Cheshire v Jennings (No 2)

Case [2021] SASCFC 11

SUPREME COURT OF SOUTH AUSTRALIA

(Full Court)

CHESHIRE & ANOR v JENNINGS & ANOR (NO 2)

[2021] SASCFC 11

Judgment of The Full Court  

(The Honourable Justice Peek, the Honourable Justice Doyle and the Honourable Justice Livesey)

19 February 2021

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES

CONTRACTS - PARTICULAR PARTIES - VENDOR AND PURCHASER

The appellants purchased a property at 15 Wyatt Road, Direk (the Property) for their daughter at an auction in November 2018. A contract was executed that same day, and the appellants were provided with a Form 1 pursuant to the Land and Business (Sale and Conveyancing Act) 1994 (SA) (the Act). After the contract was executed and the Form 1 signed by the appellants, the appellants paid a deposit of $65,000.

Settlement was scheduled to occur on 11 January 2019. However, on 9 January 2019, the appellants refused to settle on the basis that an environmental assessment had been conducted at the Property which had not been disclosed in the Form 1. The environmental assessment to which the appellants referred concerned an investigation conducted by the Department of Defence regarding the existence, nature and extent of contamination by Per- and polyfluoroalkyl substances (PFAS) in the areas surrounding the Royal Australian Airforce Edinburgh Base (the Investigation). Question 2(5) on the Form 1 asked “is the vendor aware of an environmental assessment of the land or part of the land ever having been carried out of commenced (whether or not completed)?”. The respondents answered this question in the negative.

The plaintiffs sought relief under s 15 of the Act, in particular, an order that they be allowed to avoid the Contract and have the deposit returned to them. The trial Judge dismissed their claim, finding that the respondents’ answer to question 2(5) was correct and that the appellants were not entitled to any relief under s 15 of the Act. The appellants appealed against this dismissal.

Held, per Livesey J (Peek J and Doyle J agreeing), allowing the appeal:

1.      It was open to the trial Judge to find that the respondents were aware of the Investigation given the wide-ranging information campaign.

2.      The essential function of a Form 1 is to ensure that purchasers have sufficient and accurate information to allow them to make an informed decision about whether to enter into a contract, and at what price.

3.      The term “environmental assessment”, as used in Form 1, operates as an umbrella term that potentially encompasses myriad investigations and activities. A narrow view of what encompasses an environmental assessment should be rejected.

4.      The suggested interpretation of the term “environmental assessment” which requires that an assessment pertain exclusively to, or specifically on, the land the subject of the Form 1 is unduly restrictive and inconsistent with the legislative regime.

5.      The Investigation was an "environmental assessment" for the purposes of the Form 1 and it should have disclosed in the answer to question 2(5).

6. The trial Judge found that the appellants would not have purchased the house…

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AGLC
Cheshire v Jennings (No 2) [2021] SASCFC 11
Case
[2021] SASCFC 11
Decision Date

CaseChat Overview and Summary

The appeal concerned a dispute between the vendors, Cheshire and Jennings, and the purchasers, the plaintiffs, of a property at 15 Wyatt Road, Direk, South Australia. The purchasers sought to avoid the contract of sale, alleging that the vendors failed to disclose material information in the Form 1 Vendor's Statement. The matter was heard by the Full Court of the Supreme Court of South Australia, with Justices Peek, Doyle, and Livesey presiding.

The central legal issues before the court were whether the vendors were aware of an environmental assessment concerning PFAS contamination in the vicinity of the property, and whether this assessment constituted an "environmental assessment" for the purposes of question 2(5) of the Form 1. The court also had to determine if the failure to disclose this information prejudiced the purchasers, entitling them to avoid the contract under section 15(2) of the relevant Act.

The Full Court, in allowing the appeal, reasoned that it was open to the trial judge to find that the respondents were aware of the investigation given the extensive information campaign surrounding it. The court held that the essential purpose of a Form 1 is to provide purchasers with sufficient and accurate information for an informed decision. It further determined that the term "environmental assessment" in Form 1 should be interpreted broadly, encompassing various investigations and activities, and that a narrow interpretation requiring the assessment to pertain exclusively to the specific land was unduly restrictive. Consequently, the court concluded that the investigation into PFAS contamination qualified as an "environmental assessment" that should have been disclosed.

The court found that the trial judge had correctly determined that the purchasers would not have bought the house had they been informed of the environmental assessment, establishing prejudice for the purposes of the Act. Accordingly, the Full Court ordered that the purchasers were entitled to avoid the contract.

Orders

Orders of the court

Held, per Livesey J (Peek J and Doyle J agreeing), allowing the appeal:

1. It was open to the trial Judge to find that the respondents were aware of the Investigation given the wide-ranging information campaign.

2. The essential function of a Form 1 is to ensure that purchasers have sufficient and accurate information to allow them to make an informed decision about whether to enter into a contract, and at what price.

3. The term “environmental assessment”, as used in Form 1, operates as an umbrella term that potentially encompasses myriad investigations and activities. A narrow view of what encompasses an environmental assessment should be rejected.

4. The suggested interpretation of the term “environmental assessment” which requires that an assessment pertain exclusively to, or specifically on, the land the subject of the Form 1 is unduly restrictive and inconsistent with the legislative regime.

5. The Investigation was an "environmental assessment" for the purposes of the Form 1 and it should have disclosed in the answer to question 2(5).

6. The trial Judge found that the appellants would not have purchased the house had they been told about the "environmental assessment" concerning possible PFAS contamination and that this constituted prejudice for the purpose of s 15(2) of the Act.

7. The appellants are entitled to avoid the contract.

Background

Background to the litigation

For the reasons that follow, I would allow the plaintiffs’ appeal.Background The plaintiffs are husband and wife and the parents of Ms Richards, who has three children. Ms Richards was searching for a property in which to live, and found a residence at 15 Wyatt Road, Direk, South Australia (the Property), in which the defendants had lived since 2010. An auction of the Property was held on 17 November 2018. Ms Cheshire, Ms Richards and Ms Richards’ husband attended. Ms Cheshire made a bid of $650,000. The auctioneer, Mr Roenfeldt, told Ms Cheshire that if a contract was executed before midnight there was no cooling-off period under the Act. He then spoke to the defendants. They remained firm on their set reserve price of $700,000. Mr Roenfeldt re-confirmed Ms Cheshire’s bid, calling it three times, and then announced that it would be “held over” for further negotiation with the defendants.[1][1] Mr Roenfeldt explained to the Court at trial that “held over” meant that the auction was still on foot until midnight that day, which may be contrasted with the expression “passing in” which means that the auction has concluded. He explained these are not legislated terms, but are customary in the industry: Cheshire v Jennings [2019] SADC 79, [31]. Later that day, the defendants’ real estate agent, Ms Roberts, contacted the plaintiffs to say that the defendants had accepted Ms Cheshire’s bid. On or about 3.30 pm that day, the plaintiffs entered into a contract with the defendants for the sale and purchase of the Property (the Contract). On or about that time, Ms Roberts gave Ms Cheshire a “Form 1 – Vendor’s Statement” (the Form 1) pursuant to the Act. Ms Cheshire signed the Contract, the Form 1 and paid a $65,000 deposit. Mr Cheshire’s signature also appeared on the Contract, but not on the Form 1. Settlement was scheduled to occur on 11 January 2019. However, on 9 January 2019 the plaintiffs asserted that an environmental assessment had been conducted at the Property, but had not been disclosed in the Form 1. As a consequence of this failure, the plaintiffs refused to settle. In response to this refusal, the defendants issued a Notice to Complete on 17 January 2019. This required the plaintiffs to settle by 31 January 2019, or the contract would be terminated. The plaintiffs again refused to settle. On 1 February 2019, the defendants terminated the Contract and retained the deposit. Between 2016 and December 2018, an investigation had been commenced by the Department of Defence (Defence) regarding the existence, nature and extent of contamination by Per-and Poly-Fluoroalkyl Substances (PFAS) found in firefighting foam used at the Royal Australian Air Force (RAAF) Edinburgh Base and surrounding areas (the Investigation). The Property is located in the area surrounding the Edinburgh RAAF Base. The defendants’ Form 1 had indicated that a section entitled “Particulars relating to environment protection” applied, but answered no to the question under Item 2(5) (question 2(5)): “is the vendor aware of an environmental assessment of the land or part of the land ever having been carried out or commenced (whether or not completed)?”.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

The plaintiffs also submit that, insofar as the defendants’ conduct upon becoming aware of the contamination is inconsistent with the trial Judge’s findings, this is because the defendants’ response was concerned with the effect the contamination would have upon the Property and the contract.Consideration There is an inevitable tension between the obligation in an appellate court to conduct a real review of the evidence, and the restraint that an appellate court must exercise in deference to the advantages a trial Judge has in seeing and hearing the witnesses give their evidence in court. The High Court has confronted this tension on several occasions, including in the well-known trilogy of Jones v Hyde,[27] Abalos v Australian Postal Commission[28] and Devries v Australian National Railways Commission.[29] In Fox v Percy, Gleeson CJ, Gummow and Kirby JJ stated:[30]Over more than a century, this Court, and courts like it, have given instruction on how to resolve the dichotomy between the foregoing appellate obligations and appellate restraint. From time to time, by reference to considerations particular to each case, different emphasis appears in such reasons. However, the mere fact that a trial judge necessarily reached a conclusion favouring the witnesses of one party over those of another does not, and cannot, prevent the performance by a court of appeal of the functions imposed on it by statute. In particular cases incontrovertible facts or uncontested testimony will demonstrate that the trial judge’s conclusions are erroneous, even when they appear to be, or are stated to be, based on credibility findings.(Citations omitted)[27] Jones v Hyde (1989) 63 ALJR 349.[28] Abalos v Australian Postal Commission (1990) 171 CLR 167.[29] Devries v Australian National Railways Commission (1993) 177 CLR 472.[30] Fox v Percy (2003) 214 CLR 118, [28]. See also Lee v Lee (2019) 266 CLR 129, [55] (Bell, Gageler, Nettle and Edelman JJ). The trial Judge made no explicit findings about the defendants’ demeanour, credit or reliability. However, a close reading of his Honour’s judgment as a whole, and paticularly [173] and [174], shows that he simply did not accept their evidence on this point. He rejected their denials. It was open to his Honour to conclude that, despite the defendants’ denials, they were aware of the contamination and the Investigation. It was not necessary to find that they were dishonest in their denials.[31] Clearly, he was prepared to make a finding which was contrary to their evidence without impugning their honesty. That was open to him. As well, that his Honour made findings contrary to the evidence of the defendants without justifying his decision by direct reference to his advantage in seeing and hearing the witnesses give evidence does not mean that he did not make use of that advantage. As McHugh J (Mason CJ, Deane J, Dawson and Gaudron JJ agreeing) explained in Abalos v Australian Postal Commission:[32]In S.S. Hontestroom v. S.S. Sagaporack, Lord Sumner pointed out that:“not to have seen the witnesses puts appellate judges in a permanent position of disadvantage as against the trial judge, and, unless it can be shown that he has failed to use or has palpably misused his advantage, the higher Court ought not to take the responsibility of reversing conclusions so arrived at, merely on the result of their own comparisons and criticisms of the witnesses and of their own view of the probabilities of the case. The course of the trial and the whole substance of the judgment must be looked at, and the matter does not depend on the question whether a witness has been cross-examined to credit or has been pronounced by the judge in terms to be unworthy of it. If his estimate of the man forms any substantial part of his reasons for his judgment the trial judge’s conclusions of fact should, as I understand the decisions, be let alone.”Consequently, where a trial judge has made a finding of fact contrary to the evidence of a witness but has made no reference to that evidence, an appellate court cannot act on that evidence to reverse the finding unless it is satisfied “that any advantage enjoyed by the trial judge by reason of having seen and heard the witnesses, could not be sufficient to explain or justify the trial judge’s conclusion”: Watt or Thomas v. Thomas. (Citations omitted)[31] Smith v New South Wales Bar Association (1992) 176 CLR 256, 271 (Deane J).[32] Abalos v Australian Postal Commission (1990) 171 CLR 167, 178.