Gough v South Sky Investments Pty Ltd - [2011] QSC 361

SUPREME COURT OF QUEENSLAND

CITATION:

Gough & Anor v South Sky Investments Pty Ltd [2011] QSC 361
Wicks v South Sky Investments Pty Ltd [2011] QSC 361
NOA 8338 Pty Ltd & Anor v South Sky Investments Pty Ltd [2011] QSC 361
Ryan v South Sky Investments Pty Ltd [2011] QSC 361
Linemint Pty Ltd & Anor v South Sky Investments Pty Ltd [2011] QSC 361
Walsh & Anor v South Sky Investments Pty Ltd [2011] QSC 361
Taylor & Anor v South Sky Investments Pty Ltd [2011] QSC 361
Parsons & Anor v South Sky Investments Pty Ltd [2011] QSC 361

PARTIES:

JOHN MACLAINE GOUGH AND NORMA PATRICIA GROVES
(plaintiffs)
v
SOUTH SKY INVESTMENTS PTY LTD
(ACN 097 092 709) (RECEIVERS AND MANAGERS APPOINTED)
(defendant)
and
JEFFREY AIDEN WICKS AND JULIE KATHRYN WICKS
(plaintiffs)
v
SOUTH SKY INVESTMENTS PTY LTD
(ACN 097 092 709) (RECEIVERS AND MANAGERS APPOINTED)
(defendant)
and
NOA 8338 PTY LTD
(first plaintiff)
and
PAUL ANTHONY FORD
(second plaintiff)
v
SOUTH SKY INVESTMENTS PTY LTD
(ACN 097 092 709) (RECEIVERS AND MANAGERS APPOINTED)
(defendant)
and
PATRICIA GAYE RYAN
(plaintiff)
v
SOUTH SKY INVESTMENTS PTY LTD
(ACN 097 092 709) (RECEIVERS AND MANAGERS APPOINTED)
(defendant)
and
LINEMINT PTY LTD
(first plaintiff)
and
DERICK BRISLEY AND DEBBIE BRISLEY
(second plaintiffs)
v
SOUTH SKY INVESTMENTS PTY LTD
(ACN 097 092 709) (RECEIVERS AND MANAGERS APPOINTED)
(defendant)
and
MICHAEL SHANE WALSH AND DAMIAN ROBERT HUTCHINS
(plaintiffs)
v
SOUTH SKY INVESTMENTS PTY LTD
(ACN 097 092 709) (RECEIVERS AND MANAGERS APPOINTED)
(plaintiff)
and
VICKI ANNE TAYLOR AND JENNIFER MAY FERGUSON
(plaintiffs)
v
SOUTH SKY INVESTMENTS PTY LTD
(ACN 097 092 709) (RECEIVERS AND MANAGERS APPOINTED)
(defendant)
and
JOHN CLIFTON PARSONS AND DOROTHY ANNE PARSONS
(plaintiffs)
v
SOUTH SKY INVESTMENTS PTY LTD
(ACN 097 092 709) (RECEIVERS AND MANAGERS APPOINTED)
(defendant)

FILE NOS:

12179 of 2010, 13323 of 2010, 13578 of 2010, 13613 of 2010, 13615 of 2010, 13614 of 2010, 3091 of 2011, 3092 of 2011

DIVISION:

Trial Division

PROCEEDING:

Claim

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

2 December 2011

DELIVERED AT:

Brisbane

HEARING DATES:

8, 9, 10, 11 and 12 August, 3, 6 and 7 October 2011

JUDGE:

Applegarth J

ORDERS:

In each proceeding there will be:

1.     Judgment for the defendant.

2.     A decree of specific performance and other orders on the defendant’s counterclaim.

3.     A direction that the defendant submit proposed minutes of order within seven days.

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – REPUDIATION AND NON-PERFORMANCE – REPUDIATION – WHAT AMOUNTS TO REPUDIATION – where plaintiffs contracted to purchase apartments “off the plan” in a development described as The Oracle – where seller provided disclosure statements under ss 213 and 214 of the Body Corporate and Community Management Act 1997 (Qld) – where provision for an on-site manager to conduct a letting business and provide services associated with the letting of apartments – where letting agent focused on short-term stays and provided certain hotel-like services to guests – where plaintiffs claim that the tower was no longer a residential tower but was a hotel/resort branded Peppers Broadbeach – whether tower had ceased to be a residential tower – whether tower had been branded Peppers Broadbeach – whether seller had repudiated contracts

CONVEYANCING – STATUTORY OBLIGATIONS OR RESTRICTIONS RELATING TO CONTRACT FOR SALE – PROTECTION OF PURCHASERS – OBLIGATIONS ON VENDOR: DISCLOSURE, WARNINGS AND LIKE MATTERS – where certain plaintiffs claim that disclosure statements had become inaccurate and any such inaccuracy would cause buyers material prejudice if compelled to complete – where certain plaintiffs seek to avoid the contracts under ss 214 and 217 of the BCCM Act – whether disclosure statements became inaccurate – whether inaccuracy in the name of the tower would cause material prejudice to the plaintiffs if compelled to complete the contracts

Body Corporate and Community Management Act 1997 (Qld), s 213, s 214, s 215, s 217

HG v The Queen (1999) 197 CLR 414; [1999] HCA 2 cited
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; [2007] HCA 61 discussed

Latitude Developments Pty Ltd v Haswell [2010] QSC 346 cited
Lee v Surfers Paradise Beach Resort Pty Ltd [2008] 2 Qd R 249; [2008] QCA 29 cited
Mirvac Queensland Pty Ltd v Horne [2009] QSC 269 cited
Mirvac Queensland Pty Ltd v Wilson [2010] QCA 322 discussed
Osland v R (1998) 197 CLR 316; [1998] HCA 75 cited
R v Bonython (1984) 38 SASR 45 cited
South Sky Investments Pty Ltd v Prins [2010] QSC 438 discussed
Transport Publishing Co Pty Ltd v Literature Board of Review (1956) 99 CLR 111; [1956] HCA 73 cited
Vennard v Delorain Pty Ltd as Trustee for the Delorain Trust [2010] QCA 309 cited
Wilson v Mirvac Queensland Pty Ltd [2010] QSC 87 discussed

COUNSEL:

R G Bain QC and C C Heyworth-Smith for the plaintiffs
S L Doyle SC and D G Clothier for the defendant

SOLICITORS:

Johnsons Lawyers for the plaintiffs
Allens Arthur Robinson for the defendant

These eight proceedings, which were heard together, relate to “off the plan” contracts to purchase proposed lots in Tower One of a development described as The Oracle at Broadbeach on the Gold Coast. The development was undertaken by the defendant (“SSI”), and consists of two high rise apartment towers and other low rise buildings that contain retail, restaurant and commercial premises.

SSI was incorporated in 2001 for the purpose of carrying out the development. The apartments in Tower One were released for sale in 2005. The construction of the development commenced in about October 2007. The construction of Tower One was completed in October 2010.

The plaintiffs in each proceeding, with the exception of the plaintiffs in proceeding 12179/10 (Mr Gough and Ms Groves), entered into contracts in late 2005 or early 2006 (“the original contracts”) with SSI. In June 2006 SSI obtained approval under s 29 of the Land Sales Act 1984 to extend from three and a half years to five and a half years the period of time in which it was required to provide a registrable instrument of transfer. As a result, the plaintiffs who had entered into the original contracts entered into new contracts in the second half of 2006. Mr Gough and

Ms Groves entered into their contract with SSI on 17 October 2006.

At various times the plaintiffs were given disclosure statements. In general terms, the disclosure statements explained that the development’s residential component to be known as The Oracle would be subdivided to create a community titles scheme, and that it was proposed to appoint a caretaker who could provide letting services for the owners of lots in the scheme, could carry on a business of letting lots in the scheme and would occupy identified parts of the common property.

Each plaintiff gave evidence of the type of development that they expected to be created, and about their intentions in relation to the particular apartment that they contracted to purchase. The personal circumstances of the various plaintiffs differed, as did their intentions in relation to their particular apartment. Some intended to occupy the apartment they agreed to buy. For example,

Mr and Mrs Wicks intended to retire to the apartment they agreed to buy once

Mr Wicks retired from his career as an airline pilot and they returned to Australia from their home in Hong Kong. Others hoped to on-sell the apartment before the date for settlement in order to make a profit. For example, Ms Ryan, a teacher’s aide, who had limited assets, intended to on-sell proposed Lot 902 in order to be able to settle her contract contemporaneously with the contract she hoped to enter with another buyer. Her limited financial resources did not enable her to settle the contract otherwise, and she hoped to make a profit by on-selling the proposed lot. Other buyers intended to find a long-term tenant. For example, Mr Walsh and his business partner, Mr Hutchins, intended to find a long-term tenant for the apartment they contracted to buy, and Mr Hutchins thought that eventually he might live in the apartment with his family.

In general terms, the plaintiffs in each proceeding gave evidence that they expected to purchase an apartment in a residential tower known as The Oracle, and that the tower was to be an iconic, luxurious, up-market residence, providing a sense of community and a high level of amenity to its residents. These features were to give it an “exclusivity” or a quality that distinguished it from other high rise apartment buildings on the Gold Coast. The advertisements, sales brochures, sales agents’ representations or other sources of information that gave rise to the expectations of individual buyers are not the subject of detailed or precise evidence. That is because this is not a case that relies on express or implied representations that were made by representatives of SSI or others in marketing The Oracle as the basis of the claim that has been brought by each plaintiff. Instead, it is a contract case.

Each plaintiff relies on the terms of a written contract. They also rely upon disclosure statements, and annexures to them, which are said to form part of the provisions of the contract by virtue of s 215 of the Body Corporate and Community Management Act 1997 (Qld) (“the BCCM Act” or “the Act”). On this basis, SSI is alleged to have promised that:

(a)the relevant lot would be, and would be sold to the buyer as, an apartment in a residential tower in The Oracle; and
(b)any authorisation of a person as letting agent would be in the terms of the Caretaking and Letting Agreement annexed to the disclosure statement.

In about July or August 2010 the plaintiffs received communications that announced that the letting rights had been acquired by Peppers Retreats, Resorts and Hotels. Material sent by Peppers on 12 August 2010 included a brochure that advised, among other things, that Peppers Broadbeach would be the “ultimate all encompassing hotel experience” and that Peppers Broadbeach would be “a great hotel opposite the beach”.

The plaintiffs claim that the disclosure statement made under the Act, as amended by further statements, would not be accurate if now given as a disclosure statement because of numerous matters. In very general terms, the allegations are that each plaintiff contracted to purchase an apartment in a residential tower known as

The Oracle
, and the disclosure statements described the lot to be purchased as a lot in such a residential tower, whereas the apartment in question is one in a hotel/resort branded Peppers Broadbeach. Certain plaintiffs claim that they would be materially prejudiced, as that expression is used in s 214(4)(b) and s 217(c) of the Act, if compelled to complete the contract by reason of the extent to which the disclosure statement, as amended, has become inaccurate because of a number of matters. The plaintiffs in three of the proceedings (Mr and Mrs Wicks, Mr Gough and Ms Groves, and Ms Ryan) purported to cancel their respective contracts pursuant to rights given to them under the Act within the time allowed by the Act. In all of the proceedings the plaintiffs claim that SSI evinced an intention not to be bound by the terms of the contract (and thereby repudiated the contract) in that:

(a)SSI no longer intended to provide at settlement an apartment in a residential tower in The Oracle but rather an apartment in a hotel/resort to be known as Peppers Broadbeach with the features, attributes, uses and consequences alleged by them in their pleadings; and
(b)any authorisation of a person as letting agent would not be in the terms of the Caretaking and Letting Agreement annexed to the disclosure statements.

The plaintiffs seek declarations either that they were entitled to treat the contract as discharged and that the contract has been discharged, or that they validly cancelled the contract pursuant to s 214 or s 217 of the Act.

SSI denies that the plaintiffs in each proceeding were entitled to terminate the contract. By counterclaim in each proceeding it seeks specific performance of the contract, interest on the purchase price since the date for completion and damages.

At the risk of excessively simplifying the numerous allegations of repudiation, inaccuracy in disclosure statements and material prejudice that appear in the statements of claim in the proceedings, the essential complaint of each plaintiff is in two parts. First, they contracted to purchase an apartment in a residential tower, whereas on settlement they were proffered a lot in a development that had become a hotel or resort. The second is that The Oracle has been re-branded

Peppers Broadbeach
.

The statutory context

The evidence concerning the original disclosure statement given pursuant to s 213 of the BCCM Act and the further disclosure statements given from time to time, their alleged inaccuracy, and the prejudice that the plaintiffs say they would suffer if compelled to complete the contract make it appropriate to summarise the relevant provisions of the Act[1] concerning disclosure statements about a proposed lot. Section 213(1) of the Act provides that before a contract is entered into by a seller for the sale of a proposed lot, the seller must give the buyer a disclosure statement. A proposed lot is a lot that is intended to come into existence as a lot included in a community title scheme when the scheme is established or changed. Section 213(2) prescribes what the disclosure statement must state, include and be accompanied by. The disclosure statement must be “substantially complete”.
[1]For the purposes of this case, the plaintiffs submitted that Reprint 3D was the applicable reprint and the defendants did not contest that point. All references to the BCCM Act are therefore references to Reprint 3D, which was effective from 15 March 2006 to 30 June 2007.

Section 214 relates to the variation of a disclosure statement by a further statement. It applies if the contract has not been settled and:

“(a)the seller becomes aware that information contained in the disclosure statement was inaccurate as at the day the contract was entered into; or
(b)the disclosure statement would not be accurate if now given as a disclosure statement.”

If s 214 applies, then the seller must, within 14 days (or a longer period agreed between the buyer and seller) after the section starts to apply, give the buyer a further statement rectifying the inaccuracies in the disclosure statement. Section 214(4) provides:

“The buyer may cancel the contract if—
(a) it has not already been settled; and
(b)the buyer would be materially prejudiced if compelled to complete the contract, given the extent to which the disclosure statement was, or has become, inaccurate; and

(c)the cancellation is effected by written notice given to the seller within 14 days, or a longer period agreed between the buyer and seller, after the seller gives the buyer the further statement.”

The provisions of s 214 continue to apply after the further statement is given, on the basis that the disclosure statement is taken to be constituted by the disclosure statement and any further statement, and the disclosure statement date is taken to be the most recent further statement date.[2]

[2]BCCM Act, s 214(5).

Section 215(1) provides that the disclosure statement, and any material accompanying the disclosure statement, and each further statement and any material accompanying each further statement, form part of the provisions of the contract. Section 216 states that the buyer may rely on information in the disclosure statement and each further statement as if the seller had warranted its accuracy.

Section 217 provides that the buyer may cancel the contract if:

(a) it has not already been settled; and
(b) at least one of the matters stated in sub-paragraph (b) applies; and
(c)because of the difference or inaccuracy under paragraph (b), the buyer would be materially prejudiced if compelled to complete the contract; and
(d)the cancellation is effected by written notice given to the seller by the buyer not later than the latest of the following—
(i)3 days before the buyer is otherwise required to complete the contract;
(ii)14 days after the buyer is given notice that the scheme is established or changed;

(iii)another day agreed between the buyer and the seller.

The relevant sub-paragraph of s 217(b) in this matter is:

“(iv)information disclosed in the disclosure statement, as rectified by any further statement, is inaccurate”.

If the buyer cancels a contract under the provisions of the Act in relation to proposed lots, then the seller must repay to the buyer any amount paid to the seller (including the seller’s agent) towards the purchase of the lot the subject of the contract.[3]
[3]BCCM Act, s 218.

The entitlement to cancel under s 214 arises in the context of a case in which a further statement is provided.[4] The entitlement to cancel under s 217 may arise where the disclosure statement is inaccurate and no further statement is provided. The entitlement to cancel under s 217 arises if, because of an inaccuracy in the information disclosed in the disclosure statement, as rectified by any further statement, the buyer would be “materially prejudiced” if compelled to complete the contract. The entitlement to cancel under s 214(4) arises if, among other things, the buyer would be “materially prejudiced” if compelled to complete the contract, given the extent to which the disclosure statement was, or has become, inaccurate. The meaning of “materially prejudiced” in this context was discussed by
[4]Lee v Surfers Paradise Beach Resort Pty Ltd [2008] 2 Qd R 249 at 259 and 268, [2008] QCA 29 at [4] and [41].

Margaret Wilson J in Wilson v Mirvac Queensland Pty Ltd.[5] The Court of Appeal considered the concept of “material prejudice” in Mirvac Queensland Pty
Ltd v Wilson[6] and approved the analysis and conclusions reached by her Honour. Her Honour had said that the following matters are clear:
[5][2010] QSC 87. See also Latitude Developments Pty Ltd v Haswell [2010] QSC 346 at [55]-[65] where P Lyons J also discussed the concept and concluded that material prejudice is not to be judged by reference to facts not known to the buyer at the time when it gives a notice of termination.
[6][2010] QCA 322.

“(a)The focus is on the buyer. This suggests that the test is objective having regard to the particular buyer’s circumstances: would someone in those circumstances be materially prejudiced?
(b)Given that the buyer has only 14 days in which to cancel the contract, and the completion date may still be some months away..., material prejudice must be assessed in the light of the buyer’s circumstances when the Further Statement is received or at the latest at the expiration of 14 days from its receipt.
(c)There must be a causal relationship between the inaccuracy and the prejudice.
(d)There must be proportionality between the inaccuracy and the prejudice.
(e)Because this is consumer protection legislation, it should be construed beneficially.”[7]
[7][2010] QSC 87 at [32].

Justice Jones (with whom McMurdo P and Fraser JA agreed) stated that, in the context of s 214 (and also s 217), the question of prejudice depends upon the information which has come to the buyer’s actual knowledge and whether the information on an objective basis is inaccurate. The prejudice for the purpose of the section flowing from the inaccuracy arises from some detriment or disadvantage to the buyer.[8] A person would be “materially prejudiced” if disadvantaged “substantially” or “to an important extent”.[9] Justice Jones cited Vennard v Delorain Pty Ltd as Trustee for the Delorain Trust[10] which suggested, in a similar context, that the phrase “materially prejudiced” meant “disadvantaged in a way which is substantial or of much consequence.”[11] The concept that the buyer would be “materially prejudiced” requires a consideration of “the personal circumstances of the buyer in what is otherwise a determination to be made objectively.”[12]

[8][2010] QCA 322 at [58].
[9]Ibid at [59].
[10][2010] QCA 309.
[11][2010] QCA 322 at [59], citing [2010] QCA 309 at [27].
[12][2010] QCA 322 at [59].

Justice Jones concluded that material prejudice for the purpose of s 214 (and s 217):

“has to be assessed in the context of the buyer’s personal circumstances being required to complete the contract on its changed terms. The evaluation of whether any disadvantage or detriment reaches the level of material prejudice such as to warrant cancellation of the contract, must be objectively determined in accordance with community standards.”[13]

The President, who agreed with these reasons, made reference to the apparently harsh result to the seller in the circumstances of that case, but stated that such a result was consistent with the scheme of the Act and its objects, which relevantly included the secondary object of providing “an appropriate level of consumer protection for... intending buyers of lots included in community title schemes”.[14]

[13]Ibid.

[14]Ibid at [3].

The Oracle

SSI was incorporated in 2001 as a special purpose vehicle to undertake the development of the project known as The Oracle. It was associated with Niecon Developments Pty Ltd (“Niecon”) and Niecon provided staff and services to manage the development. The development is on about 12,336 square metres of land located at Charles and Elizabeth Avenues, Broadbeach. It is in a tourist precinct. It comprises two residential towers, with Tower One being 51 levels containing 265 apartments and Tower Two being 41 levels containing 242 apartments. Tower One is closest to the beach. There are about 70 different apartment configurations. There are more than 200 two or three bedroom apartments. There is a much smaller number of one and two bedroom plus study apartments. In addition, there are a small number of three bedroom plus media apartments and three bedroom plus study and media apartments. There are three penthouses. Apartment living areas range from 81 square metres to over 318 square metres. The apartments contain separate kitchens. The average sale price for the apartments at the time of their release exceeded $1,200,000. Niecon and SSI’s Chief Operating Officer, Mr Mark Johnson, who oversaw the development, described it in his affidavit as a “substantial 5 star development, with very high quality finishes, spectacular aspect and position and extensive luxury facilities throughout the common areas.” The development also includes, in a gallery below the towers, four three-level buildings housing boutiques, retail stores, restaurants, cafes and licensed premises.

The apartments in Tower One were first released for sale in late 2005. Each of the plaintiffs in the separate proceedings gave evidence concerning their expectations, and not all of them descended to great detail in relation to the information that they relied upon in deciding to buy an apartment in The Oracle. However, the marketing of the development focused on its unparalleled status as a high-quality, residential apartment tower. For example, the first plaintiff to give oral evidence, Mr Wicks, said that he was told about The Oracle in late 2005 when he told sales representatives of his and his wife’s plan to retire to the Gold Coast. He said that he and his wife were attracted to The Oracle “by what was proposed by way of luxurious, sophisticated residential living.” Another plaintiff, Ms Ryan was told by a sales representative in late 2005 that The Oracle was to be “an iconic residential project with permanent and long-term residents only”, and that the development was designed to attract “baby boomers” looking to downsize and move from homes into a luxuriously-appointed development with quality facilities and also to attract

high-end, discerning owners looking for executive standard residences. She received promotional materials about The Oracle, including a large, glossy brochure with a foreword written by demographer Bernard Salt, and a DVD which focused on the “iconic sophisticated residential nature of the development designed to attract owner/occupiers”. The glossy blue brochure about The Oracle opens with a statement by Mr Salt about the “evolving preference by Australians for a lifestyle location in a warm climate.” Mr Salt observes:

“What had been lacking was a measure of city sophistication in these places to attract and hold the interests of aging, city-based baby boomers.”

The brochure emphasised the lifestyle that The Oracle offered. One of its first pages stated:

“LIVE, WORK, INDULGE IN YOUR VERY OWN FULLY INTEGRATED LIFESTYLE DEVELOPMENT”.

The exclusive nature of The Oracle was conveyed on a page headed “WORLD CLASS LIFESPACES” which stated:

“Every one of the residences at this landmark address will indulge its owners with world class lifespaces. The Niecon vision is to create rooms that enhance your life.”

One of the stated advantages of living at such a “landmark address” was membership of what was described as “YOUR VERY OWN EXCLUSIVE CLUB”. This page of the brochure stated:

“Acquiring a residence in The Oracle is equivalent to achieving membership in a supremely private club. Owners will enjoy the privilege of access to the Niecon Executive Lounge, a space where you can socialise with like minded neighbours over a quiet game of billiards or retreat to the ultimate tranquillity and privacy of the Zen garden. Entertain guests with a selection from your personal temperate wine locker, enjoy quiet space for reflection in the library, or treat your family and friends to a screening in the private cinema. Exclusive features that make The Oracle a truly individual environment for our residents.”

As to its location, the brochure posed a question:

“Could you locate a more strategic address to live, work and relax?”

As previously noted, Ms Ryan and each of the other plaintiffs do not rely upon these representations as the foundation for a contractual term, or for any cause of action based upon a representation such as a contravention of the Trade Practices Act 1974 (Cth), s 52. Instead, these representations and the expectations they generated are relevant to the personal circumstances of each plaintiff in considering the issue of prejudice.

The promotion of The Oracle prompted a strong reaction when apartments in Tower One were released for sale in late 2005. Prospective buyers were able to sign expressions of interest. Mr Johnson describes the release of Tower One as very successful and says that there was “a frenzy to purchase The Oracle apartments off the plan.” It was the first launch of quality apartments in Broadbeach for a long time. Whilst the popularity of the development was not surprising to him, the extent to which people were keen to purchase was higher than had been anticipated and people were “practically lining up to buy the apartments.” He and other Niecon staff could not keep up with the pace at which people wanted to buy the apartments. Contract administrators were appointed to process the execution and return of contracts.

The process was for the contracts administrator to prepare a letter to the buyer or the buyer’s solicitor, under cover of which the following documents requiring execution by the buyer would be sent:

(a)the contract and associated forms required by the Act and the Property Agents and Motor Dealers Act 2000 (Qld) (“PAMDA”);
(b)a Contract Disclosure Statement which contained a Developer Product Disclosure Statement, and another Disclosure Statement which itself included:
(i)a single page entitled “INFORMATION ABOUT THE DEVELOPMENT”;

(ii)a Disclosure Statement given under the BCCM Act; and
(iii)a PAMDA Form 27c.
(c)an Operator Product Disclosure Statement.

The original contracts were executed by the buyers. In late May 2006 SSI obtained approval under s 28 of the Land Sales Act 1984 to extend the period of time within which it was required to provide buyers with a registrable instrument of transfer. Following that approval, SSI began preparing and issuing new contracts to buyers. As a result, the original contracts were replaced and discharged by new contracts. The reissuing and execution of new contracts did not involve the provision of an Operator Product Disclosure Statement to the buyers. However, new Disclosure Statements in the form described in (b) above were given. From time to time further statements were sent to buyers pursuant to s 214 of the Act.

Relevant provisions of the contract

After the pages consisting of statutory warning statements and the like, the first page of the contract is headed:

“Contract of Sale
The Oracle”

and bears the logo for The Oracle below which appears the name:

“The Oracle
Central Broadbeach”

The contract includes a number of plans, including the site plan, a matrix plan showing levels/floors and a draft building format plan. Each of the relevant plans is headed “The Oracle”. The contract included various definitions, including the “Scheme” (being the community titles scheme to be created under the Act by SSI and comprising the Scheme Land and the Community Management Statement). Provision was made for the payment of a deposit and for SSI, at its discretion, to accept in lieu of a deposit a Security in favour of the deposit holder. Clause 3 related to the development and its subdivision. Clause 5 provided for settlement to occur on the “Settlement Date” and this was to be 14 days after SSI’s lawyers gave notice to the buyer or its lawyers that the Scheme had been established, or changed, to create the Lot. The contract provided for time to be of the essence and for default interest. In Clause 16 the buyer acknowledged having received from the seller, before it signed the contract:

(a) a Product Disclosure Statement under the Corporations Act; and
(b) a Disclosure Statement under the BCCM Act.

Clause 18 of the contract described the development of “the Land” as comprising:

(a) the Retail Lot; and
(b) the Scheme.

In Clause 18.2 the buyer acknowledged that the Retail Lot would be used for commercial activities and would generate noise, pedestrian and vehicle traffic and related activities incidental to the commercial activities. Clause 18.3(a) related to commercial activities in the Scheme Buildings. By clause 18.3(a) the buyer acknowledged:

“that the Scheme may contain up to two levels in the Scheme Buildings which are used for Commercial Purposes.”

The clause defined “Commercial Purposes” to mean “any lawful purpose that is non-residential.”

The Disclosure Statements

Those buyers who entered into the original contracts were sent a disclosure statement which is referred to in the pleadings as “the original disclosure statement”. Another disclosure statement was given to these buyers pursuant to

s 213 of the Act before they entered into the replacement contracts. The original disclosure statement and the new disclosure statement were in materially identical terms. One of its first pages was titled “INFORMATION ABOUT THE DEVELOPMENT”. The information page purported to give “a general outline of the development being undertaken by the Seller”. It stated that:

“The Seller intends to construct a residential and retail development.

Land on which the Development will be constructed is proposed to be initially subdivided to create 2 lots (being a residential lot and a retail lot). The residential component, to be known as The Oracle, will be further subdivided by a building format plan to create a community titles scheme in respect of which there will be one body corporate. The Seller has not yet decided whether the retail component of the Development will be subdivided to create a community titles scheme. The retail component may also, at the Seller’s discretion, be subdivided to create land from which another residential community titles scheme will be derived.”

The disclosure statement given pursuant to s 213 of the Act stated that details of the terms of any proposed authorisation of a person as a letting agent for the Scheme proposed to be given after the establishment of the Scheme appeared in the Caretaking and Letting Agreement in Annexure 2. Annexure 2 consisted of a number of documents including the Caretaking and Letting Agreement.

Clause 3 of the Caretaking and Letting Agreement made provision for the remuneration of the Caretaker. Clause 3.6 provided that no part of the remuneration paid under cl 3 would be for carrying out any letting functions, providing any letting services or operating a letting business. Clause 4 defined the duties of the Caretaker.

Clause 6 of that agreement related to the Letting Business. It provided:

“6.1The Caretaker may carry on from the Caretaker’s Unit the business of:
(a)letting lots in the Scheme;

(b)all associated services commonly rendered in connection with letting lots in developments similar to that comprising the Scheme; and

(c)any other lawful activity.

6.2The Caretaker may provide such letting service for such owners of lots in the Scheme as require that service. However the owners are free to choose whether or not to use the letting services of the Caretaker to be provided under this Agreement.
6.3If the Caretaker decides to provide the services referred to in this clause, then it will supervise the standard of tenants of all such lettings arranged by it and ensure, so far as practicable, that no nuisance is created on the Scheme Land and that the Scheme and lots in it are not brought into disrepute.
6.4In so far as it is lawful, the Caretaker may erect signs reasonably necessary in or about the Scheme Land for the purpose of promoting and fostering the letting business. Such signs must be temporary and moveable.
6.5The Caretaker must comply with all laws in conducting the letting business.”

Clause 16 of the Caretaking and Letting Agreement provided for the Caretaker’s Unit to be used by the Caretaker for the purpose of management of the property, conducting the letting business and any other lawful purpose.

Clause 20 was headed “Occupation Authority”. Its various sub-clauses gave the Caretaker the authority to occupy identified parts of the Common Property on certain conditions. These areas were identified as OA1, OA2, OA3 and OA4. In each case the Caretaker was authorised to use the area in question to perform its duties under the agreement “and for any other lawful purpose”. Areas OA1, OA2 and OA4 were for the exclusive occupation of the Caretaker. In the case of OA3 the caretaker was authorised to use it “for special events, functions, presentations or any other lawful use” (which together were called an Event). Clause 20.3 permitted the Caretaker to charge a fee for persons attending an Event and to retain that fee as its property. The clause went on to make provision in relation to the prior booking or reservation of OA3 by an owner. Clause 20.3(e) entitled the Caretaker to serve alcohol, other beverages and food on OA3 but only if all appropriate licences were held and laws were complied with to allow such service.

Clause 20.5 authorised the Caretaker to place signage and other items. It provided:

“20.5The Body Corporate gives the Caretaker the authority to place (and, where appropriate, have manned) a tour desk, brochure stands, signage, vending machines and other similar things (Structures) (for example, without limitation, marketing activities and sale of products) on any part of the Common Property on the following conditions:-
(a)the Caretaker must keep any Structures in good condition and repair and to a standard commensurate with the surroundings in which they are located (namely a high quality and standard);

(b)the Structures must not materially inhibit the flow of persons on the Common Property;

(c)the Caretaker does not have the exclusive use of the area in which the Structures are located.

(d)if the erection and use of a Structure causes any damage to the Common Property (except for fair wear and tear), the Caretaker must promptly make good such damage.”

The separate document entitled “Developer Product Disclosure Statement” had the purpose of informing buyers of apartments about the opportunity to make their apartments available to the Operator for letting purposes. Buyers were not obliged to appoint the Operator to let their apartments. This Developer Product Disclosure Statement (“PDS”) was required by the Australian Securities and Investments Commission (“ASIC”) as a condition of a class order given by it under the Corporations Act in respect of “managed investment schemes”. The Developer PDS gave an overview of the development and indicated that a further document called an “Operator PDS” would be issued in relation to the management rights scheme known as the “Oracle MR Scheme”. Part 7 of the Developer PDS identified the benefits of participating in the Oracle MR Scheme as follows:

“(a)all services such as cleaning/servicing of rooms are on-site, and done in a timely manner to suit Guests’ arrivals and departures;
(b)on-site reception facilities to meet and check in Guests;
(c)telephone connection to the main reception, and through the CTS central system;
(d)ability to utilise all guest services such as room service, restaurants, tours, etc which can all be charged to the room;
(e)the on-site building manager can make available any specials or promotions that may exist at that time;
(f)the on-site building manager is readily able to deal with Guests’ needs;
(g)wholesale accommodation operators requiring accommodation for on-sale to retail customers often prefer to deal with on-site building managers rather than off-site letting agents. This is because of the convenience to wholesale operators of dealing with just a few on-site building managers rather than many individual agents;
(h)Guests wanting to let apartments in particular resorts or buildings frequently make inquiries with on-site building managers rather than approaching off-site letting agents.”

Part 10 of the Developer PDS was headed “Returns to Participating Apartment Owners”. Part 16 related to the returns that might be expected from participation in the Oracle MR Scheme. It advised that the income that a participating apartment owner receives from participation is uncertain and may vary. Ultimately, “occupancy levels and room rates will determine the gross income” from letting an apartment. This part of the document identified a number of factors that affected occupancy levels, including demand, the Australian economy, different seasons and the Operator. As to the Operator, it stated:

“The demand for rooms may be influenced by the contacts that the Operator has in the industry and the Operator’s experience in operating similar properties. An Operator that is unknown in the accommodation industry may have more difficulty attracting Guests.”

The Operator PDS was to like effect. The version that was provided to

Mr and Mrs Wicks was dated 16 December 2005. It identified its purpose as offering apartment owners the opportunity to make apartments available to

Sky Asset Management Pty Ltd (SAM) “for short term, holiday and medium term letting purposes.” It also gave an overview of the Oracle development and the benefits of participating in the Oracle MR Scheme. Clause 9 stated that the Operator would have “certain rights over part of the common property of the CTS, for example, rights to erect signage.” These rights were said to be outlined in the proposed Community Management Statement. Clause 10 addressed returns to participating apartment owners. It defined apartment revenue as income received by the Operator for occupation only of the relevant apartment less “frequent flyer commissions, fees and other money payable to travel wholesalers and booking agents”. Sub-clause 10(d) provided:

“(d)Any fees, charges or other income received by SAM or any Manager which are not Apartment Revenue will not form part of the revenue paid to Participating Apartment Owners. For example, income from food and beverages, laundry and dry cleaning income and extra room servicing is not Apartment Revenue. That income will not be included in Apartment Revenue.”

The Operator PDS contained provisions similar to the Developer PDS in relation to returns from participation in the Oracle MR Scheme including the factors that would influence demand for rooms. Clause 22 of the Operator PDS identified the main documents relating to the Oracle MR Scheme to be an application form, the appointment (PADMA Form 20a) and the Caretaking and Letting Agreement. It sought to summarise the key terms of the appointment as including the fact that the apartment owner appointed SAM “exclusively as agent for the Apartment Owner to let the Apartment for short term, holiday and medium term lettings.” It enabled SAM to engage a manager to carry out its day to day activities. The definitions in

cl 24 of the document included a definition of Apartment Revenue. Apartment Revenue was said not to include money that SAM received for selling goods and services to Guests or any other person. These goods and services were defined to include, without limitation:

“(a) food and beverages;

(b) laundry and dry cleaning;

(c) extra room servicing;

(d)entertainment, pay television, video hire and in-room movies;

(e) telephone, facsimile or other communications services;

(f) valet parking, arranging and providing transport;

(g) gift shop and tour sales;

(h) foreign exchange;

(i) recreational facilities; and

(j)conference room use and conference, office and business services and equipment use.”

The Operator Product Disclosure Statement concluded with advice as to what an apartment owner who wanted to make an apartment available to SAM “for short term and holiday letting” must do.

The proposed Letting Appointment Agreement annexed to the Operator PDS referred to the agent’s duties. The services that the agent was to provide included:

“advise and promote the Property and The Oracle generally to travel agents, tourism operators and the public as a quality Guest accommodation”.

The Further Disclosure Statements

SSI issued further disclosure statements from time to time. Again, adopting the further disclosure statements provided to Mr and Mrs Wicks as a convenient point of reference, on 27 September 2006 SSI provided a further disclosure statement pursuant to s 214 of the Act. It advised, among other things, that a Facility Sharing Agreement allowing the owners and occupiers of lots in the proposed Oracle Tower Two to use the facilities in The Oracle Community Titles Scheme had been varied, and that the facility sharing agreement for owners and occupiers of lots in

The Oracle
to use the facility in The Oracle Tower Two had been varied. It advised of variations in relation to the Facility Sharing Agreement benefiting the retail lot. It also advised that the proposed Caretaking and Letting Agreement to be entered into with the body corporate for The Oracle had been varied. The main changes to the documents that had previously been supplied were highlighted on attached documents. The single page further statement dated 27 September 2006 and the attached documents run to almost 200 pages.

A document described in the pleadings as the second s 214 further statement was provided by SSI on 16 January 2007. It related to changes to the Community Management Statement and to the Body Corporate budget and levies, which are not presently relevant. The third s 214 further statement was provided on 22 December 2008. Among other things, it annexed an amended Caretaking and Letting Agreement.

On 28 May 2010 SSI provided the “fourth section 214 further statement”. It advised that the occupation authority plans, attached to the Caretaking and Letting Agreement, had been updated and attached a copy of them. It also advised that the Caretaking and Letting Agreement had been amended and attached a copy of the amended document. The amended document identified South Sky Assets Pty Ltd as the Caretaker. The fourth s 214 further statement also advised, among other things, that the Product Disclosure Statement for The Oracle Community Titles Scheme that had been previously distributed had been withdrawn, and a copy of the withdrawal notification was attached. The withdrawal notice dated 28 May 2010 stated that Sky Asset Management Pty Ltd (SAM) had previously proposed operating letting schemes for apartment owners and that the buyer may have received a PDS about the letting schemes. SAM advised that the Product Disclosure Statements that it had previously issued had been withdrawn and that ASIC had been notified of the withdrawal. The reason for the withdrawal was that the ASIC class order provided that where the minimum purchase price exceeded $500,000 a PDS was not required, and SAM was withdrawing the PDS because minimum purchase prices at The Oracle and The Oracle Tower Two exceeded $500,000. The statement went on to advise that despite the withdrawal of the PDS, the seller advised that it still expected that buyers and owners would be able to participate in letting schemes at The Oracle and The Oracle Tower Two, and that updated details about the new proposed letting schemes would be sent to the buyer shortly.

It is unnecessary to detail for present purposes minor changes made to the Caretaking and Letting Agreements by the first, third and fourth s 214 further statements. The plaintiffs rely upon the fact that the amendments to the Caretaking and Letting Agreement for The Oracle did not change the terms of the Letting Business described in cl 6 of that agreement. SSI relies on the fact that the Caretaking and Letting Agreements annexed to the Disclosure Statement given under s 213 of the Act and to the first, third and fourth s 214 further statements provided, among other things:

(a) for the Caretaker to provide letting services and to operate a letting business;
(b)for the Caretaker’s unit to be used for the purposes of the management of the property and conducting the letting business (and any other lawful purpose);
(c)that the letting business involved the letting of lots, all associated services and any other lawful activity;
(d)that the body corporate gave the Caretaker the authority to occupy part of the common property for special events, functions and presentations or any other lawful use and that the Caretaker might serve alcohol, other beverages and food in that area if all appropriate licences were held and laws complied with to allow such service;
(e)that the body corporate gave the Caretaker the authority to place (and, where appropriate, have manned) a tour desk, brochure stands, signage, vending machines and other similar things on any part of the common property on certain conditions.

The plaintiffs’ cases in relation to the disclosure statements

The plaintiffs rely upon the fact that the disclosure statement and the first, second, third and fourth s 214 further statements (and related material) were expressed to relate to The Oracle and/or The Oracle CTS. SSI admits this. There is no contest that the disclosure statement given under the Act, as varied by the first, second, third and fourth s 214 further statements, formed part of the contract by virtue of

s 215 of the Act. The plaintiffs plead that, in the premises, there were further terms of the contract that:

(a)SSI would sell to the plaintiff a specified lot “in a residential tower in The Oracle”; and
(b)any authorisation of a person as letting agent would be in the terms of the Caretaking and Letting Agreement annexed to the Disclosure Statement and as described in the Developer PDS and the Operator PDS.

The plaintiffs invoke s 216 of the Act and plead that they are entitled to rely on the information in the disclosure statement, the first, second, third, fourth (and, in one case, fifth) further statements, and the respective annexures to those as if SSI had warranted their accuracy. On that basis, the plaintiffs plead that SSI warranted to them that:

(a)the relevant lot would be, and would be sold to the relevant plaintiff as, an apartment in a residential tower in The Oracle; and
(b)any authorisation of a person as letting agent would be in the terms of the Caretaking and Letting Agreement annexed to the disclosure statement.

SSI admits that it was a term of the contract that, subject to the terms and conditions of the contract, it would sell to the plaintiffs the relevant lot in Tower One of

The Oracle
development, but otherwise denies that it was a term of the contract that any authorisation of a person as letting agent would be in the terms of the Caretaking and Letting Agreement, as pleaded by the plaintiffs. The denial is based upon, among other things, the additional terms pleaded by it in its defence and the fact that any authorisation by the body corporate for a person to be the on-site letting agent was to be on the terms of the Caretaking and Letting Agreement annexed to the fourth s 214 further statement.

The appointment of Peppers

Peppers was established in 1984 when Peppers Guest House opened in the Hunter Valley. According to its website, the “short break market” was then in its infancy. Its website states:

“Today you will find the Peppers collection of Retreats and Resorts in the most extraordinary places throughout Australia and New Zealand. You will find us set amongst rainforests, vineyards and cities, as stately homes, on cattle stations, mountain ranges, golf courses, beaches and tropical islands, each property boasting its own individual charm and character.”

Its web page titled “Escapes and Experiences” states:

“At Peppers, our exquisite collection of Resorts and Retreats present a plethora of specialised escapes. Our romantic escapes offer the chance to reconnect while our indulgence escapes allow you to relish in life’s luxuries. For blissful pampering try one of our renowned spas or for the ultimate in serene seclusion our beach or island escapes are perfect.”

The website and other promotional material from Peppers is badged under the logo:

PEPPERS
RETREATS.RESORTS.HOTELS

Peppers forms part of the Mantra Group of companies. Mantra operates three divisions or brands—Peppers, Mantra and Break Free—which offer hotels, resorts, retreats and self-contained accommodation on a short-term or holiday basis. Each brand is positioned in different markets.

In about early 2009 SSI started to give serious thought to selling the management rights at The Oracle. In mid-2009 meetings were held with representatives of different groups who had expressed interest, including the Mantra group of companies. Any entity which was appointed to undertake caretaking/letting/ management at The Oracle required substantial capacity since, with more than 500 apartments, the caretaking and letting activity was a substantial enterprise. After discussions, SSI decided that Mantra’s top brand, Peppers, should be appointed because it was a “premium brand and because Mantra was prepared to offer a better price for the management rights.” SSI thought that the Peppers brand would bring the level of professionalism and quality to The Oracle that was required. As part of the negotiations, Mantra requested that a liquor licence be obtained in the name of South Sky Assets Pty Ltd (“SSA”), and application was made by SSA with SSI’s consent. Discussions between SSI and Mantra turned to how Mantra could provide guests who stayed in The Oracle with services, including mini-bars.

A Share Sale Agreement relating to the sale of the shares in SSA, a company then in the Niecon group of companies, was entered into on 14 July 2010. All the issued shares in SSA which were owned at the time by South Sky Enterprises Pty Ltd, another Niecon company, were sold to Peppers Leisure Pty Ltd, conditional upon certain events.

The amount payable under the Share Sale Agreement was the subject of detailed provisions. There were to be various payments, including a “Key Payment” for each qualifying lot in excess of 150 qualifying lots during the initial period ending on 30 November 2012. The payment of the purchase price was subject to, among other things, the Tower One body corporate consenting to an application by SSA for a liquor licence in respect of the relevant part of the land in the tower that SSA could occupy and the body corporate of Tower Two consenting to a similar application in respect of relevant land in that tower. The Share Sale Agreement contemplated “Restaurant Works” as part of the “Buyer’s Fitout”. The works are set out in Annexure L to the Share Sale Agreement and involve the creation of a restaurant and kitchen in Lot 101 (the Caretaker’s Unit) on the ground floor of Tower One. In addition to the provision for SSA to obtain a liquor licence over the areas it was entitled to occupy, the Share Sale Agreement provided for SSA to apply for a liquor licence in respect of the restaurant and bar, and areas adjoining them, the lots and the “Authorised Common Property” (being the Occupation Areas). These provisions were to facilitate the service of liquor in the planned restaurant and bar, at events, in mini-bars and by room service. They were important to Peppers in delivering the services that were necessary to achieve the standards required of one of its resorts.

The Share Sale Agreement addressed the issue of signage and required SSI within 14 days of the establishment of the Tower One Scheme to cause the Tower One body corporate to approve the signage referred to in Annexure I. A similar obligation arose in respect of signage on Tower Two.

The result of the carrying into effect of this agreement has been the establishment of large neon Peppers signage on the top of each building. Other Peppers signage appears in and around the residential tower.

On or about 14 September 2010, the Community Management Statement for

The Oracle Community Titles Scheme was registered. On 4 October 2010 the body corporate for The Oracle CTS entered into a Caretaking and Letting Agreement with SSA. On and from 7 November 2010 Peppers Leisure Pty Ltd caused SSA to operate its on-site letting business in respect of Tower One and Tower Two in accordance with the Caretaking and Letting Agreement. Although SSA was still a Niecon company, Peppers Leisure Pty Ltd assumed control of its activities under the Share Sale Agreement. The Share Sale Agreement settled on Monday,

28 February 2011. However, before this date Peppers signage had been installed and Peppers Broadbeach had been launched.

Shortly after the Share Sale Agreement was entered into, the appointment of Peppers was announced in a letter to buyers and also in a joint press release made on or about 23 July 2010. The letter stated that:

“The Oracle will be branded Peppers Broadbeach and will be the flagship Peppers hotel.”

The joint SSI/Peppers press release was titled:

“Peppers to launch the Gold Coast’s first five star hotel in a decade”.

The press release, which was approved by SSI prior to its release, made a number of references to “hotel”. The news of Peppers’ appointment apparently attracted attention. Mr and Mrs Wicks received a letter dated 6 August 2010 from

Noble House Design which stated:

“We were delighted to hear of the appointment of Peppers as Residential Managers to The Oracle which will be branded ‘Peppers Broadbeach’”.

In late July, after the joint press release had been issued, Mr Mark Johnson, the Chief Operating Officer for both Niecon and SSI, says that he formed the view that it was not correct to call the development a hotel and he issued instructions to Niecon employees to request that Mantra not describe it as a hotel.

By this time, and despite the fact that the Share Sale Agreement was still conditional, Mantra had been provided with information about buyers to enable it to convey information to them.

By 12 August 2010, Mantra had prepared an “Owners Pack” and other material for distribution to buyers. Mr Johnson learned that the material had been printed for distribution that day, when he was told that Mantra had “boxes and boxes of documents printed and that it was too late for SSI to review it because they were being sent.” Mr Johnson says that he asked Mantra’s representatives to hold off sending information until SSI had had a proper chance to review it. However, the packs were sent without any review or approval by SSI. The material was sent under cover of a letter dated 12 August 2010 signed by Ms Simms of the Owner Relations Department of Peppers Retreats, Resorts and Hotels. It was on letterhead styled Peppers Broadbeach and referred to the appointment of Peppers as “onsite Hotel Managers”. It referred to the opportunity for holiday letting, furniture packages and other matters. It enclosed forms that would facilitate its appointment by an owner as a letting agent. It attached a brochure that described

Peppers Broadbeach
as a hotel.

The material was sent by Mantra to buyers before SSI had an opportunity to review its contents properly and obtain legal advice about its implications for contracts with buyers. I accept Mr Johnson’s evidence that SSI did not authorise or approve references in the packs to the development as a hotel.

On 24 August 2010 SSI sent a pro forma letter to owners advising that The Oracle precinct was nearing completion and that it was estimated that completion of the residential buildings (and settlements) should occur in early to mid October. It informed owners about the opportunity to undertake an inspection and provided contact details for various inquiries, including inquiries about the holiday or permanent letting program.

On 30 August 2010, Ms Simms from Peppers Broadbeach sent a letter to owners which stated:

“By now you would have received Owners Packs outlining the letting program to be operated from The Oracle and The Oracle Tower 2. As you know, South Sky Assets Pty Ltd is to be the Caretaker of each tower in line with the disclosed Caretaking and Letting Agreements. The Caretaker will be operating the holiday letting pool under the Peppers Broadbeach brand.”

The letter went on to advise that Peppers Broadbeach had a guest program that was “developed to not only provide you as an owner with great ‘hotel style’ services and management, but offers many services not available to any other apartment owner or guest on the Gold Coast.”

Despite requests from SSI to Mantra/Peppers’ representatives not to refer to the development as a hotel in the marketing, Ms Simms sent an email to a buyer in September 2010 which again referred to the development as a hotel. Ultimately, SSI instructed its solicitors to write to Mantra demanding that they cease referring to the development as a hotel in any marketing. Mantra eventually agreed to cease referring to the development as a hotel and made amendments to its website. However, it continued to communicate with owners and others by referring to Peppers Broadbeach rather than The Oracle. For example, a letter dated

24 September 2010 from Ms Simms of Peppers Retreats, Resorts and Hotels was sent on Peppers Broadbeach letterhead and referred to Peppers holiday letting packs. It stated: “In the 4 weeks since we commenced taking bookings for Peppers Broadbeach, bookings have been incredibly strong and we have already oversold on various room nights.”

These communications were apt to alert buyers who had contracted to purchase an apartment in Oracle Tower One that the letting agent intended to engage in the business of short-term and holiday letting. This would not have come as a surprise to a buyer who had read the various disclosure statements and other documents that had been sent to them over the previous years. Earlier in 2010 SSI had written to buyers from time to time about the letting program. A pro forma letter dated

22 February 2010 advised owners that SSI had been “busy finalising our in-house Oracle Management and Letting Program.” This letter advised that SSI could “dove-tail an ideal holiday letting program that will work with your own requirements for using your apartment”. Other letters sent to buyers before the announcement of Peppers’ appointment also informed buyers about a holiday letting program. For example, a letter dated 31 May 2010 to Mr and Mrs Wicks stated that the advantage of using the in-house management team included “walk-in bookings”, convenient on-site check-in and other services guests would expect from a facility of such stature.

In short, after the Share Sale Agreement was entered into, and prior to the date for settlement of the buyers’ contracts, the fact that the letting business would be operated by Peppers was communicated to buyers. Certain correspondence continued to refer to “The Oracle and The Oracle Tower 2”. SSI did not give a further disclosure statement relating to the implications of the Share Sale Agreement. However, the Share Sale Agreement related to the sale by the developer of management rights, and a disclosure statement given under the Act is not required to disclose the terms of such a sale. If, however, such an agreement alters the terms of a Caretaking and Letting Agreement which has previously been disclosed pursuant to s 213 or s 214, so that the disclosure statement has become inaccurate, then this will attract the provisions of s 214 and s 217.

The Share Sale Agreement, in effect, stated the terms upon which South Sky Enterprises Pty Ltd (SSE) would sell the management rights business to Mantra/Peppers. The mechanism for the sale was the sale of SSE’s shares in

South Sky Assets Pty Ltd (SSA) to Peppers Leisure Pty Ltd (Peppers). The agreement was conditional upon a number of matters, including entry by the body corporates of the Tower One and Tower Two schemes into Caretaking and Letting Agreements in the form that had been disclosed to buyers. It was also conditional upon:

(a)the body corporate consenting to applications for liquor licences over areas it was entitled to occupy;
(b)the body corporate approving the alterations required for a restaurant and bar to be constructed in Lot 101;
(c)the body corporate approving certain signage in accordance with the Caretaking and Letting Agreements.

The signage for which the Share Sale Agreement provided included Peppers “hero signs” atop each building and signs at the lobby entrance to each building.

The conditions of the Share Sale Agreement were implemented over time. The hero sign on Tower Two was installed in December 2010 and the one on Tower One in March 2011. On 1 October 2010 the first meeting of the body corporate for

The Oracle was held, and the South Sky interests procured resolutions to enter the Caretaking and Letting Agreement with SSA, to consent to applications by SSA for a liquor licence over the lots and certain areas of common property and for the erection of signage in accordance with a signage plan.

A liquor licence was granted on 8 December 2010. The licence is a Subsidiary On Premises licence relating to The Oracle, which means that alcohol can only be served whilst SSA adheres to its primary function of providing accommodation. Since the liquor licence was granted, some apartments have been excluded from it, reflecting the fact that owners who do not wish to have it apply to their apartments can choose not to do so.

An application was made to the Gold Coast City Council for confirmation that the proposed restaurant and bar is generally in accordance with the existing approval. The restaurant and bar are yet to be built within Lot 101, but their establishment is important to Peppers in ensuring it achieves its desired rating, and this apparently requires an in-house restaurant and bar for its guests to access. In support of the application the Mantra Group’s Director of Acquisitions wrote to the

Chief Executive Officer of the Gold Coast City Council on 6 April 2010 and advised that, without a restaurant and kitchen, Mantra could not brand The Oracle as a “Peppers Resort” and that a “restaurant facility and room service is something that is expected in a 4.5 – 5 star strata titled resort.” The letter concluded:

“Although it is hoped that the restaurant will obtain a good reputation for its quality of service, it is not intended to be advertised for the general public. It is understood that it will be of such a capacity to service in-house guests and residents.
It is critical for the resort branding for Peppers at the Oracle to have a restaurant facility. A restaurant and room service facility is ancillary to its management rights business.”

In the months immediately preceding the date for settlement of their contracts the plaintiffs knew of the appointment of Peppers as Caretaking and Letting Agent, and they received a variety of communications from both SSI and Peppers. Initially SSI stated that: “The Oracle will be branded Peppers Broadbeach and will be the flagship Peppers hotel.” This was said by SSI on or about 23 July 2010. SSI and Peppers jointly announced the same thing. Peppers continued to describe

Peppers Broadbeach
as a hotel, despite SSI’s requests that it not do so.

On 29 November 2010, which was after the date for settlement fixed by the contracts, SSI’s Group Operations Manager wrote to purchasers noting that SSI’s earlier advice that “The Oracle/Peppers Broadbeach would be the flagship Peppers hotel” had caused some confusion. The letter advised:

“While the ‘Peppers Broadbeach’ brand features prominently, the precinct includes the same luxury residential buildings and facilities which we started constructing in 2006. The Peppers group will be offering hotel-like services for the precinct, but The Oracle/Peppers Broadbeach is not a hotel. The two towers (called The Oracle Tower 1 and The Oracle Tower 2) are not hotel buildings. The Oracle/Peppers Broadbeach comprises two luxury residential buildings, with all the facilities and services you’d expect to find in a hotel.”

SSI’s caution after July 2010 in not wanting The Oracle described as a hotel is understandable. As Mr Johnson explained in his evidence, the building had not been approved by Council for use as a hotel. At least one buyer had complained following the announcement about Peppers, and Mr Johnson was concerned that some buyers would use the description of Peppers Broadbeach as a hotel to avoid their contracts.

SSI had permitted the development to be described as a hotel in the joint press release of 23 July 2010, despite knowing that the development approval did not allow the building to be described as a hotel. Shortly afterwards Mr Johnson reflected on the matter and issued a standing instruction to his staff to request that Mantra not describe the development as a hotel. Part of the concern was that the building did not have a certificate of classification for hotel use, and an associated concern was that inaccurate descriptions of the building might prejudice contracts of sale. SSI sought to review documents, such as the material sent by Peppers to owners on or about 12 August 2010, because of a requirement of its financiers not to put any of the contracts of sale under threat.

After the 23 July 2010 joint press release, SSI received at least one protest from a buyer of a proposed lot. A question asked of Mr Johnson during his

cross-examination tended to suggest that there were protests from more than one buyer, but Mr Johnson’s answer referred to a “query from a buyer”. There is no evidence that there was a large number of protests, and on the evidence there may have been only one, it having been made shortly after the 23 July 2010 joint press release.

The plaintiffs in these proceedings did not complain to SSI prior to the date originally set for settlement about the appointment of Peppers, save for Mr Gough and Ms Groves who purported to terminate in a solicitor’s letter dated

13 October 2010, some six days before the settlement date. The letter complained about the promotion of the development by Peppers as a “hotel” and an increase in letting fees over those previously estimated. Ms Ryan gave her reasons for not complaining earlier than her solicitor’s letter of 4 November 2010. She was hoping to be employed by Niecon and did not want to sound like she “hated the building”. One plaintiff, NOA 8338 Pty Ltd, by its director, Mr Ford, communicated with Peppers in October 2010 about possible arrangements for leasing the apartment it had contracted to purchase. It is possible that the plaintiffs did not know the extent to which Peppers intended to brand the building as Peppers Broadbeach, and they were not told about the terms of the Share Sale Agreement that facilitated this by signage. They were not told about plans for a liquor licence of the kind contemplated by the Share Sale Agreement or of the plan to have a ground floor restaurant and bar so as to facilitate Peppers’ plans. Still, the plaintiffs were aware after July/August 2010 of the appointment of Peppers, and of its plans to use the Peppers Broadbeach brand and to promote short stays and holiday lettings. The plaintiffs did not complain to SSI about these things soon after becoming aware of them, or complain about the services that they expected Peppers would supply to its guests.

Purported terminations

After The Oracle CTS was established, SSI’s solicitors sent letters to buyers nominating settlement dates. Some of the plaintiffs negotiated short extensions of time within which to settle. The first settlements were set for 19 October 2010. In various forms, and on various dates, the plaintiffs in each of these proceedings purported to cancel the contract.

Common issues

The pleadings in each proceeding are in a generally similar form. In each proceeding the same essential allegation is made, namely that the plaintiff contracted to purchase an apartment in a residential tower in The Oracle when in fact the apartment purportedly offered in performance by SSI is an apartment in a hotel/resort branded Peppers Broadbeach.[15]
[15]See for example Wicks proceeding para 32.

The statements of claim in each proceeding continue with allegations along the same lines. For example, it is alleged that the plaintiff contracted to purchase an apartment the resale value of which would be determined by reference to it being an apartment in a residential tower in The Oracle and not an apartment which is an element in a hotel/resort branded Peppers Broadbeach. Additional allegations along these lines are made in respect of the rental value of an apartment in a residential tower in The Oracle rather than an apartment in such a hotel/resort branded Peppers Broadbeach. Further allegations are made in relation to the ability to advertise and let through an off-site agent and the ability to obtain on-site caretaker and letting services in accordance with the disclosed letting agreements, which are pleaded to have been more favourable to an owner than that available through Peppers. The plaintiffs plead that the practical consequence of the apartment being in a hotel/resort branded Peppers Broadbeach rather than an apartment in The Oracle will include:

(a)an increase in the extent and intensity of use of common areas because of the increased number of persons (hotel/resort guests and hotel/resort staff) using it;
(b)an increase in the public access and use of the development resulting in a reduction of privacy and security;
(c)a compromise of the plaintiffs’ use and enjoyment of the apartment and common areas;
(d)accelerated deterioration of common areas;
(e)preventing the plaintiffs from attracting persons who do not wish to stay in a hotel/resort; and
(f)preventing the plaintiffs from attracting persons who do not wish to stay in a premises the subject of a liquor licence.

By reason of the date upon which they purported to cancel, only some of the plaintiffs are able to seek to invoke the statutory right to cancel under s 214(4)(b) and s 217(b)(iv). However, each plaintiff alleges that the final disclosure statement has become inaccurate on a number of grounds. These include the fact that the disclosure statement describes the lot as a lot in a residential tower, whereas the disclosure statement if now given would state that the lot was an apartment in a hotel/resort, and also would state that the lot is in a hotel/resort branded

“Peppers Broadbeach”.

Reliance is placed upon the fact that the Caretaking and Letting Agreement, if given now, would have to disclose that the plaintiffs would have no practical ability to let the lot through an off-site agent or privately because:

(a)the development is branded as Peppers Broadbeach and as a hotel/resort rather than apartments available for holiday letting in the normal course;
(b)The plaintiffs would not be able to use the name and mark Peppers Broadbeach in order to advertise the apartment; and
(c)The plaintiffs would not be able to use the name and mark The Oracle in order to advertise the apartments.

Another ground of alleged inaccuracy is that the Caretaking and Letting Agreement, by cl 6, enabled the caretaker to erect temporary and moveable signs for the purpose of promoting and fostering the letting business whereas the disclosure statements if given now would disclose that the caretaker would be entitled to affix signage to and above the scheme property, including signs erected on the exterior of Oracle Tower One and Oracle Tower Two identifying each tower as “Peppers”.

The plaintiffs place reliance upon the terms of the Share Sale Agreement as part of their respective cases. Particular reliance is placed upon the provision of the

Share Sale Agreement in relation to a liquor licence, the restaurant and bar to be established in the caretaker’s lot and the provision for Peppers signage.

The various pleaded features of the tower as a result of the appointment of Peppers are alleged to have resulted in a substantial difference between acquiring an apartment in a residential tower known as The Oracle and an apartment in a hotel/resort branded Peppers Broadbeach.

The common issues in each proceeding may be broadly summarised as follows:

1.What was promised by the terms of the written contract and the disclosure statements that formed part of it by virtue of s 215 of the BCCM Act? In particular, did the plaintiff in each proceeding contract to purchase an apartment in a residential tower known as The Oracle?
2.Was the plaintiff offered in performance of the contract something substantially different to what the plaintiff contracted to purchase, namely an apartment in a hotel/resort branded Peppers Broadbeach?
3.If so, was the plaintiff entitled to terminate the contract because SSI evinced an intention not to be bound by the terms of the contract in that:
(a)SSI no longer intended to provide to the plaintiff at settlement an apartment in a residential tower known as The Oracle but rather an apartment in a hotel/resort to be known as Peppers Broadbeach with the features alleged in the statement of claim; and

(b)any authorisation of a person as letting agent would not be in the terms of the Caretaking and Letting Agreement annexed to the final disclosure statement, and as described in the Developer PDS and the Operator PDS.

4.In the alternative, were certain plaintiffs (Mr and Mrs Wicks, Mr Gough and Ms Groves, and Ms Ryan) entitled to cancel the contract pursuant to

s 214 or s 217 of the Act?

If a plaintiff was entitled to terminate or cancel the contract, then there will be declarations to that effect and consequential orders for the delivery up of bank guarantees/deposits. If, however, the plaintiff was not so entitled, then it is accepted that SSI should obtain orders for specific performance and other relief on its counterclaim by way of damages for costs that it has incurred as a result of the plaintiff’s failure to settle. The basis for the calculation of such damages has been agreed and the parties proposed that an updated calculation be produced up to the date of judgment.

What documents comprised the contract by virtue of s 215 of the Act?

There is no issue on the pleadings that it was a term of the contract that, subject to its terms and conditions, SSI would sell to the plaintiff or plaintiffs in each proceeding the specified lot in Tower One of The Oracle. Nor is there any issue that by virtue of s 215 of the Act it was a further term of the contract that any authorisation by the body corporate for a person to be the letting agent would be on the terms of a Caretaking and Letting Agreement annexed to the disclosure statement given under the Act. The first issue between the parties as to the terms of the contract relates to the documents that form part of the provisions of the contract by virtue of s 215 of the Act.

The plaintiffs submit that by operation of s 215 of the Act the contract comprised the following documents:

(a)     The Contract of Sale;
(b)     The Disclosure Statement title page;
(c)     The Developer PDS;
(d)The Disclosure Statement given pursuant to s 213 of the Act and the 13 documents annexed to it; and
(e)The Operator PDS.

SSI submits that the Operator PDS is not a contractual document and has no effect under the Act. It also submits that the Developer PDS does not contain contractual warranties and the mere fact that it was provided at the same time as the BCCM Disclosure Statement does not make it “accompanying material” for the purposes of s 215 of the Act.

The Operator PDS

The Operator PDS was provided with the original contracts. It was not provided again to the buyers who entered the original contracts before they entered into the replacement contracts. Mr Gough and Ms Groves received an Operator PDS prior to executing contracts to purchase Lots 2905 and 2907 in October 2006.

The Operator PDS was issued by Sky Asset Management Pty Ltd (SAM), not SSI. It explained that it was issued by SAM to comply with the requirements of the Corporations Act in relation to managed investment schemes. Under a managed rights scheme class order, ASIC granted exemption from certain registration requirements subject to compliance with conditions. One of the conditions of the ASIC class order was that a Product Disclosure Statement be given to a buyer of an apartment before entry into a contract. The purpose of the Operator PDS was to provide information about the Oracle MR Scheme to enable owners to decide, once they had received it, whether or not to participate in arrangements to make their apartment available for letting.

The Operator PDS was provided as a separate bound document. The covering letter that was sent to the buyers who entered into an original contract identified it as a separate and distinct document from the disclosure statements which included the Developer PDS under the Corporations Act and the disclosure statement under the BCCM Act. Both the covering letter and the terms of the Operator PDS distinguished it from the disclosure statement given under the BCCM Act.

The contract itself did not refer to the Operator PDS, let alone give it contractual force. Clause 16 of the contract included an acknowledgment by the buyer of having received from the seller, before it signed the contract, a Product Disclosure Statement under the Corporations Act and a disclosure statement under the

BCCM Act
. In the case of the replacement contract this was referrable to the Developer PDS and the BCCM Disclosure Statement respectively since no new Operator PDS was provided to these buyers.

The contract did not incorporate the Developer PDS as a term of the contract. The Developer PDS contemplated that the operator would issue an Operator PDS. However, it did not purport to incorporate any Operator PDS. It contemplated that a detailed PDS about the Oracle MR Scheme would be issued by the Operator. The Developer PDS made no promise about what its terms would be, and stated that “no warranty can [sic] or is given by South Sky as to what conditions the Appointment will contain. Those conditions will be decided by the Operator.”

The Operator PDS was not given any contractual force by the contract. Accordingly, the issue is whether s 215 of the Act operated so that it formed part of the contract. I have earlier summarised s 215. Section 215 provides:

The initial contract was entered into after she spoke to a real estate agent who told her that The Oracle was to be “an iconic residential project with permanent and long-term residents only”. After investigating in late 2005 other projects planned for Broadbeach, and finding nothing which compared to The Oracle, she entered the contract. Her affidavit states:

“I was satisfied that The Oracle would meet the requirements of a different and separate market from existing and planned developments in Broadbeach such as the Meriton, Sierra Grande, the Soffitel [sic] and Jupiters Casino. The Oracle was to be an iconic, luxury, residential development and had a unique position on the beach-side offering high quality finishes for discerning long-term residents and quality inclusions and facilities such as a Zen garden, private wine locker, gym, movie theatre and a teppanyaki bbq for use by owner/occupiers. I believed it would define Broadbeach long term as predominantly a city-like residential living environment with a mix of residential, hotels and commercial buildings.”

Ms Ryan received a disclosure statement in January 2006, along with the Operator PDS and Developer PDS. She received another disclosure statement on

14 July 2006 before signing the second contract. She received further disclosure statements in September 2006, January 2007, December 2008 and May 2010.

Ms Ryan gave oral evidence of probably “scanning through” the disclosure statements that she received.

The only means by which Ms Ryan would be able to perform the contract was by finding another purchaser and arranging contemporaneous settlements. She had no independent means of settling the contract.

In early 2010, and before any announcement of Peppers, Ms Ryan listed the property at a price of $1.28 million. This price was selected because it would enable her to cover the purchase price, stamp duty and agent’s commission. However, the price of $1.28 million was unrealistic in the light of the global financial crisis and its impact on property prices, even though Ms Ryan had the hope that such an iconic building would not be affected as other parts of the market had been.

In July 2010 she was sent an email announcing that Peppers would manage

The Oracle
, which would henceforth be a flagship Peppers hotel branded Peppers Broadbeach. In August or September 2010 she received the Owners Information Pack including a letter and brochure promoting Peppers and Peppers Broadbeach, a furniture package brochure and various forms. In October 2010 she was sent the Peppers Investor Brochure promoting Peppers Broadbeach.

In her affidavit, Ms Ryan says that upon receiving the Owner’s Information Pack from SSI on around 12 August 2010 she became aware that the circumstances with respect to her purchase had substantially changed from what she understood to be the case as a result of what was represented to her. Her affidavit says that she was “shocked and disappointed” to hear that Peppers/Mantra had been appointed as letting agents and that the building would be a Peppers flagship hotel. She did not complain to SSI about this. Instead, on 22 September 2010 she wrote to

Mr Con Nikiforides of Niecon and explained her predicament. She explained that she did not have the funds to settle and that the matter had cost her $7,500 in bank guarantee fees. She explained that she had a mortgage of around $100,000 on her $300,000 townhouse, was in her mid-50s and earned about $550 per week as a teacher’s aide. She asked to be let out of the contract and explained the difficulties that she had in meeting the required deposit of $94,000. She explained that she had brought up her children without maintenance from her former husband and saw the investment in The Oracle as a way of finally getting ahead by using the equity in her home as the deposit.

Her personal circumstances were apt to evoke sympathy. Ms Ryan’s letter mentioned the severe health problems of her aged parents and the circumstances of her daughter who had recently separated from her husband and was left with the care of two small children and a $50,000 business debt. They were coming to live with Ms Ryan. Ms Ryan offered to work for Niecon in order to make up the deposit amount. A notation on the file copy of a letter of 22 September 2010 indicates that it received the standard Niecon response. Ms Ryan explained in her oral evidence that she did not complain in this letter or in others that she wrote to Mr Nikiforides in October 2010 that she was upset by the appointment of Peppers. She said that she did not know her legal rights and that she did not want to put herself in a bad light with Niecon by laying any blame on it. She did not complain about the building being turned into a hotel because she did not want to make it sound as if she hated the building, and she was offering to work for Niecon. She hoped to be let out of the contract. I accept her evidence as to her reasons for not complaining about the appointment of Peppers.

Ms Ryan’s settlement date was 27 October 2010. This was extended by agreement to 9 November 2010. On 4 November, however, her solicitors wrote to SSI’s solicitors to cancel the contract.

Ms Ryan pleads the same six grounds of inaccuracy as the other plaintiffs in these actions. She also pleads 13 grounds on which she would be materially prejudiced if required to complete the contract. Her affidavit makes the claim that the value of her apartment has been compromised by the Peppers re-branding. She says that her apartment’s value would be higher if it was part of an iconic, luxury, residential development as opposed to being part of a hotel. The appointment of Peppers is said to have negatively impacted on the prestige of her lot, which it will no longer attract the sort of wealthy baby-boomers to whom she hoped to on-sell. Instead, her prospective market is now said to be limited to investors interested in night-rate letting, which is a market already met by other Broadbeach developments.

A separate complaint is made in relation to letting fees, but this complaint is without merit for the reasons given in SSI’s submissions at paragraph 340, and which was explored in her cross-examination.

In her oral evidence, Ms Ryan reiterated that she was led to believe that The Oracle was to be a prestigious address and that the complex itself was unique. She was persuaded that the main market for it was “retiring baby-boomers” and that this was a large market. She was taken in cross-examination, as other plaintiffs were, to the contractual documents and disclosure statements. Her evidence was that references in the Operator PDS to short-term holiday letting would have come as a surprise to her had she read them. This is because it was not what was promoted to her. However, she did not read that document or the other documents. She recalled the documents but could not recall reading them.

In her oral evidence, she identified her concern as short-term letting, and the fact that the letting agent is Peppers, with accommodation being offered under its name. Her complaint would have been the same had the same services been offered by an agent under some innocuous unknown name. She identified her problem with the Peppers branding as being that it “devalues the development because it’s not residential and you don’t get the same capital gain and… the banks won’t lend as much money on [it].” She stated that “it’s just not The Oracle”. Her concern with the branding of Peppers was not the name as such, but that the name is linked to a chain of hotels and the building was not “long-term residential in the mainstream”. Instead of providing a lifestyle for long-term residents, the appointment of Peppers placed a focus on short stays. As Ms Ryan explained: “You don’t go to Peppers to retire or to live” and so “that dynamic has changed.”

As a result of what she was told prior to entering into the contract, Ms Ryan did not expect short-stay guests. Her definition of a short stay was not precise but it included people who booked at night-rates. She did not necessarily expect people to stay there for many months but did not expect it to be a place where people could go and stay overnight. She did not expect the business to attract weekend guests. In various ways, Ms Ryan explained that she was disappointed with the prospect of The Oracle having short-term guests. It was not “the iconic vision that everybody had”. She expected the apartment, with its facilities that included a full kitchen, to be a home in which people lived. She accepted, however, that the contract documents that she signed placed no restriction on her capacity to short-term let her apartment and she did not think that anyone else had promised such a thing. She simply assumed that purchasers would live there.

I found Ms Ryan’s oral evidence more informative of the substance of her complaint than her affidavit. However, one sub-paragraph of her affidavit captures the prejudice she claims to have suffered as a result of the development being rebranded Peppers:

“The Oracle was to be an iconic, unique and luxury residential complex with the intention of attracting well-off baby-boomers who wished to downsize and live out their lives in luxury and exclusive living. The Oracle with the rebranding of Peppers will no longer attract such persons or any person looking for a residential apartment to live in or to let as a residential apartment ...”.

The essence of her complaint is that she believed that the development was to be for owner-occupiers and permanent residents only. Like other plaintiffs, she complains that the letting agent conducts a business which will attract short-stay holiday makers.

In her oral evidence she explained that her complaint was not just that Peppers was offering certain hotel-like services, but that it was offering them “under a new name”, namely Peppers Broadbeach. As she said in her oral evidence: “It’s just not The Oracle.” Part of her complaint was that the branding of the development as Peppers Broadbeach had a number of consequences, principally the attraction of short-term tenants, and that the Peppers branding and descriptions of it as a hotel had severely compromised her ability to sell the apartment to the market that she had identified.

Ms Ryan, probably more than any of the other plaintiffs, articulated the relevant prejudice occasioned to her because of a change in the name itself. The relevant prejudice arises because the residential tower is not known as The Oracle, but is branded as Peppers Broadbeach. This prejudice relates to what Ms Ryan understood the name The Oracle to mean as a result of what was said to her by an identified real estate agent and by unnamed Niecon sales staff before she entered the contract, namely that The Oracle would be an iconic residential project with permanent and long-term residents only. She believed that there was a market for on-selling an apartment in such a tower. The relevant prejudice is not to her own personal residential amenity; rather, it is that a tower branded Peppers Broadbeach, and not known as The Oracle, is not what she expected to purchase.

Her case, as pleaded and as put in submissions, did not focus upon an alleged inaccuracy in the name of the tower itself. Instead, it was pleaded on the wider basis that I have earlier addressed. The relevant pleaded inaccuracy is that the disclosure statement describes her lot as being a lot in a residential tower in

The Oracle
, whereas a disclosure statement if given now would state that the lot would be a lot in a hotel/resort branded Peppers Broadbeach. An inaccuracy in respect of the name of the tower itself was not specifically pleaded. Ms Ryan’s evidence in relation to prejudice includes the fact that the lot is not in a tower known as The Oracle, and that the residential towers have been branded Peppers Broadbeach. Part of her case on prejudice relates to the name itself, and what that name meant to Ms Ryan.

I have earlier found that the disclosure statement stated that the residential component of the development was to be known as The Oracle. I have found that it has been branded Peppers Broadbeach. Accordingly, the disclosure statement would be inaccurate in this regard. It had become inaccurate in this regard prior to the date for settlement of Ms Ryan’s contract and at the time she purported to exercise a statutory entitlement to cancel it. The statutory entitlement to cancel under s 214(4)(b) arises if the buyer would be materially prejudiced if compelled to complete the contract, given the extent to which the disclosure statement was, or has become, inaccurate. Section 217(c) has a similar causal element. An inaccuracy in the information disclosed in the disclosure statement, as rectified by any further statement, is not itself sufficient. The buyer must show that “because” of the inaccuracy in the information disclosed in the disclosure statement, he or she would be materially prejudiced if compelled to complete the contract. I have earlier addressed what is meant by “materially prejudiced”. The test is objective having regard to the particular buyer’s circumstances: would someone in those circumstances be materially prejudiced? As with the other plaintiffs relying upon the statutory right to cancel, it is necessary to identify the relevant “material prejudice”, and there must be a causal relationship between the inaccuracy and the prejudice.

In Ms Ryan’s case, the substance of her complaint is not the name of the residential tower as such (that is, that the tower is no longer known as The Oracle). The name aspect is part of a broader case on prejudice relating to the conduct of the development, namely that the arrangements that have been put in place attract short stays with the result that the tower has become a hotel/resort. The relevant prejudice is pleaded in paragraph 41(a) of her pleading, namely that the apartment purportedly offered in performance is not an apartment in a residential tower in The Oracle but, rather, an apartment in a hotel/resort branded Peppers Broadbeach with the features, attributes, uses and consequences referred to in paragraphs 33 to 38 of that pleading.

As with other plaintiffs, the claimed prejudice relates to the difference between what was expected as a result of statements not found in the disclosure statement and what is offered by way of contractual performance. However, the BCCM Act requires a causal relationship between the inaccuracy and the prejudice, and, as was said in Mirvac Queensland Pty Ltd v Wilson,[36] there must be “proportionality between the inaccuracy and the prejudice”.
[36][2010] QCA 322 at [50], endorsing what was said in Wilson v Mirvac Queensland Pty Ltd [2010] QSC 87 at [32].

The relevant inaccuracy in the disclosure statement relates to the name by which the tower was to be known. This is the inaccuracy that has been established by

Ms Ryan and the other plaintiffs. The disclosure statement has not been shown to have been inaccurate in the other respects pleaded by them. Having regard to the need for a causal relationship between the inaccuracy and the prejudice claimed by Ms Ryan, the disclosure statement did not say the things about the tower that she expected as a result of what was said to her. It did not say that the tower was to be occupied by permanent and long-term residents only. It did not say that owners could not let their apartments for a short term. The Caretaking and Letting Agreement contemplated, among other things, that the letting agent might operate a tour desk.

Any inaccuracy in the disclosure statement with respect to the name of the residential tower (being an inaccuracy not specifically pleaded) is an inaccuracy in respect of a tower in which apartments might be let for short-term stays. The disclosure statement did not become inaccurate because the appointment of Peppers permits such conduct. The disclosure statement was not inaccurate, and did not become inaccurate, because the tower might be a “resort” for a large number of persons occupying apartments for a short time. Any inaccuracy in the disclosure statement in respect of the name of the tower needs to be seen in that context.

In assessing “material prejudice”, regard must be had to Ms Ryan’s particular circumstances. She was misled by at least one real estate agent into believing that The Oracle was to be for permanent and long-term residents only. Her belief in this regard was in part a function of her failure to read each of the disclosure statements. If she had done so, she would not have formed that belief. She also would have questioned that belief if she had reflected on the absence of any contractual provision in her standard contract (and presumably in standard contracts signed by other buyers) that prevented her from letting her apartment on a short-term basis. In any event, I accept that Ms Ryan had an expectation that The Oracle would consist of permanent and long-term residents.

Ms Ryan attached significance to the name The Oracle because of what that name conveyed to her in the light of what she had been told (even if these things were not part of any contractual promise). She intended to on-sell the apartment to persons seeking an apartment with the features that she expected The Oracle to have, being individuals who wished to live in the apartment on a permanent basis or let it to others on a long-term lease.

Having regard to those personal circumstances, I conclude that someone in those circumstances would be materially prejudiced if compelled to complete the contract and acquire an apartment in a tower branded Peppers Broadbeach because of the meaning and significance that was attached to the name The Oracle as a result of non-contractual representations. That person would also be prejudiced even if the tower was not branded Peppers Broadbeach, and was known as The Oracle, but was managed by a letting agent with a focus on short-term stays.

The material prejudice that arises because of the focus of Peppers on short-term stays is not because of an inaccuracy in the disclosure statement. The only relevant inaccuracy is in the name of the tower itself. The material prejudice is not because of that inaccuracy. The extent to which the disclosure statement was or became inaccurate is in respect of the name of the tower itself. The material prejudice pleaded and proven by Ms Ryan relates to the difference between what she expected (on the basis of non-contractual representations) The Oracle would be like, and what was provided for in the contract, including the disclosure statement which formed part of it and which permitted short stays.

The tower that was to be known as The Oracle, as described in the disclosure statement, did not have the features that Ms Ryan expected, but it did have the features described in that document. These included an on-site letting agent who could promote its business and focus on short stays. The name given in the disclosure statement was the name of a tower having those features, not a tower having the features which Ms Ryan understood that The Oracle would have. The inaccuracy in the name of the tower must be seen in that context.

In summary, the apartment was still in a development named The Oracle, even if the tower itself would not be known as The Oracle because of the branding being undertaken by Peppers. A disclosure statement stating that the tower would be known as The Oracle would have been inaccurate if given in October 2010, but only in respect of the name of the tower itself. It would not have been inaccurate in relation to the nature of the tower and the type of guests that the letting agent might seek to attract to it. It is these matters, not the name of the tower itself, that constitute the substance of Ms Ryan’s disappointed expectations and the prejudice that she says she will suffer as a result if she is compelled to complete the contract.

Any inaccuracy in the disclosure statement is not the cause of the material prejudice that has been pleaded and proven by Ms Ryan.

Conclusion – cancellation under the BCCM Act

The plaintiffs who claimed an entitlement to cancel pursuant to the BCCM Act have not established such an entitlement. I have had regard to the personal circumstances of each such claimant. In general terms, however, the focus of each of those plaintiffs was on the expectation that The Oracle would be predominantly, if not exclusively, occupied by owner-occupants and long-term tenants. This was important to Mr and Mrs Wicks and to Mr Gough and Ms Groves because of their own residential amenity. It was important to Ms Ryan because an iconic, luxury, residential tower catering to permanent and long-term tenants was what she understood The Oracle to be as a result of representations that were made to her. Each of the plaintiffs’ expectations were not met because the tower in which they contracted to purchase an apartment permits short-term letting and the letting agent has a focus on short-term letting.

The disappointed expectations of each of the plaintiffs may be described as a “material prejudice”. Having regard to each plaintiff’s circumstances, someone in those circumstances would be materially prejudiced if compelled to complete the contract. They would be disadvantaged in a substantial way. However, the prejudice is not because of an inaccuracy in the information disclosed in the BCCM Disclosure Statement. They are not materially prejudiced in the respects alleged, given the extent to which the disclosure statement was, or had become, inaccurate prior to the date for their contract to settle. The prejudice suffered by the plaintiffs is because the contract (including the BCCM Disclosure Statement that formed part of it) did not give protection to their expectations.

Other plaintiffs

The personal circumstances of the other plaintiffs are not relevant to any claim under the BCCM Act. The written submissions of the plaintiffs do not address the individual circumstances of the plaintiffs apart from those plaintiffs who rely upon an entitlement to cancel their contracts under the BCCM Act. SSI makes some general submissions about the evidence given by the plaintiffs, and then descends to some detail concerning the evidence of each of them. The general submissions are as follows. First, the evidence given by the plaintiffs in relation to their expectations in respect of their apartments is irrelevant to the construction of the contract, or any issue of whether there has been a departure from it. Indeed, this evidence tends to disprove the plaintiffs’ pleaded cases because it makes clear that the plaintiffs’ expectations were not based upon the “core documents”, being the contract and the disclosure statements. In fact, generally the plaintiffs did not read these documents or read only a small part of them. SSI also relies upon the absence of complaint by the plaintiffs about the appointment of Peppers until they went to their present solicitor. Finally, the general point is made that the plaintiffs are aware that the market value of their apartments had been substantially reduced as a result of broader economic events and, understandably, none of them wished to proceed with their contracts in those circumstances. I accept these general submissions.

It is unnecessary to address the individual circumstances of the other plaintiffs. The circumstances of their entry into the contracts are not in dispute. It is unnecessary to canvass in these reasons the oral evidence given by each of these plaintiffs concerning their expectations and the respects in which they say they will be prejudiced by being compelled to complete their contracts. In general, I found each of the plaintiffs to be an honest and reliable witness. I did not find substantial parts of the evidence given by Mr and Mrs Parsons to be reliable. Their former solicitor’s correspondence sent in late 2010 did not reflect their actual circumstances.

Mrs Parsons’s evidence is that in late 2010 her husband still wanted to purchase the apartment. There was no document supporting Mr Parsons’s evidence that he complained about the appointment of Peppers. I conclude that the predominant reason for Mr Parsons being disappointed with the purchase and wishing to explore reasons not to complete is the valuation that he obtained on 19 October 2010. I found Mr Parsons’s evidence of having no recollection of receiving certain correspondence unconvincing. Apart from the evidence of Mr and Mrs Parsons which I found to be unreliable, I found the oral evidence of the other plaintiffs in relation to their expectations to be reliable. I do not propose to address their oral evidence in any detail. Their expectations differed in some respects, but generally were along the same lines. For example, Mr Walsh, who intended to let out the apartment that he and Mr Hutchins contracted to purchase to a long-term tenant, understood that he could rent out the apartment for a short term if he wanted to. When he entered the contract he understood that the building was directed “towards a residential market”, but expected that the letting agent would be experienced, would promote its business and might conduct its business in a way that would attract short stay or holiday business. He did not expect, however, that there would be hotel-like services such as valet parking and room service, and it is these things that in his view have turned the development into a hotel-like environment. To similar effect is the evidence of Ms Ferguson, who understood that apartments in The Oracle could be let for short-term and holiday purposes, but thought that this would represent only a very small percentage because the development was “mainly marketed for [the] long-term, residential owner-occupier”. Ms Taylor, who entered into the same contract, accepted that the decline in the market value of the apartment was part of the reason that she does not wish to complete, but did not wish to settle because she felt that she and Ms Ferguson were not now getting what they had contracted to purchase. When she entered the contract, Ms Taylor expected that there might be holiday letting but that most of the people who were purchasing an apartment were purchasing it to “either live in it or [when they were not living in it] close it up”. In this regard, she expected that it would be “more of a residential building.” She was aware that purchasers could use their apartments for holiday letting. Mr Hutchins likewise knew that it was possible that apartments could be let for short periods, but expected that it would be occupied primarily by long-term residents.

The convincing oral evidence given by a variety of plaintiffs about their expectations, and how the apartment offered to them at settlement falls short of those expectations, fails to prove that those expectations had contractual protection, and that there has been a repudiation of a contract that protected those expectations. The contractual promises are found in the contractual documents, not in the evidence of the plaintiffs about what they expected as a result of other matters, or what they imagined the building was going to be like in circumstances in which they did not read the contractual documents. As with the evidence of those plaintiffs who claimed an entitlement to cancel under the BCCM Act, the other plaintiffs are, in various ways and in varying degrees, disappointed because of features of the apartment tower, not to mention a decline in the value of luxury apartments on the Gold Coast because of general economic conditions.

In different ways the plaintiffs are disappointed because the apartment is not in the kind of building that they expected. They may have expected the building not to have the number of short-term stays that the appointed letting agent has achieved, and they may not have expected that short-term guests would be able to receive certain hotel-like services. However, the plaintiffs’ expectations were not based on the provisions of the contract, including documents that formed part of it by virtue of the BCCM Act, or on the other disclosure statements that they received. Their disappointed expectations do not give them an entitlement to terminate their contracts for repudiation. Their contracts did not protect those expectations.

Conclusion

The plaintiffs in each proceeding have not established that they were discharged from their contract under the general law. Mr and Mrs Wicks, Mr Gough and

Ms Groves, and Ms Ryan have not established that they were entitled to cancel their respective contracts under the BCCM Act. The plaintiffs breached their contracts by failing to settle. SSI was ready, willing and able to complete the contracts. In each proceeding it is entitled to a decree of specific performance.

SSI has also established an entitlement to damages. It proved an entitlement to damages which were calculated to the date of trial on an agreed basis. The final calculation will need to be updated to the date of judgment.

In each proceeding there will be judgment for the defendant. SSI is entitled to a decree of specific performance on its counterclaim, and also judgment on its counterclaim against the buyers and guarantors. I will hear the parties, if necessary, on the question of costs. However, there appears to be no reason as to why costs should not follow the event. I direct the defendant to submit proposed minutes of order within seven days. I anticipate that the form of order requiring each buyer specifically to perform and carry into effect the relevant contract will be in a form similar to that ordered in comparable cases and, if required, I will hear the parties as to the date for completion and other terms of the orders.

CITATION:	Gough & Anor v South Sky Investments Pty Ltd [2011] QSC 361 Wicks v South Sky Investments Pty Ltd [2011] QSC 361 NOA 8338 Pty Ltd & Anor v South Sky Investments Pty Ltd [2011] QSC 361 Ryan v South Sky Investments Pty Ltd [2011] QSC 361 Linemint Pty Ltd & Anor v South Sky Investments Pty Ltd [2011] QSC 361 Walsh & Anor v South Sky Investments Pty Ltd [2011] QSC 361 Taylor & Anor v South Sky Investments Pty Ltd [2011] QSC 361 Parsons & Anor v South Sky Investments Pty Ltd [2011] QSC 361
PARTIES:	JOHN MACLAINE GOUGH AND NORMA PATRICIA GROVES (plaintiffs) v SOUTH SKY INVESTMENTS PTY LTD (ACN 097 092 709) (RECEIVERS AND MANAGERS APPOINTED) (defendant) and JEFFREY AIDEN WICKS AND JULIE KATHRYN WICKS (plaintiffs) v SOUTH SKY INVESTMENTS PTY LTD (ACN 097 092 709) (RECEIVERS AND MANAGERS APPOINTED) (defendant) and NOA 8338 PTY LTD (first plaintiff) and PAUL ANTHONY FORD (second plaintiff) v SOUTH SKY INVESTMENTS PTY LTD (ACN 097 092 709) (RECEIVERS AND MANAGERS APPOINTED) (defendant) and PATRICIA GAYE RYAN (plaintiff) v SOUTH SKY INVESTMENTS PTY LTD (ACN 097 092 709) (RECEIVERS AND MANAGERS APPOINTED) (defendant) and LINEMINT PTY LTD (first plaintiff) and DERICK BRISLEY AND DEBBIE BRISLEY (second plaintiffs) v SOUTH SKY INVESTMENTS PTY LTD (ACN 097 092 709) (RECEIVERS AND MANAGERS APPOINTED) (defendant) and MICHAEL SHANE WALSH AND DAMIAN ROBERT HUTCHINS (plaintiffs) v SOUTH SKY INVESTMENTS PTY LTD (ACN 097 092 709) (RECEIVERS AND MANAGERS APPOINTED) (plaintiff) and VICKI ANNE TAYLOR AND JENNIFER MAY FERGUSON (plaintiffs) v SOUTH SKY INVESTMENTS PTY LTD (ACN 097 092 709) (RECEIVERS AND MANAGERS APPOINTED) (defendant) and JOHN CLIFTON PARSONS AND DOROTHY ANNE PARSONS (plaintiffs) v SOUTH SKY INVESTMENTS PTY LTD (ACN 097 092 709) (RECEIVERS AND MANAGERS APPOINTED) (defendant)
FILE NOS:	12179 of 2010, 13323 of 2010, 13578 of 2010, 13613 of 2010, 13615 of 2010, 13614 of 2010, 3091 of 2011, 3092 of 2011
DIVISION:	Trial Division
PROCEEDING:	Claim
ORIGINATING COURT:	Supreme Court at Brisbane
DELIVERED ON:	2 December 2011
DELIVERED AT:	Brisbane
HEARING DATES:	8, 9, 10, 11 and 12 August, 3, 6 and 7 October 2011
JUDGE:	Applegarth J
ORDERS:	In each proceeding there will be: 1. Judgment for the defendant. 2. A decree of specific performance and other orders on the defendant’s counterclaim. 3. A direction that the defendant submit proposed minutes of order within seven days.
CATCHWORDS:	CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – REPUDIATION AND NON-PERFORMANCE – REPUDIATION – WHAT AMOUNTS TO REPUDIATION – where plaintiffs contracted to purchase apartments “off the plan” in a development described as The Oracle – where seller provided disclosure statements under ss 213 and 214 of the Body Corporate and Community Management Act 1997 (Qld) – where provision for an on-site manager to conduct a letting business and provide services associated with the letting of apartments – where letting agent focused on short-term stays and provided certain hotel-like services to guests – where plaintiffs claim that the tower was no longer a residential tower but was a hotel/resort branded Peppers Broadbeach – whether tower had ceased to be a residential tower – whether tower had been branded Peppers Broadbeach – whether seller had repudiated contracts CONVEYANCING – STATUTORY OBLIGATIONS OR RESTRICTIONS RELATING TO CONTRACT FOR SALE – PROTECTION OF PURCHASERS – OBLIGATIONS ON VENDOR: DISCLOSURE, WARNINGS AND LIKE MATTERS – where certain plaintiffs claim that disclosure statements had become inaccurate and any such inaccuracy would cause buyers material prejudice if compelled to complete – where certain plaintiffs seek to avoid the contracts under ss 214 and 217 of the BCCM Act – whether disclosure statements became inaccurate – whether inaccuracy in the name of the tower would cause material prejudice to the plaintiffs if compelled to complete the contracts Body Corporate and Community Management Act 1997 (Qld), s 213, s 214, s 215, s 217 HG v The Queen (1999) 197 CLR 414; [1999] HCA 2 cited Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; [2007] HCA 61 discussed Latitude Developments Pty Ltd v Haswell [2010] QSC 346 cited Lee v Surfers Paradise Beach Resort Pty Ltd [2008] 2 Qd R 249; [2008] QCA 29 cited Mirvac Queensland Pty Ltd v Horne [2009] QSC 269 cited Mirvac Queensland Pty Ltd v Wilson [2010] QCA 322 discussed Osland v R (1998) 197 CLR 316; [1998] HCA 75 cited R v Bonython (1984) 38 SASR 45 cited South Sky Investments Pty Ltd v Prins [2010] QSC 438 discussed Transport Publishing Co Pty Ltd v Literature Board of Review (1956) 99 CLR 111; [1956] HCA 73 cited Vennard v Delorain Pty Ltd as Trustee for the Delorain Trust [2010] QCA 309 cited Wilson v Mirvac Queensland Pty Ltd [2010] QSC 87 discussed
COUNSEL:	R G Bain QC and C C Heyworth-Smith for the plaintiffs S L Doyle SC and D G Clothier for the defendant
SOLICITORS:	Johnsons Lawyers for the plaintiffs Allens Arthur Robinson for the defendant