Festa Holdings Pty Ltd v Adderton
[2004] NSWCA 228
•13 July 2004
Reported Decision:
(2005) NSW ConvR 56-117
Court of Appeal
CITATION: FESTA HOLDINGS PTY LTD & ANOR v ADDERTON & ORS [2004] NSWCA 228 HEARING DATE(S): 2 June 2004 JUDGMENT DATE:
13 July 2004JUDGMENT OF: Mason P at 1; Sheller JA at 62; Stein AJA at 63 DECISION: Appeal dismissed with costs CATCHWORDS: Vendor and Purchaser - Home Building Act 1989 - certificate of insurance - contract to do residential building work - subsequent contract for sale of residential property - termination - forfeiture of deposit - whether certificate of insurance is part of the title of the property - whether lack of insurance a defect in title enabling purchaser to terminate - whether subsequent purchaser obliged to procure insurance. (D) PARTIES :
FESTA HOLDINGS PTY LTD (In liquidation)
Lawrence MORASCHI (2nd Appellant)
Peter ADDERTON (1st Respondent)
FILE NUMBER(S): CA 41230/03 COUNSEL: 2nd Appellant: B S Oslington SC/ A Maroya
Respondent: A C M IulianoSOLICITORS: 2nd Appellant: John Byrnes & Assoc
Respondent: Colin Biggers & Paisley
LOWER COURTJURISDICTION: Supreme Court - Equity Division LOWER COURT FILE NUMBER(S): SC 1253/03 LOWER COURT
JUDICIAL OFFICER :Gzell J
CA 41230/03
Tuesday 13 July 2004MASON P
SHELLER JA
STEIN AJA
BACKGROUND
A vendor purported to terminate a Contract for sale of a residential property at Curl Curl. His entitlement to forfeit the deposit hinged upon whether the purchaser was entitled to insist that he provide a certificate of insurance under s92 of the Home Building Act 1989 as part of the “title” of the property contracted to be sold.
The Contract was exchanged on 17 September 2002. The first respondent, Mr Adderton was the Vendor and the first appellant, Festa Holdings Pty Ltd, was the Purchaser. Half of the deposit was paid to the Vendor’s agent upon exchange. The remaining half was payable upon completion or default by the Purchaser, this liability being backed by the guarantee and indemnity of the second appellant, Mr Moraschi, the sole director and shareholder of the Purchaser.
On 30 September 2002 the Purchaser’s solicitor issued requisitions on title which included an inquiry as to whether any building work had been done on the property since 21 March 1990 and if so, it was requested that details of the relevant insurance under the Building Services Corporation Act 1989 be furnished.
The Vendor’s solicitor replied stating that building work had been done in 1999. In response to the request for details of insurance, the solicitor supplied copies of letters from Dexta Corporation, an agent for Allianz Austrlia Insurance Ltd, which stated that Dexta was unable to provide a copy of a statutory certificate of insurance because it had never been issued to the original building contractor and it did not exist.
Completion did not occur in 3 months in accordance with the Contract, despite the Vendor being ready, willing and able. On 18 December 2002 the Vendor issued a notice to complete requiring completion on 6 January 2003. The Purchaser responded with a letter requiring the Vendor to furnish proper replies to the requisitions concerning the insurance on or before 14 January 2003, time being of the essence.
Completion did not occur on 6 January 2003. On 7 January 2003 the Vendor served a Notice of Termination forfeiting the deposit. On 23 January 2003 the Purchaser’s solicitor notified the Vendor’s solicitor that the Purchaser terminated the Contract as a result of the vendor’s failure to provide answers to requisitions.
The Vendor commenced proceedings in the Equity Division seeking declarations that he had validly terminated the Contract and forfeited the deposit. He also sought orders that the Purchaser pay the outstanding balance of the deposit and that the second appellant indemnify him against moneys that the Purchaser could not pay. The Purchaser cross-claimed for return of the deposit and other relief, contending that its termination had validly brought the Contract to an end.
In 1999 Windy Dropdown Pty Ltd owned the land and it engaged a builder to construct a dwelling. It was common ground that the circumstances under which the dwelling had been built in 1999-2000 had triggered s9 of the Home Building Act 1989 which required a contract of insurance to be in force with respect to any contract to do residential building work.
The second appellant submitted that the lack of insurance meant that there was a defect in the Vendor’s title that the Purchaser was entitled to have removed, failing which the Purchase was entitled to terminate. The Purchaser conceded that it would have been virtually impossible for the Vendor to procure the insurance.
Gzell J held that the Vendor had validly terminated. The Purchaser appealed.
HELD: per Mason P (Sheller JA and Stein AJA agreeing) dismissing the appeal:
1. The obligation to provide insurance fell upon Windy Dropdown’s builder. [31]
2. None of the relevant provisions imposed any duty on the present Vendor with respect to the insurance. [40]
3. Legal and practical enjoyment of the land was in no way undermined by the non-existence of a contract of insurance [54]. Not even the quality of the subject property is affected by the absence of insurance. [55]
4. The Vendor was not obliged to obtain insurance from Windy Dropdown before he completed the purchase from that vendor. Nor was he obliged by statute, contract or fiduciary obligation to procure such insurance for the benefit of the Purchaser. [58]
ORDERS: Appeal dismissed with costs.
CA 41230/03
Tuesday 13 July 2004MASON P
SHELLER JA
STEIN AJA
1 MASON P: A vendor purported to terminate a Contract for sale of a valuable residential property at Curl Curl. His entitlement to forfeit the deposit hinges upon whether the purchaser was entitled to insist that he provide a certificate of insurance under s92 of the Home Building Act 1989 (the Act) as part of the "title" of the property contracted to be sold. The residence was constructed by a builder that contracted with the vendor’s predecessor in title.
2 The Contract was exchanged on 17 September 2002. It is in the standard "2000 Edition" with special conditions. The first respondent, Mr Adderton was the Vendor and the first appellant, Festa Holdings Pty Ltd, was the Purchaser. The purchase price was $3 million. $150,000 representing half of the 10 percent deposit was paid to the Vendor's agent as stakeholder upon exchange. The remaining $150,000 was payable on completion or default by the Purchaser (special condition 47), this liability being backed by the guarantee and indemnity of the second appellant, Mr Moraschi, the sole director and shareholder of the Purchaser. If the contract was duly terminated by the Vendor, the second appellant became liable to pay the balance of the deposit in light of the supervening insolvency of the Purchaser.
3 The Contract described the Property as:
- The land, the improvements, all fixtures and the inclusions, but not the exclusions.
These terms were defined. It is only necessary to observe that the Land is described and identified by address, registered plan and Torrens title folio identifiers.
4 The Completion Date was "3 Months".
5 Special condition 31 provided:
- ACCEPTANCE OF PROPERTY
- The purchaser acknowledges that the purchaser is purchasing the property in its present condition and state of repair and subject to any faults or defects whether latent or patent. The Purchaser shall not make an objection, requisition or claim for compensation arising out of any of the matters referred to in this condition nor call upon the Vendor to carry out any repairs whatsoever in relation to the said property.
6 The Contract was silent as to insurance under the Act.
7 Clause 5 of the Contract set time limits on the Purchaser's right to make requisitions, leaving it to the common law to determine whether it had the right to make the requisition at all. "Requisition" was defined to mean an objection, question, requisition or claim (see conditions 1 and 34).
8 On 30 September 2002 the Purchaser's solicitor issued requisitions on title that included:
- 18B. (a) Has any residential building work been done on the property under a contract entered into or commenced after 21 March 1990?
- (b) If so, please furnish details of the BSC Comprehensive Insurance or BSC Special Insurance protection which applies to that work under Part 6 of the Building Services Corporation Act 1989?
9 Further requisitions issued on 13 November 2002 including:
- 29. Please provide copy of Home Owners Warranty Insurance for dwelling at 20 Molong Street, North Curl Curl.
10 The Vendor's solicitor responded on 5 December 2002 as follows:
- 18B. (a) Yes
- (b) See attached copies of letters dated 28 August 2002, 18 September 2002, 15 October 2002, 18 October 2002, 21 November 2002 and 22 November 2002.
- 29. See reply to requisition 18B.
11 The letters referred to in the answer to requisition 18B(b) were correspondence between the Vendor’s solicitor and the Builders Warranty Department of Dexta Corporation. This Corporation, as agent for Allianz Australia Insurance Ltd, appears to have had the function of issuing insurance under the Act. Dexta was unable to provide the Vendor’s solicitor with a copy of a statutory certificate of insurance because it had never been issued to the original building contractor and it did not exist (letter dated 22 November 2002).
12 Completion did not occur in three months in accordance with the Contract, despite the Vendor being ready, willing and able. On 18 December 2002 the Vendor issued a notice to complete requiring completion on 6 January 2003. The Vendor’s entitlement to issue this notice is not in dispute except as regards his alleged failure to provide the Purchaser with satisfactory answers to the requisitions. The Purchaser countered with a letter from its solicitor dated 20 December 2002 requiring the Vendor to furnish proper replies to outstanding requisitions 18B(b) and 29 on or before 14 January 2003, time being of the essence.
13 Completion in accordance with the Vendor's notice to complete did not occur on 6 January 2003. Accordingly, on 7 January 2003 the Vendor served Notice of Termination forfeiting the deposit. On 23 January 2003 the Purchaser’s solicitor notified the Vendor’s solicitor that the Purchaser terminated the contract "as a result of your client's inability and/or unwillingness to provide answers to Requisitions as required under the terms of the Contract".
14 The Vendor commenced proceedings in the Equity Division seeking declarations that he had validly terminated the contract and forfeited the deposit. He also sought orders that the Purchaser pay the $150,000 balance of the deposit and that the second appellant indemnify him against any moneys that the Purchaser was ordered to pay but could not pay. The deposit stakeholders were joined as additional defendants and they have adopted a submitting stance in the proceedings.
15 The Purchaser cross-claimed for the return of the deposit and other relief, contending that its termination had validly brought the Contract to an end. The issues tendered for determination in the pleadings on the cross-claim included the Purchaser's contention that the Vendor had taken no steps to arrange or obtain an Insurance Certificate under s92 of the Act (a matter admitted by the Vendor). The Purchaser also complained about the Vendor’s failure to provide satisfactory answers to the two requisitions. The Vendor denied that he had any obligation to provide the Insurance Certificate and he defended the adequacy of his answers.
16 Gzell J held that the Vendor had validly terminated (Adderton v Festa Holdings Pty Ltd and Ors [2003] NSWSC 1065). He declared that the $150,000 deposit held by the stakeholders had been duly forfeited to the Vendor. The Purchaser was ordered to pay the remaining $150,000 and there was a declaration that the second appellant was liable as guarantor to indemnify the Vendor.
17 The Purchaser's application for the return of the deposit pursuant to s55(2A) of the Conveyancing Act 1919 was rejected. This discretionary decision is no longer in dispute.
Progress of the appeal
18 The appeal was instituted by the Purchaser and its guarantor, Mr Moraschi. Written submissions were filed on behalf of both appellants on 5 April 2004.
19 On 26 May 2004 the Vendor filed a notice of motion seeking dismissal of the appeal filed by the first appellant on the basis that it was incompetent. In truth it was a challenge to the first appellant’s solicitor’s retainer. The first appellant had been ordered to be wound up on 13 April 2004. Mr Peter Rodgers was appointed its liquidator. Correspondence from the Vendor’s solicitor effectively challenged the retainer of Mr Byrnes, the solicitor on the record for the two appellants. Mr Byrnes replied that he had not purported to act for the first appellant since its liquidation and that he had no consent to do so. On 1 June 2004 he filed Notice of Ceasing to Act for the first appellant.
20 The evidence disclosed that the Purchaser has no funds and that no arrangements have been made that would enable its liquidator to re-engage Mr Byrnes as its solicitor on the record.
21 When the appeal was called for hearing, Mr Oslington QC announced that he appeared with Mr Henry for the second appellant. That appellant has undoubted standing to prosecute at least so much of the appeal as affects his financial interests. The order requiring him to pay the balance of the deposit provides him with standing to challenge that order and its associated declarations. This enables him to challenge the core reasoning of the primary judge. In light of my conclusions on the appeal, it becomes unnecessary to debate whether the second appellant has standing at this point of time to challenge the separate declaration that the Vendor was entitled to forfeit the half deposit paid by the Purchaser to the stakeholders.
Home Building Act 1989
22 The Home Building Act 1989 was called the Building Services Corporation Act until 1996. The change of title signified a broad shift of emphasis. At inception, the Act established the Building Services Corporation with licensing, regulatory and inspectorate powers in relation to residential building work and “specialist work” (plumbing, gas fitting, electrical work etc). The Corporation dealt with complaints about the conduct of licence holders, subject to a right of appeal to the Commercial Tribunal.
23 The original Act established two BSC Insurance Schemes in which the Corporation was the insurer. Licence holders were required to pay prescribed premiums (s94) and to notify persons for whom residential building work was contracted or commenced to be done that insurance had been taken out (s95).
24 The Department of Fair Trading took over the administration of the insurance scheme in September 1995. In 1996 the Act was substantially recast. Part 2C - Statutory Warranties (ss18A-18G) was added. Warranties by licence holders as to the quality of workmanship and materials are now implied in every contract to do residential building work (s18B). The benefit of these warranties extends to the immediate successors in title of the original warranty beneficiaries (s18D). The warranties endure for seven years after completion of the work (s18E).
25 Part 6 - Insurance (ss90-103E) was substantially amended in 1996. The BSC Insurance schemes were abandoned and the Government ceased to be the statutory insurer. A private insurance scheme was introduced, subject to requirements that insurers meet basic standards. The scheme was compulsory, subject to thresholds (s92), with power to exempt in certain situations, not including contractors doing work under a building contract (s97).
26 In 1999 the owner of the land was Windy Dropdown Pty Ltd (Windy Dropdown). It engaged a builder to construct a dwelling (ie do “residential building work” within the Act). There is some uncertainty as to whether the builder was WDD Constructions Pty Ltd or Burnette Constructions (CB 82, 466-574). Perhaps these are different names for the same entity. The work was done under contract (“BC 4”: see CB 473) and Progress Claims spanned the period June 1999 to January 2000. These show the “Developer” as Windy Dropdown and the “Builder” as Burnette Constructions.
27 It is common ground that the circumstances under which the dwelling was built in 1999-2000 had triggered s92 of the Act. When the building work commenced s92(1) provided:
- A person must not contract to do any residential building work unless a contract of insurance that complies with this Act is in force in relation to the proposed work.
- Maximum penalty: 100 penalty units.
28 During the currency of the building work this provision was amended by the Home Building Amendment Act 1999 (No 26 of 1999), relevantly commencing on 30 July 1999. The amended (and current) form of the provision (in s92(1)(a)) states:
- A person must not do residential building work under a contract unless … a contract of insurance that complies with this Act is in force in relation to that work in the name of the person who contracted to do the work ….
- Maximum penalty: 200 penalty units.
29 Apart from the higher penalty, the difference between the two provisions is that the earlier form prohibited entry into a contract to do residential building work; whereas the current provision permits contract formation, but prohibits the doing of work under the contract unless insurance is in force. Whichever provision applied to the contracted building work done in 1999-2000, the Builder was in breach because statutory insurance was never taken out by it.
30 There was also an obligation to attach a certificate of insurance in prescribed form to the building contract (s92(2) in its earlier form). The current obligation is to provide such a certificate to the other party (or one of the other parties) to the contract (current form of s92(1)(b)).
31 These obligations fell upon Windy Dropdown’s builder (see also Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 273 at [33] per Barrett J). The second appellant submitted that Windy Dropdown would have been complicit in its builder’s offence, but it is unnecessary to determine this. It has no bearing on the rights of the Vendor and Purchaser under the Contract for Sale dated 17 September 2002 (ie the first respondent and first appellant respectively).
32 The Act uses two mechanisms for encouraging compliance. These explain why it is legitimate to describe insurance as compulsory.
33 The first mechanism is the creation of relevant offences. As indicated, prior to 10 July 1999 the offences included contracting to do residential building work unless statutory insurance was in force, with a certificate of insurance being attached to the building contract. After 30 July 1999 the corresponding offences occur when residential building work is done under a contract unless (a) statutory insurance is in force; and (b) a certificate of insurance has been provided to at least one of the other parties to the contract. Demanding or receiving payment under a contract for residential building work unless these two steps have occurred has also been an offence since 1999 (s92(2)).
34 The second sanction involves restrictions upon the building contractor recovering damages or other civil remedies against the other party in various circumstances (s94).
35 At the time when Windy Dropdown contracted with its builder the sanction was harsh and apparently unyielding. Section 94 then provided:
- Effects on contract of contravention
- (1) A person who enters into a contract in contravention of section 92(1) or 93(1):
- (a) is not entitled to damages or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract or to recover money in respect of work done under the contract under any other right of action (including a quantum meruit action), but
- (b) is liable for damages and subject to any such remedy in respect of a breach of the contract committed by the person.
- (2) This section does not affect the liability of any such person for an offence against a provision made by or under this or any other Act.
See generally Casa Maria Properties Pty Ltd v Trend Properties Pty Ltd NSWCA unreported, 18 December 1998.
36 The uninsured contractor remains subject to significant disabilities after the 1999 amendments. But s94 now permits insurance to be obtained after the performance of “uninsured work”, thereby allowing enforcement by the builder (ss(3)). Since further amendments in 2001, s94 also enables the defaulting contractor to seek relief and recover on a quantum meruit basis if a court or tribunal considers it just and equitable. Section 94 currently reads:
- Effect of failure to insure residential building work
(1) If a contract of insurance required by section 92 is not in force, in the name of the person who contracted to do the work, in relation to any residential building work done under a contract (the uninsured work ), the contractor who did the work:
- (a) is not entitled to damages, or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, in relation to that work, and
(b) is not entitled to recover money in respect of that work under any other right of action (including a quantum meruit).
- (1A) Despite section 92 (2) and subsection (1), if a court or tribunal considers it just and equitable, the contractor, despite the absence of the required contract of insurance, is entitled to recover money in respect of that work on a quantum meruit basis.
- (1B) A contractor who applies to a court or tribunal for a remedy under this section, or who is awarded money under this section, is not guilty of an offence under section 92 (2) by virtue only of that fact.
- (1C) Without limiting the factors that a court or tribunal may consider in deciding what is just and equitable under subsection (1A):
- (a) in relation to any contract—the court or tribunal may have regard to the impact on the resale price of the property if no contract of insurance is provided, and
(b) in relation only to a contract entered into before 30 July 1999—the court or tribunal is not to be limited by the fact that the required contract of insurance was not obtained until after the date of the contract.
- (3) Residential building work that is uninsured work at the time the work is done ceases to be uninsured work for the purposes of this section if the required contract of insurance for the work is subsequently obtained.
- (4) If a person commenced residential building work before 30 July 1999 and entered into a contract of insurance that complies with this Act in relation to that work after the contract for the residential building work was entered into, that contract of insurance is, for the purposes of this section or any previous version of this section, taken to have been in force in relation to the residential building work done under the contract for the residential building work whether that work was done before or after the contract of insurance was entered into.
- Note. If a contract of insurance is in force in relation to part of the residential building work, this section applies only in relation to the part of the work that is not insured.
37 Section 94(1C)(a) recognizes that an owner may be faced with having no insurance and that this may have a negative impact upon the resale value of the residential property. This disadvantage may be taken into account in the judicial determination whether it is just and equitable to allow the builder to enforce claims against the owner arising out of the building contract. The provision implicitly recognizes that such an owner may wish to resell during the currency of the builder’s statutory warranties (cf s18E) notwithstanding the absence of insurance.
38 Section 99 opens with the stipulation: “A contract of insurance in relation to residential building work required by section 92 must insure…”. This spells out the content of the contract of insurance required by s92: it is not a free-standing obligation. The form of the section was amended by Act No 26 of 1999, but again nothing turns on this. The essential stipulation continued to include a requirement to insure a person on whose behalf the work was being done and the person’s successors in title against the risk of being unable to bring effective proceedings following a breach of statutory warranty in respect of building work. The section was further amended between the date of the original building contract and the date of entry into the instant Contract of sale.
39 Section 99 is to be read with Div 2 of Pt 5 of the Home Building Regulation 1997 (cll 41-49). In particular, cl 42 of the Regulation provides further definition as to the persons required to be made beneficiaries under an insurance contract and as to those not required to be beneficiaries. A successor in title to a person on whose behalf residential building work covered by the contract of insurance is done or is to be done must be made a beneficiary under the insurance contract (see cl 42(1)(a)(i)and (b)). Additional requirements relating to the content and duration of insurance cover are enacted in ss102, 103B and the Regulation.
40 None of these provisions imposed any duty upon the present Vendor. He was a successor in title to the original building owner, Windy Dropdown. As such, he acquired rights to enforce the statutory warranties against the original building contractor and he would have been a beneficiary of the insurance contract taken out by the original building contractor had this occurred. But no obligation was placed on him by the Act.
41 Nor is any such obligation to be found in the vendor disclosure and statutory warranty provisions of the Conveyancing Act 1919 (s52A), the Conveyancing (Sale of Land) Regulation 2000 or any other statutory provision regulating conveyancing practice.
Appellant’s submissions analysed
42 It is now possible to address the second appellant’s submissions.
43 It was not contended that the Vendor owed any duty to the Purchaser stemming directly from the Act. Like his vendor before him, the Vendor had acquired the residence with the benefit of the builder’s statutory warranties, but without the backing of statutory insurance. The obligation to take out that insurance had been imposed upon the builder. Its failure to have obtained insurance before contracting to build and/or building would have involved an offence and would have imposed statutory disabilities under s94 had it sought to enforce the building contract against the original owner, Windy Dropdown. But nothing placed any statutory obligation on the Vendor.
44 Nothing is known as to the solvency or even the existence of the builder as at 17 September 2002, the date of the instant Contract. In these circumstances, the appellant accepted that it would have been difficult, if not impossible, for the Vendor to have obtained in the builder’s name and on the builder’s behalf the statutory insurance that should have been procured by the builder in 1999-2000.
45 The second appellant submitted nevertheless that there was a defect in the Vendor’s title that the Purchaser was entitled to have removed, failing which the Purchaser was entitled to bring the Contract to an end. (On this argument it was unnecessary to determine whether the Vendor’s inability to make title represented a breach or merely a basis upon which the Purchaser could resist completion and bring down the contract for sale.)
46 The second appellant’s argument fails at several points.
47 Under the general law a vendor must disclose to the purchaser all latent defects in title. Where an undisclosed defect is “substantial” or “essential”, the purchaser may terminate the contract. This obligation may be modified by contract and it is subject to several qualifications that have no relevance in the present case (see generally Peter Butt, The Standard Contract for Sale of Land in New South Wales, 2nd ed at [0.3] ff, Stonham, Vendor and Purchaser pp229-30).
48 There is much case law deciding what are and are not defects of title (as distinct from defects in quality) in particular situations. No case to which the Court was referred addressed the absence of a contract of insurance.
49 Some matters are clear as regards defects of title. The focus of attention is upon the vendor’s capacity to deliver title having regard to the subject matter of the contract for sale. Necessarily one is looking at a state of affairs represented to exist at that point of time.
50 According to Stuckey, The Conveyancing Act, 2nd ed p115:
- Defects of title are facts or circumstances adversely affecting the title to the land which the vendor has contracted to sell.
51 In Dormer v Solo Investments Pty Ltd [1974] 1 NSWLR 428 Holland J described defects of title (at 433) as:
- … matters within [the vendor’s] knowledge which detract from his right to convey the estate he has agreed to sell or which prevent him from conveying his title free of encumbrances.
52 In Adolfson v Jengedor Pty Ltd (1995) 6 BPR 14,147 Young J said (at 14,152):
- When considering whether there is a defect in title one must direct one’s mind to what it was that the purchaser was led to expect then ask ‘whether the purchaser was obtaining something essentially what it bargained for or whether it was obtaining something so materially altered in character as to be in substance a different thing from that contracted for’: Liverpool Holdings Ltd v Gordon Lynton Car Sales Pty Ltd [1978] Qd R 279, 283.
53 When one turns to the Contract in the present case, there is nothing capable of generating any such expectation on the Purchaser’s part. The Contract was at pains to emphasise caveat emptor in stipulating that the Purchaser accepted the property in its present condition and state of repair (Special Condition 31 set out above).
54 The subject matter of the Contract was land described as a freehold estate under Torrens title. Legal and practical enjoyment of that land was in no way undermined by the non-existence of a contract of insurance underpinning whatever rights the Purchaser might wish to assert against the original builder under the statutory warranties. Nothing in the evidence suggests that there was any basis for a claim against the builder at the time when the Contract was entered into (cf Carpenter v McGrath (1996) 40 NSWLR 39).
55 Not even the quality of the subject property is affected by the absence of insurance. All that has happened is that the Vendor (not having the benefit of insurance) did not promise to include that benefit as part of the Contract subject-matter. For all that one knows, the value of the absent insurance was taken into account in the negotiated contract price.
56 Faced with the silence of the Contract, the appellant pointed to the statutory definitions of “land” in s3 of the Real Property Act 1900 and the provisions of s67 of the Conveyancing Act 1919. The former is no more than a definition for the purposes of the Act and instruments executed under it, being a definition that expressly yields to inconsistent context and subject matter. The provision therefore casts no light upon the title promised in the subject Contract.
57 Section 67(2) of the Conveyancing Act deems a conveyance of land containing a house to include various appurtenances and other interests, including “all… privileges … and advantages whatsoever appertaining to the land, houses, or other buildings conveyed … at the time of conveyance”. The Court was referred to the decision in Regis Property Co Ltd v Redman [1956] 2 QB 612 that the corresponding English provision did not mean that a transfer to a landlord carried an obligation to supply constant hot water or central heating to the tenants. This authority does not assist the second appellant having regard to its facts and the wider terms of the English provision (see Stuckey, op cit at [384]). In any event, s67 does not apply to land under the Real Property Act (see ss(5)). And even within its sphere of operation it only applies to conveyances and not to contracts (Stuckey, loc cit citing Borman v Griffith [1930] 1 Ch 493. See also Re Peck and the School Board for London’s Contract [1893] 2 Ch 315 at 318).
58 Nothing in the Contract addressed the question of insurance under the Act. The Vendor had not bargained for nor obtained any such insurance from his vendor, Windy Dropdown. He had not been obliged to do so before he completed the purchase of the land from Windy Dropdown. Nor was he obliged by statute, contract or fiduciary obligation to procure such insurance for the benefit of his purchaser, a procurement that the appellant conceded was virtually impossible.
59 Gzell J held that s94 prescribed the effect of the original builder’s failure to insure. Nothing required the Vendor to obtain alternative insurance cover for his purchaser. Indeed, s94(1C)(a) was a counter-indicator. In the absence of a contractual requirement obliging the Vendor to obtain alternative insurance cover, his answers to requisitions 18B and 29 were appropriate. The absence of insurance imposed no impediment to the Purchaser obtaining clear title to the land and dwelling that were the subject of the Contract. His Honour refrained from deciding that there was a defect in title, although he favoured the view that there was not a defect.
60 It will be seen that I agree substantially with the reasoning of the learned primary judge. Unlike him, I think it necessary to grasp the defect of title issue. I have concluded that there was no such defect when the Act and the Contract are analysed. The second appellant’s argument is essentially circular and flawed in its statutory analysis. Insurance cover would have been an advantage to the Purchaser to the extent that any of the statutory warranties were breached within the seven year timeframe, but this was insufficient to give it a right to insist that the Vendor obtain such cover.
61 The appeal should be dismissed with costs.
62 SHELLER JA: I agree with Mason P.
63 STEIN AJA: I agree with Mason P.
Last Modified: 07/26/2004
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