordinary purchaser of this type would take the view that the apartment built would be (at least substantially) in accordance with the area explicitly stated in the brochure (as reinforced in the architectural plans).
Misleading
130 As accepted by the parties, the representation was made as to a future fact; being the physical dimensions of the apartment to be built measured on a particular basis. Accordingly, the representation is taken to be misleading if the vendors did not have reasonable grounds for making the representation.[28]
[28] Competition and Consumer Act 2010 (Cth) sch 2 The Australian Consumer Law cl 4(1)(b).
131 The defendants contend that they had reasonable grounds to make the representation submitting that the retention of professionals by Mr Feingold constituted reasonable grounds in this case.[29]
[29]Closing Submissions of the Defendants dated 13 February 2014 paras 85-88; Amended Defence dated 24 January 2014 [27].
132 However, as extracted above, Mr Feinberg gave candid evidence to the effect that he had not checked the contract “carefully enough” before returning it to the solicitors, Kalus Kenny, with his approval. In particular his evidence was that he did not pick up that what the purchaser was going to receive on title was going to be different to what the purchaser was said to be getting in the brochure and the plans.
133 Although the retention of professionals may in some circumstances constitute reasonable grounds, I do not consider this to be the case here where the misleading statement arises because the conceptual basis for the measurements is different in the brochure/plans as compared with the contract. If the plans had actually made clear that the area was calculated including wall-space and/or the basis of measurement in the title was altered ( as Mr Feingold suggested) the representation may not have been misleading. However, as the evidence stands, there were no reasonable grounds for the statement to be made that the property would be constructed at 48.5 on the title basis of measurement (without counting wall space).
134 I am therefore satisfied that the defendants did not have reasonable grounds for the representation such that the defendants engaged in misleading conduct as alleged.
Trade or commerce
135 The defendants accepted that the representations alleged were made in trade or commerce,[30] which leaves the question of causation and loss.
Causation/reliance
[30] Amended Defence para 23
136 Even without the direct evidence, an inference of reliance would be drawn in this case. Thus, the representation as to the size of an “off the plan” apartment was calculated to induce the plaintiff to enter into the contract; is of a kind likely to provide an inducement; and the plaintiff entered the contract.[31] This is particularly so when consideration is given to the fact that the vendor’s agent knew that size was an important matter to this purchaser.[32]
[31] See generally Lord Buddha Pty Ltd (in liq) v Harpur [2013] VSCA 101 [159].
[32] Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 [37].
137 The direct evidence in the case also confirms that the plaintiff relied upon the representation.
138 As found at paragraph 97, above, the plaintiff said that the statements in the brochure as to area were automatically a “tick” for her for financing because they suggested that the apartment was over the 40m².
139 The defendants again however rely on the relevant disclaimers to suggest that the causal connection between the contravening conduct and the loss or damage is broken (citing Campbell v Backoffice Investments Pty Ltd,[33] at [31]).
[33] (2009) 238 CLR 304.
140 In terms of the disclaimer in the brochure the plaintiff’s evidence was that she could see the qualification “barely” in the witness box which she described as four point print but did not see it at the time. Nor did Ms Warton draw her attention to it. She also did not read clause 2.5 in the contract, but did not believe it would make a difference. Instead, she made sure with a magnifying glass that the figures in the brochure matched the figures in the contract (in the architectural plans).
141 I accept this evidence and am satisfied that the plaintiff was in fact actuated by the statements in the brochure in entering the contract and paying the deposit. Given the positioning of the disclaimer and the confirmation of the measurements in the contract, I also do not consider the reliance to be so “unreasonable” as to be not sufficiently causal of loss (as submitted by the defendants).
142 The plaintiff would therefore also be entitled to the return of her deposit on the alternative basis of the ACL claim.
Conclusion
143 The plaintiff is entitled to the return of the deposit in the amount of $35,900.
144 The defendants’ Counterclaim should be dismissed.
145 I will hear from the parties as to the form of final orders.
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