Harris v K7@Surry Hills Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

PROPERTY LIST

S CI 2016 01868

BRUCE ANDREW HARRIS	Plaintiff
v
K7@SURRY HILLS PTY LTD (ABN 84 508 292 379)	Defendant

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JUDGE:	Derham AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	5 and 6 March 2019
DATE OF JUDGMENT:	20 August 2019
CASE MAY BE CITED AS:	Harris v K7@Surry Hills Pty Ltd
MEDIUM NEUTRAL CITATION:	[2019] VSC 551

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PROPERTY LAW – Sale of land – Whether lawful rescission or wrongful repudiation by purchaser – Anticipatory breach by vendor of special condition in contract – Purchaser lawfully rescinded contract – Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115.

PROPERTY LAW – Whether purchaser rescinded contract pursuant to s 9AC(2) of the Sale of Land Act 1962 (Vic) – Deming No 456 Pty Ltd v Brisbane Unit Development Corporation Pty Ltd (1983) 155 CLR 129; Besser v Alma [2012] VSC 460; JD No 6 (Dava) Pty Ltd & Anor v P Battlay Holdings Pty Ltd [2011] VSC 353; Lockwood v PSP Investments Pty Ltd [2013] VSC 10 and Ausgrand Pty Ltd v Stephanie Michele Freeland-Small [2016] VCC 942 considered.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr KE Mihaly	LMG Lawyers
For the Defendant	Mr BJ Murphy	Serry White

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

The facts............................................................................................................................................... 1

Plaintiff’s claims................................................................................................................................. 7

Defendant’s defences and counterclaim....................................................................................... 8

Construing the Contract.................................................................................................................... 9

Cross-examination of Harris and Vu Nguyen............................................................................ 10

Was the Contract repudiated by K7?............................................................................................ 12

Plaintiff’s submissions................................................................................................................ 16
Defendant’s submissions........................................................................................................... 18
Did Plan H comply with special condition 38?...................................................................... 19
The defendant’s intention from correspondence and the provision of Plan H................. 22

Termination under s 9AC of the SLA........................................................................................... 27

Interpretation............................................................................................................................... 27
Materially affect the lot.............................................................................................................. 30

Misleading or deceptive conduct claim....................................................................................... 36

Section 49(2) of the PLA.................................................................................................................. 40

Conclusions....................................................................................................................................... 40

HIS HONOUR:

Introduction

In this proceeding the plaintiff (Harris) claims to have lawfully rescinded (that is, terminated) a contract of sale by which he agreed to purchase off-the-plan from the defendant (K7) lots 306 and 307 on unregistered Plan of Subdivision PS 725930K together with two car parking spaces and two storage cages for the price of $850,000.00 (the Contract). Harris claims:

(a) a declaration that he has validly rescinded the Contract;

(b) the return of the deposit (paid by way of a bank guarantee) in the sum of $85,000.00, plus interest, alternatively the return of the deposit pursuant to s 49(2) of the Property Law Act 1958 (Vic) (PLA);

(c) pursuant to the Australian Consumer Law (ACL), as a result of alleged misleading or deceptive conduct, to vary the Contract so as to include a term that the defendant provide two fixed car parks next to each other and two full length storage cages (the Requirements);

(d) alternatively, damages.

K7 claims that Harris wrongfully repudiated the Contract, which repudiation it has accepted. K7 claims that the deposit is forfeited and claims damages suffered on the re-sale of the property sold. In particular K7 counterclaims for:

(a) a declaration that the plaintiff wrongfully repudiated the Contract;

(b) an order pursuant to s 9AF(1)(a) of the Sale of Land Act 1962 (Vic) (SLA) that the defendant is entitled to be paid and retain the deposit paid by the plaintiff in the sum of $85,000.

The facts

K7 is the developer of an apartment complex which, in October 2014, it proposed to build at 629 Canterbury Road, Surrey Hills, Victoria, called ‘Canterbury Hill’. The directors of K7 were and are Bao Phong Nguyen and Vu Hoang Nguyen. Mr Vu Nguyen was also the principal of the solicitors acting for K7, Asia Pacific Lawyers, whose address was the same as K7. The complex was to include a ground floor (of mixed residential and commercial units), two basement levels (predominantly taken up by services, car parks and storage cages) and three floors of residential units. As is usual with sales ‘off-the-plan’, there was no registered Plan of Subdivision and construction had not commenced.

In December 2014 Harris entered into negotiations with the agent for K7, CBRE Pty, Ltd (CBRE), for the purchase of two single bedroom units on the third floor of the development (lots 306 and 307). The two lots were to be combined to form one lot and there were various detailed changes to the fit out of the combined apartment. The agent’s representative was one Melanie Wickham. The negotiations were oral and in writing between Harris and his solicitor Candice Hani of Braggins Group Lawyers, on the one hand, and Melanie Wickham of CBRE and Mr Bao Nguyen and Mr Vu Nguyen, on the other.

Before the entry into the Contract, a plan that combined the two lots (306 and 307) was negotiated and discussed, particularly by email between Harris, Ms Wickham of CBRE, Bao and Vu Nguyen and an interior design consultant at the architects, Rothe Lowman Property Pty Ltd (Rothe Lowman). A suitable sketch plan was arrived at which seemed to satisfy Harris. The terms of the Contract were then the subject of some emailed negotiations in the course of which Harris wrote to Ms Wickham in relation to the contract terms:

I noticed there is a power to move car park spaces. I was hoping to get the two allotted to me to be next to each other. Can we investigate this?

In about mid-February 2015, shortly before signing the Contract, Harris claims that Wickham showed him a version of the Plan of Subdivision (Pre-contract Plan E) (sheet 4 of which is annexed and marked ‘A’ to these reasons)[1] that had two full length storage cages (that is storage cages that were delineated on the Plan as a part of lots 306 and 307, respectively, and not ‘over the bonnet’ storage cages which were elevated and placed above a car space).[2] This is the essential basis of the claim based on misleading or deceptive conduct.
[1]Only sheet 4 of the Plan showing level 2 of the basement is annexed.
[2]Transcript of Proceedings, Bruce Andrew Harris v K7@Surry Hills Pty Ltd (Supreme Court of Victoria, S CI 2016 01868, Derham AsJ, 5 and 6 March 2019) 35 (Transcript). These were not depicted on the Plan of Subdivision. They were shown only on the Building Plans (CB 158 for example).

The Contract was signed by Harris on 19 February 2015 and on behalf of K7 on 20 February 2015. It relates to lots 306 and 307 on the Plan, included a sketch plan of those two lots combined into one, and included a provision for the Plan to be revised so as to incorporate the combined lots as one lot on the Plan. It was accompanied by a vendor’s statement, as required by s 32 of the SLA, which included another version of plan E of the Plan (Contact Plan E) (sheet 4 of which is annexed and marked ‘B’ to these reasons). The Contract also included architectural drawings. As I explain later, however, there were two versions (at least) of the vendor’s statement provided by CBRE to the solicitor acting for Harris, Ms Candice Hani.

The Contact Plan E, read with the architectural drawings annexed to the Contract, had the effect that under the Contract Harris was to receive:

(a) lots 306 and 307 combined into one apartment in accordance with a sketch plan annexed to the Contract;

(b) subject to amendment to give effect to special condition 38 (see below):

(i) one ‘grade’ car park with an over the bonnet storage cage towards the northern end of Basement Level 2;[3]
[3]A ‘grade’ car park is one on the concrete floor of the basement separated by white lines from other car parks and specifically shown on the Plan of Subdivision as allocated to a particular Lot on the Plan.

(ii) membership (with 11 other lot owners) of Owners Corporation No. 3, which provided access to Common Property No. 3 in which 6 car stackers (each capable of holding two vehicles) was to be installed. This provided the second car park; and

(c) one standalone full length storage cage at the northern end of Basement Level 2 and marked ‘306 Pt’, meaning that it was to be a part of Lot 306.

The grade car park and full length storage cage were shown on sheet 4 of the Plan whilst the over the bonnet storage cage is only revealed by the Building Plans in Annexure B to the Contract.[4] Annexure A to the Contract was a schedule of Finishes, Fittings and Fixtures, which specified that that there was to be one storage cage ‘per apartment located within building’.
[4]CB 158.

Annexed to the Particulars of Sale was a sketch plan of the combined Lots 306 and 307 with the following term handwritten beneath it:

This Contract is subject to and conditional upon this Revised Plan being adopted prior to the registration of the Plan. If the Plan registered does not incorporate such amendments made to lot 306 and 307 the Contract is at an end and the deposit must be returned to the Purchaser and any interest accrued to the Purchaser within 14 days.

There was also included, at the insistence of Harris, special condition 38 (SC 38) relating to the two car parking spaces, also handwritten, as follows:

The contract is subject to and condition upon the vendor providing to the purchaser two (2) car parks that are adjacent. This special condition prevails regardless of any other condition in this contract to the contrary. The vendor and purchaser both warrant that they have read and understood this special condition and that it is an essential term of the Contract.

There are also two other special conditions relied upon by K7 in its Further Amended Defence and counterclaim:[5]

(a) special condition 17 permitted K7 to make alterations to the allocation or location of car parking spaces and storage cages, ‘in its absolute discretion’ and to change ‘in its absolute discretion’ the location and configuration of car spaces or storage cages and even if they had been allocated at the Day of Sale;

(b) special condition 20, deals with variations to the building and the Plan of Subdivision and includes a provision to the effect that, subject to Section 9AC of the SLA, the vendor may make such alterations to the Plan of Subdivision as it requires including without limitation amendments that are necessary to ensure that the relevant Plan of Subdivision accords with the Property as proposed, designed or built from time to time or considered by the Vendor to be necessary or desirable.

[5]Further Amended Defence filed on 11 August 2017 which includes a counterclaim.

Harris paid the deposit by procuring the provision of a bank guarantee for the sum of $85,000.00 on 10 March 2015.

On 26 February 2016, the defendant gave notice to the plaintiff of an amendment to the Plan of subdivision in the form of version H (Plan H) (sheet 4 of which is annexed and marked ‘C’ to these reasons). The new Plan was sent by Bao Nguyen under cover of a short email with the title ‘Canterbury Hill apartments project – change to plan of subdivision’. The email did not set out any details of the changes. In fact Plan H differed from the Contact Plan E in that:

(a) Lots 306 and 307 had been combined to result in the a new Lot 306 (as required pursuant to the Contract) and the former Lot 308 was renumbered as Lot 307;

(b) membership of Owners Corporation No 3 (OC 3) (with 11 others) was preserved. The effect of this was one of the car parks was located in a stacker as had been provided in the Contact Plan E;

(c) the grade car park (along with an over the bonnet storage cage) had been moved so that it was across the roadway nearby Common Property No. 3 and marked ‘306 Pt’. This repositioning brought the grade car park closer to the stacker and thus nearer to the other car park (assuming space in a stacker constituted a car park under the Contract); and

(d) Lot 306 no longer had any standalone full length storage cage in basement level 2, or anywhere else.

On receipt of Plan H, Harris’ solicitor responded by email on Monday 29 February 2016 asking for detail of the changes to the plan of subdivision. Mr Bao Nguyen responded that day attaching a document from the architect detailing the changes. In response, on 2 March 2016 the plaintiff’s solicitor asked for versions F and G of the Plan, a copy of the updated drawings, written detail of the changes made since Contract version E of the Plan, when those changes were made, and confirmation of the location of the two storage spaces allocated to lots 306 and 307, now consolidated into the new Lot 306.

Mr Bao Nguyen responded on 3 March 2016 that versions F and G were created internally by the consultants to K7 as the design and development progressed and that the changes from Plan E to H included the consolidation of lots 306 and 307 into one apartment. He confirmed ‘that your client will be allocated with two (2) storage cages, we will provide further information once we’re nearer to practical completion. Thanks’.

The plaintiff’s solicitor then emailed on 3 March 2016 as follows (so far as relevant):

We require confirmation that my client will receive two (2) free-standing storage cages in basement level 2 as they were indicated on the plan version E. Not over bonnet spaces.
We also require confirmation that my client will receive two (2) car spaces that are adjacent as per our special condition. A car stacker does not satisfy this condition.

The defendants solicitor, Mr Vu Nguyen, responded by email on the same day, commenting that:

(a) in relation to the storage cages:

The developer cannot guarantee this. The allocation of car spaces and storage spaces are only finalised at the time of construction completion. The developer will comply with the contract of sale.

(b) In relation to the car spaces:

The contract will be complied with here. Having said that the special condition 38 does not exclude stacker car spaces adjacent to each other.

The plaintiff maintained, and maintains, that from these statements the defendant had repudiated the Contract. By letter to K7 dated 11 March 2018, Harris’ solicitor rescinded the Contract.[6] Upon a close analysis of that letter, there were two grounds advance for rescission of the Contract: first, that the proposed amendments to the plan of subdivision revealed changes between Contract Plan E and Plan H which will materially affected the lot to which the Contract relates; secondly, the failure to provide two adjacent car spaces (and the failure to allocate two free standing storage cages), is a departure from the Contract and is a breach of an essential term of the Contract. Harris was, accordingly, entitled to rescind under s 9AC(2) of the SLA.[7] The plaintiff demanded a refund of the deposit by 4pm on the 25 March 2016.[8]
[6]CB 443.
[7]CB 443.
[8]CB 446.

K7 responded to this letter on 24 March 2016, stating they considered Harris’ letter to be a repudiation of the contract of sale.[9] K7 stated that they accepted this repudiation, would retain the deposit and rejected the plaintiff’s grounds for terminating the contract of sale.[10] Subsequently K7 made a claim on NAB under the bank guarantee and received $85,000.00 from NAB on or after the 24 March 2016.[11] The plaintiff commenced this proceeding by writ on 17 May 2016.
[9]CB 448.
[10]CB 448.
[11]Transcript 197.

Plaintiff’s claims

The plaintiff relies on four causes of action to recover the deposit, and interest:

(a) the Contract was validly terminated when the plaintiff accepted the defendant’s repudiation of the Contract for breach of special condition 38. This relates solely to the provision of two adjacent car parks pursuant to that special condition;

(b) the Contract was validly terminated under s 9AC(2) of the SLA by reason of a material change between the Contact Plan E and Plan H notified on 26 February 2016;

(c) the defendant engaged in misleading or deceptive conduct as to the car parks and storage cages that the plaintiff was to be provided under the contract of sale;

(d) it is just that the plaintiff be compensated under s 49(2) of the PLA.

Defendant’s defences and counterclaim

The defendant’s responses to the plaintiff’s four causes of action are as follows:

(a) the defendant did not repudiate the Contract by providing the plaintiff with Plan H, and was ready, willing and able to perform the Contract.

(b) the provision of Plan H did not ‘materially affect’ the property the plaintiff purchased under Plan E, as it was not the final version of the Plan. As such there was no basis to rescind the Contract under s 9AC(1) of the SLA.

(c) the defendant did not make the representations claimed by the plaintiff.

(d) there are no exceptional circumstances in this case that enliven the operation of s 49(2) of the PLA.

The defendant submitted that the letter written by the plaintiff to the defendant on 11 March 2016 constituted a repudiation of the Contract. The defendant submitted they accepted this repudiation and accordingly claimed the bank guarantee as they were entitled to under the Contract.

The defendant also included a counterclaim in its Further Amended Defence, which is the inverse of the plaintiff’s claims. The parties agreed that that if the plaintiff rightly rescinded it is entitled to a return of the deposit, with interest, and the counter-claim should be dismissed. If, on the other hand, the plaintiff did not rightly rescind but has repudiated the Contract, the defendant is entitled both to retain the deposit and to recover any damages suffered upon the re-sale. It was common ground, however, that the property was re-sold at a higher price than the contract price.

Construing the Contract

The Contract construed as a whole plainly contemplated changes to the Contact Plan E in order for the Plan of Subdivision to accord with the terms of the Contract. The Contract specifically provided that Contact Plan E, which was annexed to the Vendor’s Statement under s 32 of the SLA, was incorporated in the Contract. At the commencement of the Contract it provides:

The Vendor agrees to sell and the Purchaser agrees to buy the Property, being the Land and the Goods, for the price and on the conditions set out in this Contract:

The terms of this contract are contained in the:
-         Particulars of sale; and
-         special Conditions (if any); and
-         General conditions; and
-         Vendor’s statement

and in that order of priority.
The Vendor’s Statement required by section 32 (1) of the Sale of Land Act 1962 is attached to and forms part of this contract.

It is the plaintiff’s case that the Plan of Subdivision was intended to be replaced by a Plan that showed both the combination of Lots 306 and 307, the two ‘adjacent’ car parks as grade carparks side by side (neither in a car stacker) and two full length storage cages shown on the plan.

It was also contended that where SC 38 specified 2 carparks that are adjacent, that meant that membership of OC 3, which was the car stacker, does not provide a car park. It provides an entitlement to common property which at settlement of the Contract allows storage of a car but does not provide a car park within the meaning of SC 38.

K7 agrees that it was plainly the intention of the parties to replace the Contact Plan E with an amended plan that combined Lots 306 and 307 and provided for two adjacent carparks as required by SC 38, but disputes any obligation to provide two full length storage cages (pleading, rather curiously, that K7 is not familiar with the term ‘full length storage cages’)[12] and maintained that one grade carpark near the car stacker in which there was to be another carpark satisfied, or perhaps could satisfy, the terms of SC 38. I should add that in its pleading K7 admitted that the Contract provides that Harris would be provided with two car parks that are adjacent and two storage cages.[13] Later there is some indication that K7 accepted that in the context of the Contract and the proposed building, ‘adjacent’ meant side by side car parks.[14] But it is not entirely clear, and for that reason I consider the question below.
[12]Further Amended Defence, [15], CB 28.
[13]Further Amended Defence [17(a)], CB 28.
[14]Transcript 251.

Cross-examination of Harris and Vu Nguyen

Each of Harris and Mr Vu Nguyen gave evidence and was cross-examined. There were no other witnesses for either party.

In the course of the cross examination of Harris by Counsel for K7, it became clear that Ms Hani did not, in her correspondence, refer to any representation made by Ms Wickham to Harris prior to the entry into the Contract as a basis for the assertion that Harris was entitled to two full length, or free-standing, storage cages. This was vigorously pursued so as to undermine the credibility of Harris. When Ms Hani sought, on 3 March 2016 by email, confirmation that Harris will receive two free-standing storage cages in basement level 2 ‘as they were indicated on the plan version E’ and not over bonnet spaces, the clear inference was that she was working from a version of the plan that showed two free standing storage cages, as did the Pre-contract Plan E.

As a result of questioning by me, investigations were made by Harris and his lawyers that revealed an electronic copy (soft copy) of the vendor’s statement that included the Pre-contract Plan E had been provided by CBRE to Ms Hani (attached to an email) on 20 February 2015, the day that K7 executed the Contract. The email sent on Friday 20 February 2015 was from one Jasmina Erakovic, Sales Administrator – Residential Projects, of CBRE. The subject was ‘Canterbury Hill – 306-307- Contract of Sale’. The attachments to the email were:

(a) 150220 – Contract of Sale – 306-307.pdf;

(b) FINAL – Canterbury Hill Contract of Sale (14 Oct 2014)v2.pdf;

(c) FINAL – Vendor’s Statement (14 Oct 2014)v2.pdf.

The text of the email was as follows:

Dear Candice,
Please find attached the scanned particulars of sale for the above mentioned lot.
I have also attached for you the soft copy of the contract and the vendors statement.
The signed contracts arrived at my office today and I have couriered them to the vendor’s solicitor –Asia Pacific Lawyers.
If you have any further queries please let me know.

The email and its attachments were admitted into evidence without objection. The copy of the particulars of sale from the Contract included the hand written special conditions and completed particulars, but was not signed by K7. The vendor’s statement attached to the email clearly showed two free-standing storage cages as allocated to Lots 306 and 307, which lots were, of course, to be combined into one Lot on the Plan.

It emerged in the cross-examination of Mr Vu Nguyen that the vendor’s statement signed by Mr Bao Nguyen and dated 1 October 2014 was changed whenever a part of it – such as the plan of subdivision – changed and without being re-dated and re-signed. The old plan was removed and the new plan was inserted. It was thus not possible to tell from one vendor’s statement to the next whether they were the same or different without a close scrutiny. The result was that there were different versions of the vendor’s statement each dated and signed in the same way but with different content. The result was a hard copy of the Contract with the Contract Plan E and a soft copy of the Contract and the vendor’s statement with the Pre-contract Plan E.

I will refer further to the evidence in chief and cross-examination of Harris and Mr Vu Nguyen as necessary when dealing with the claims and defences.

Was the Contract repudiated by K7?

The High Court explained in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd,[15] the term repudiation is used in different senses:

First, it may refer to conduct which evinces an unwillingness or an inability to render substantial performance of the contract. This is sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party’s obligations. It may be termed renunciation. The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it. … Secondly, it may refer to any breach of contract which justifies termination by the other party…. There may be cases where a failure to perform, even if not a breach of an essential term…, manifests unwillingness or inability to perform in such circumstances that the other party is entitled to conclude that the contract will not be performed substantially according to its requirements.[16] [footnotes omitted]

[15](2007) 233 CLR 115 (Koompahtoo).

[16]Ibid [44] (Gleeson CJ, Gummow, Heydon and Crennan JJ).

Parties to a contract may agree that a particular obligation is essential, in which case a breach of that obligation will be treated as a fundamental breach entitling the other side to terminate.[17] Such a breach, however, will not necessarily manifest unwillingness or inability to render substantial performance of the contract.[18]
[17]Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268, [296] (Macquarie International Health Clinic Pty Ltd); Koompahtoo (2007) 233 CLR 115, [47].
[18]Macquarie International Health Clinic Pty Ltd [2010] NSWCA 268, [296].

Both parties were content to rely on the review of the law undertaken by Croft J in Impact Funds Management Pty Ltd v Roy Morgan Research Ltd.[19] A brief summary is as follows:
[19][2016] VSC 221, [157]-[164] (Impact Funds Management).

(a) a party may terminate a contract on the grounds that the other party has repudiated it. Acceptance of the repudiation discharges the innocent party then from further performance and entitles the party to sue for damages;[20]
[20]Shevill v Builders Licensing Board (1982) 149 CLR 620, 625–6 (Shevill).

(b) a party will have repudiated a contract if, by words or conduct, they evince an intention no longer to be bound by the contract or show and intention to fulfil the contract only in a manner substantially inconsistent with their obligations and not in any other way;[21]
[21]GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1, 202–3 [889]–[891] (GEC Marconi); Shevill (1982) 149 CLR 620, 625–6; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 (Laurinda).

(c) the party’s conduct is to be judged objectively by reference to the effect it would be reasonably calculated to have upon a reasonable person,[22] and not by reference the subjective state of mind of the party.[23] What matters is the character of the repudiator’s conduct;[24]

(d) a party that acts on a genuine but erroneous view of its obligations under the contract will not for that reason alone have repudiated it. That party may still be willing to perform the contract according to its tenor; to recognise its heresy; or to accept an authoritative exposition of the contract.[25] But persistence in an untenable construction will ordinarily be regarded as repudiatory;[26]

(e) repudiation of a contract is a serious matter and is not to be lightly found or inferred.[27] In considering it, one must look to all the circumstances of the case to see whether the conduct ‘amounts to a renunciation, to an absolute refusal to perform the contract’.[28]

[22]GEC Marconi (2003) 128 FCR 1, 202–3 [889]–[891]; Laurinda (1989) 166 CLR 623, 658; Satellite Estate Pty Ltd v Jaquet [1968] 2 NSWR 340, 357.

[23]Laurinda (1989) 166 CLR 623, 647; Sopov v Kane Constructions Pty Ltd (2007) 20 VR 127, 130–3 [7]–[18] (Sopov).

[24]Sopov (2007) 20 VR 127, [9] (Maxwell P and Kellam JA).

[25]GEC Marconi (2003) 128 FCR 1, 202–3 [889]–[891]; DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423, 431–2; Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277.

[26]GEC Marconi (2003) 128 FCR 1, 202–3 [889]–[891]; Summers v Commonwealth (1919) 26 CLR 180.

[27]Shevill (1982) 149 CLR 620, 633 (Wilson J); Ross T Smyth & Co Ltd v TD Bailey Son & Co (1940) 3 All ER 60, 71.

[28]Mersey Steel and Iron Co v Naylor, Benzon & Co (1884) 9 App Cas 434, 439; Shevill (1982) 149 CLR 620, 633 (Wilson J).

The first ground relied upon in this case for the right to terminate is the breach of an essential term, or condition, by K7. Harris claims that K7 repudiated the Contract by an anticipatory breach of special condition 38. The determination whether a term is essential or not depends upon the intention of the parties discovered from the contract.[29]
[29]Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632, 641-642 (Jordon CJ) (Tramways), cited with approval in Koompahtoo (2007) 233 CLR 115, [47].

As Jordan CJ said in Tramways:

The test of essentiality is whether it appears from the general nature of the contract considered as a whole, or from some particular term or terms, that the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or a substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor. If the innocent party would not have entered into the contract unless assured of a strict and literal performance of the promise, he may in general treat himself as discharged upon any breach of the promise, however slight. If he contracted in reliance upon a substantial performance of the promise, any substantial breach will ordinarily justify a discharge. In some cases it is expressly provided that a particular promise is essential to the contract, eg, by a stipulation that it is the basis or of the essence of the contract; but in the absence of express provision the question is one of construction for the Court, when once the terms of contract have been ascertained. …[30]

[30]Tramways (1938) 38 SR (NSW) 632, 641-2.

In this case SC 38 expressly provides that it is essential and ‘prevails regardless of any other condition’ in the Contract. It expresses the common intention of the parties, understood in the context of the relationship of vendor and purchaser of land and the commercial purpose of an off-the-plan sale of land.[31] The parties have themselves stipulated that SC 38 is a condition and that it is essential. If the term merely provided that it was a condition, that might not have been sufficient of itself.[32] But here it is agreed to be essential and that can only mean that a breach by the vendor – no matter how technical or slight – gives the purchaser the right to rescind the Contract and to a return of the deposit.[33] I should add, that in addition to the wording of the term and its position as a special condition, the fact that it is handwritten gives it priority in the event of inconsistency with other terms.[34]
[31]Koompahtoo (2007) 233 CLR 115, [68].
[32]See L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235, 251; Koompahtoo (2007) 233 CLR 115, [49].
[33]Koompahtoo (2007) 233 CLR 115, [48].
[34]Greater weight being given to handwritten terms over typed and printed terms in case of inconsistency: see for example Building and Engineering Constructions (Aust) Ltd v Property Securities No 1 Pty Ltd [1960] VR 673, 681-2.

There was no serious dispute as to its classification as a condition, that is, an essential term of the Contract. In its terms it necessarily prevails over the specific clauses that reserve to the vendor the discretion to allocate any car space or storage cage to a lot ‘in its absolute discretion’ (SC 17) or to make alterations to the plan of subdivision (SC 20).

The plaintiff submitted that the provision of Plan H was evidence of the defendant’s intention to not be bound by SC 38. Therefore, in providing Plan H to the plaintiff the defendant had committed an anticipatory breach of the Contract which constituted a repudiation capable of acceptance by Harris resulting in rescission of the Contract.

The party arguing they have the right to rescind a contract based on a breach of an essential term bears the onus of showing that the other parties’ actions constituted such a breach of the contract.[35] As I have said, the test of determining the intention of a party, and whether they are ready, willing and able to perform in accordance with the contract, is an objective one to be found in either words or conduct. Whether an intention is sufficiently evinced by conduct is whether the party renunciating has acted in such a way as to lead a reasonable person to the conclusion that the party does not intend to fulfil his part of the contract.[36]
[35]Lombard North Central Plc v Butterworth [1987] QB 527, 545 (Nicholls LJ) (Lawton LJ agreeing).
[36]Universal Cargo Carriers Corporation v Citati [1957] 2 QB 401, 436 (Citati). Cited in Rigg v Lee Low Seng [1987] WAR 333, 361 (Smith J).

The plaintiff’s submission in relation to repudiation is broadly that the provision of Plan H by the defendant to the plaintiff evinced an intention not to be bound by the Contract, in particular SC 38. This submission has two components:[37]

(a) did Plan H fail to comply with SC 38 of the Contract?

(b) did Plan H represent the defendant’s intention, as at the date that it was provided to Harris, as to what would be provided to the plaintiff at settlement pursuant to SC 38?

[37]Plaintiff’s outline of submissions, 48 CB.

Plaintiff’s submissions

It was common ground that by allocating to lot 306 one grade car park marked ‘306pt’ Plan H would give Harris title to that car park.[38]
[38]Transcript 207-208.

Harris submitted that Plan H did not provide two car parks to the plaintiff because membership of OC 3 (and thus part ownership of Common Property No. 3)[39] does not constitute the provision of a car park such that Plan H only provided one car park to the plaintiff. The effect of membership of OC 3, which governed the proposed car stacker, was to give him an essentially uncertain car parking right rather than a car park. The lot entitlement and liability schedule for OC 3 gave each lot owner specified, including lot 306, 10 of 120 units. On the assumption that the stacker had space for 12 cars, that gave lot 306 one space.
[39]Subdivision Act 1988 (Vic) s 30.

This was submitted because under the rules applicable to OC 3, which governed Common Property No. 3 on which the stacker was to be placed, Harris had no guarantee that part ownership of that common property would give him the right to a car park whenever he required. This followed from the following:

(a) plan H was not accompanied by a document specifying the functions and obligations of OC 3 so as to mandate the use of the common property in a way that complies with SC 38;[40]

(b) the draft rules for OC 3 included in the Contract[41] do not mandate that its members could only park one vehicle at any time in Common Property No. 3;[42]

(c) there were no rules that mandated a unanimous resolution before OC 3 could lease the common property[43] or alter the common property, such as by the removal of the car stackers or the installation of impediments to the use of the common property for parking.[44]

[40]Subdivision Act 1988 (Vic) s 27C(4).

[41]CB 165.

[42]Such rules being permissible: Owners Corporations Act 2006 (Vic) s 138; sch 1 cl 4.

[43]Owners Corporations Act 2006 (Vic) s 14.

[44]Owners Corporations Act 2006 (Vic) s 138; sch 1 cls 4, 6.

Harris contended that the lack of certainty as to the right of a member of OC 3 is consistent with the limitations on the size of the vehicles that can use car stackers[45] and the generally reduced desirability of such car parks.
[45]CB 300A, which is the Architects drawing of basement level 2 showing the specified car stacker and some dimensions to which I refer below.

If membership of OC 3, so as to enable the parking of a vehicle in a stacker on Common Property No. 3, did constitute a car park within the meaning of SC 38, then Harris contended that, in the context of the Contract, adjacent means next to or side by side because:

(a) all car parks in the development are inherently relatively close together such that they are all nearby. Accordingly, adjacent must mean something closer than merely nearby;

(b) given that SC 38 is intended to have some utilitarian objective, what is it? The utility of adjacent car parks arises from the proximity of the two cars to each other, including: the ease of moving goods from one car to another; the maximisation of the space around a car in its park; and the control over how a neighbouring car park is used. Therefore, two car parks cannot be adjacent within the meaning of SC 38 if they are separated by another car park, a roadway or a physical obstruction such as a lift, stairway, column or pillar.[46] This kind of utility informs the meaning to be given to adjacent in SC 38.

[46]Harris gave the example referred to in Ausgrand Pty Ltd v Stephanie Michele Freeland-Small [2016] VCC 942, [45] (Ausgrand) where it was found that placing a car park next to a pillar might constitute a material change.

On the basis that adjacent means next to or side by side, then Plan H did not provide two adjacent car parks, because one car park in the stacker on Common Property No. 3 is not adjacent to the grade car park across the roadway. Reference was made to a decision of Vincent J in a review of a decision of the Planning Appeals Board in which the meaning of adjacent was considered in a different context: A & M Martino Holdings Pty Ltd v The City of Melbourne.[47] I will return briefly to that case in my consideration of the meaning of adjacent in SC 38.
[47](Supreme Court of Victoria, Vincent J, 15 October 1987, 1987 No O/R 125).

Harris submitted that Plan H shows K7’s disregard for SC 38 and its intention only to comply with the Contract, by supplying two adjacent carparks, if this suited the defendant. This is illustrated by the defendant’s conduct after the plaintiff queried the defendant over the contents of Plan H.

Defendant’s submissions

K7 contended that the words and conduct the plaintiff contends amount to a renunciation, or repudiation, of the Contract should not be so construed. Mr Vu Nguyen was clear in his emails in response to the emails form Ms Hani that Plan H was not the final version. The allocation of car spaces and storage cages was only finalised at the time of completion of the construction of the development. In response to the requirements of SC 38, he was clear that the Contract would be complied with. Nevertheless, he maintained that SC 38 does not exclude stacker spaces adjacent to each other. Viewed objectively, there was no statement or conduct by K7 that it would not comply with the Contract.

K7 submitted that SC 38 does not specify what type of car park Harris was to receive at settlement. It says car park. It does not exclude a car park in Common Property No 3 and says nothing about matters concerning the body corporate rules that go to what might be called security of tenure identified by Counsel for Harris. It is a condition which simply requires two adjacent car parks.

In respect of the requirement that the car parks be adjacent, in his evidence Mr Vu Nguyen expressed the view that one car park in the stacker, Common Property No 3, and one outside could be adjacent.[48] The answer to the claim comes back to the proposition advanced by Mr Vu Nguyen that the allocation of car spaces cannot be finalised until construction has completed. K7 said it would comply with the Contract in relation to SC 38.
[48]Transcript 163. Although Counsel for K7 construed the cross-examination of Mr Vu Nguyen overall as amounting to the position that one car space in the stacker and one outside would not be adjacent: Transcript 246.

Did Plan H comply with special condition 38?

The issue here is whether the arrangement of the car parks contained in Plan H was compliant with SC 38. To answer this question, it is necessary to consider the construction of SC 38, and more specifically the meaning of ‘adjacent’ within that clause in the context of the Contract. The relevant sentence in SC 38 is ‘The contract is subject to and conditional upon the vendor providing to the purchaser two (2) car parks that are adjacent.’

The word adjacent is not defined in the Contract. As such, it is of assistance to consider the meaning of adjacent and related words contained in the Macquarie Dictionary:[49]

Adjacent lying near, close, or contiguous; adjoining; neighbouring: a field adjacent to the main road.
Close near, or near together, in space, time, or relation: in close contact.
Contiguous touching; in contact. In close proximity without actually touching; near.
Adjoining bordering; contiguous: the adjoining room.
Neighbouring living or situated near.

[49]Macquarie Dictionary (7^th ed online, updated 2019) ‘adjacent’.

The definition of adjacent reflects the truism that many English words have more than one meaning and may have varying shades of meaning, depending on the context in which they are used. This amply demonstrated by the decision of Vincent J in A & M Martino Holdings Pty Ltd v The City of Melbourne.[50] That case concerned the construction of a clause in a Planning Scheme Ordinance that limited the height of a development where it was ‘adjoining’ buildings in certain protected classes. The particular clause also referred back to the adjoining building using the expression that ‘no building or works shall exceed the highest part of the said adjacent building or buildings’. His Honour considered the authorities on the meaning of adjoining and adjacent and noted, amongst several other authorities, that in Wellington Corp v Lower Hut Corp[51] it was said that adjacent

…is not a word to which a precise and uniform meaning is attached by ordinary usage. It is not confined to places adjoining, and it includes places close to or near. What degree of proximity would justify the application of the word is entirely a question of circumstances.

[50](Supreme Court of Victoria, Vincent J, 15 October 1987, 1987 No O/R 125).

[51][1904] AC 773, 775-6.

It is evident that the term adjacent, in the context of considering the distance between two objects, refers to two objects in close proximity. The meanings of the words associated with adjacent, which include touching and bordering, give a sense that the two objects may be very close to each other. This is also indicated by the examples the dictionary provides; the adjoining room gives the image of the next room being less than a step away.

What kind of car parks would the reasonable person, viewing the facts and circumstances objectively, conclude was intended by the insertion of SC 38? The most reasonable understanding of adjacent in the context of two underground car parks in an apartment building where there is provision for grade car spaces and spaces in a car stacker, is that they are to be next to each other on the floor of the basement (not in the stacker) either end to end, or more likely, side by side.

In the Contact Plan E, the two lots the subject of the Contract were to be combined. Contract Plan E did not represent what was agreed. The sketch plan and un-numbered special condition accompanying it showed that the obligation of K7 under the Contract was to produce an amended Plan showing the two lots merged together. Similarly, the Contract Plan E showed an entitlement of the owner of lot 306 to one ‘entitlement’ within the car stacker on Common Property No 3 and one grade car park in the bank of car parks towards the Windsor Lane end of Basement level 2, relatively remote from the proposed car stacker in Common Property No 3. The inclusion of SC 38, at the insistence of Harris, modifies the contractual provision of these two car spaces (assuming for the present that a space in the Stacker amounted to a car park) so as to evidence an intention that car parking of that kind will not satisfy the condition. It is hardly to be supposed that if Contract Plan E satisfied the requirement of SC 38 that the condition would have been necessary at all. The obligation of K7 was to produce an amended Plan to satisfy the car parking condition, SC 38. That involved an assumption that Contract Plan E did not satisfy that requirement. In my opinion, that can only mean that the provision of two grade car parks was intended and they must be adjacent, in the sense of side by side.

This way of interpreting the Contract is also supported by Harris’ submission that the provision of an entitlement to a 1/12^th share in Common Property No 3 was not a car park within the meaning of SC 38. His argument that this gave him no guarantee of a right to a car park whenever he required has considerable force. In addition, one of the documents admitted into evidence without objection was the Architects drawing of basement level 2 showing the specification of a ‘Wohr Parklift 430 or similar’ stacker. There was no evidence before me as to the specifications of that device (apart from the notation mentioned below). The drawing also shows the height of the basement to be about 2300mm.[52] The specified stacker has 6 car spaces marked. Given that there are 12 entitlements to occupy Common Property No 3, that would indicate a two level stacker descending into a pit, with 6 doors and 12 bays. The Architects drawing of basement level 2 includes beside the stacker the words:

50 per cent (six out of 12) car parking spaces within car stacker Wohr Parklift 430 or similar can accommodate a vehicle clearance height of 1.8 metres – see traffic report.[53]

[52]On the plan it appears to be 2280mm or thereabouts, but it is unclear.

[53]CB 300A. See also Transcript 216.

What this means for the other six spaces is unclear. There is otherwise no indication on the Architects drawing of the height, width and weight limitations of the stacker. It is clear from the drawing that there are at least height limitations. I think it is a matter of common knowledge that there are also width and weight limitations, and I can and do take judicial notice of the fact that car stackers are limited in these ways. The limitations of the size of the grade car park is shown by dimensions on the Plan, and are thereby capable of being known in advance to the purchaser.

The car parks provided to the plaintiff in Plan H were one in a car stacker, and the other in a group of grade car parks at the Canterbury Road end of basement level 2, directly across a roadway (Common Property No 1) from the car stacker. While close, the position of these car parks does not satisfy the understanding of the term ‘adjacent’ that I have come to.

As such, it is clear that Plan H did not comply with the terms of SC 38 contained in the Contract. The supply of Plan H alone to the plaintiff is evidence of breach of an essential condition of the Contract sufficient to amount to a repudiation of the Contract, and this conclusion is confirmed when the words and conduct of the defendant when providing the plaintiff with Plan H are examined.

The defendant’s intention from correspondence and the provision of Plan H

The correspondence in relation to the provision of Plan H to the plaintiff also gives insight into the defendant’s intentions with respect to not complying with the Contract. Plan H was provided to the plaintiff’s solicitor, Ms Candice Hani of Braggins Group Lawyers, on the 26 February 2016. On 2 March 2016 Mr Vu Nguyen received a request from Ms Hani for copies of Plans F and G of the plan of subdivision, updated drawings, and other details. When Mr Vu Nguyen replied the next day, he did not provide the information requested and instead stated ‘we will provide further information once we’re nearer to practical completion. Thanks.’[54]
[54]CB 389.

Ms Hani responded by specifically requesting information about whether the plaintiff would receive two free standing storage cases and two adjacent carparks. Mr Vu Nguyen responded to each of these queries with similar statements:

(In relation to the storage cages) The developer cannot guarantee this. The allocation of car spaces and storage spaces are only finalised at the time of construction completion. The developer will comply with the contract of sale.
(In relation to the adjacent car spaces) The contract will be complied with here. Having said that the special condition 38 does not exclude stacker car spaces adjacent to each other.

These statements from Mr Vu Nguyen both indicate that the contract of sale is unlikely to be complied with, but this factor is attempted to be softened in each case with assurances that the defendant will comply with the contract of sale.

It is evident from these exchanges that Mr Vu Nguyen thought that by stating the developer will comply with the contract of sale, that he was covered in the event that what was currently provided to the plaintiff was not compliant with the contract of sale. This is consistent with the evidence Mr Vu Nguyen gave under cross examination, where he repeatedly mentioned that Plan H was not the final plan of Canterbury Hill, and seemed to proceed on the basis that this meant Plan H was not required to comply with the contract of sale.[55]
[55]Transcript 115, 134, 165.

The statement that K7 would (in the future) comply with the Contract was self-serving and in conflict with the notification of the amended plan as what was proposed to be registered. Harris’ solicitor engaged with Mr Vu Nguyen about that issue, seeking confirmation that there would be compliance with the Contract in a particular way. K7 refused to engage, giving blanket statements without example and without engaging as to what it maintained the Contract required, with the exception of the proposition that SC 38 does not exclude stacker car spaces adjacent to each other. In substance, the response by K7 to Harris’ solicitors statement of what was required under the Contract was largely a rebuff.

Mr Vu Nguyen also admitted in cross examination that the vendor did not turn its mind to SC 38 when providing Plan H to the plaintiff.[56] He also accepted that movement of car parks into a car stacker could be a ground for a purchaser to rescind.[57]
[56]Transcript 135.
[57]Transcript 126-7.

The parties to contracts for the sale of apartments off-the-plan are entitled to assume that when a proposed amended plan of subdivision is produced and notified as required by s 9AC of the SLA, that proposed amended plan of subdivision is, at that time, the final plan to be registered. If this were not the case, there would not be the requirement to notify the purchaser under s 9AC of the SLA. Parliament could have required notification only of the final registered plan. Parliament could have provided a purchaser only a right to rescind if the registered plan was different to the plan in the Contract. But instead parliament required notification of a proposed amended plan whenever that happened.

There were at least two proposed amended plans of subdivision between Contract Plan E and Plan H, namely Plan F and Plan G. These were not notified to Harris under s 9AC(1) of the SLA, notwithstanding that they each combined lots 306 and 307 into the new lot 306, as provided by the Contract, and on basement level 2 moved the grade car park from the bank of car parks at the Windsor Lane end to the Canterbury Road end and left the entitlement to a car space in the stacker (Common Property No 3). It may have been thought that because they were drafts they did not need to be notified, although in cross-examination Mr Vu Nguyen seemed to say that it was because he did not pay attention to them at the time, and that they were produced for different purposes.[58] It must be concluded that by the time Plan H was produced it was thought to have in some way crystallised amendments to which s 9AC(1) applied that needed to be notified under that sub-section. That ‘crystallisation’ equally means that the proposed amended plan (Plan H) was what K7 then intended as the final plan of subdivision. This was confirmed by emails between Mr Bao Nguyen and the Architect on 26 February 2016, just before the notice was given to Harris’ solicitor of the ‘updated plan subdivision for your client’s attention’.[59] In that exchange, Mr Bao Nguyen suggested that Plan H was not up to date and the Architect responded that they were not aware of any other changes.
[58]Transcript 158.
[59]CB 385C and 386 and cross-examination of Mr Vu Nguyen at Transcript 159-160.

Notwithstanding that Mr Vu Nguyen claimed that the allocation of car spaces and storage cages had not been finalised at the time Plan H was notified to Harris,[60] I am unable to accept that the notification of Plan H was not objectively to be considered by the reasonable observer to be the final plan of the Canterbury Hill development. The notification of Plan H involved a positive step of amendment and disclosed a definitive statement of intent. The right of Harris to rescind if the proposed amended plan renounced or repudiated the obligations of K7 under the Contract cannot be deferred at the whim of K7 because it subjectively considered that the plan was not final. The argument of K7 amounts to allowing the defendant to provide multiple versions of the plan of subdivision that did not comply with the Contract without being exposed to the charge that by doing so it has renounced its obligations under the Contract, particularly SC 38.
[60]Transcript 162.

Further, bald statements of compliance are not relevant when determining whether a party is ready, willing and able to perform the contract. As Smith J noted in Rigg v Lee Loy Seng, an intention not to be bound by a contract ‘may be inferred despite professed willingness to go on with the contract.’[61] This is particularly so when the defendant is in the same breath stating their opinion that it is unlikely they will be able to provide the plaintiff with what is in the contract. As Devlin J noted in Citati, the standard is whether a reasonable person would assume the party intends to be bound by the contract.[62] In my opinion, a reasonable person would not conclude that the defendant intended to be bound by the contract in this case.
[61][1987] WAR 333, 361.
[62][1957] 2 QB 401, 436.

It is clear, in my view, that K7 was not ready, willing and able to perform the Contract by providing two adjacent car parks when they provided Plan H to Harris. Plan H was not compliant with SC 38, K7 had not turned its mind to complying with the Contract’s terms, and were labouring under the misunderstanding that the Plan provided to the plaintiff was not ‘final’ evidence of their intention to be bound by the Contract.

In the circumstances where:

(a) K7 claims that Harris’ rescission of the Contract was wrongful and itself a repudiation, which K7 accepted, bringing the Contract to an end; and

(b) Harris’ readiness and willingness to perform his side of the Contract was not put in issue by K7,

it is not incumbent on Harris to prove that he was ready, willing and able to perform his part of the bargain in order to be entitled to rescind for K7’s repudiation.[63]

[63]Foran v Wight (1989) 168 CLR 385, 451-2 (Dawson J); see also Hensley v Rescke (1914) 18 CLR 452.

The letter by which Harris’ solicitors purported to rescind the Contract for K7’s breach of SC 38 (the letter dated 11 March 2016 referred to at [19] above),[64] relied (when read carefully) on both s 9AC of the SLA and breach of an essential condition for the rescission of the Contract. To the extent that the letter may not have been completely clear that Harris exercised his common law right to rescind for breach of an essential condition, particularly because the letter rolls together the failure to provide two adjacent car parks with the failure to provide two free standing storage cages, the law treats rescission on the basis of any breach as effective as long as there is a basis at law for claiming the rescission.[65] As such, the plaintiff’s rescission was effective from 11 March 2016.
[64]443 CB.
[65]Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359, 378 (Dixon J); Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245, 262 (Mason CJ)(Deane, Dawson and Toohey JJ agreeing), 277-80 (Gaudron J).

I note that neither party contended that General Condition 27 was engaged in the circumstances so as to require a notice of default to be given. That position was correct, as in case of a repudiation or renunciation which is accepted by the other party, that condition does not operate to require a notice of default.[66]
[66]Walters v Cooper [1967] VR 583, 586; Loughridge v Lavery [1969] VR 912, 923; Thornton v Bassett [1975] VR 407, 431, Poort v Development Underwriting (Vic) Pty Ltd (No 2) [1977] VR 454, 460; Nund v McWaters [1982] VR 575, 589; Rigg v Lee Loy Seng [1987] WAR 333, 354.

That conclusion is sufficient to resolve the disputes between the parties and entitles Harris to damages measured by a return of the deposit and interest.

In case I am found to have erred in the above analysis, however, and because the second ground for termination and recovery of the deposit, pursuant to s 9AC of the SLA, was argued, I consider that I should deal with it.

Termination under s 9AC of the SLA

The second cause of action relied upon by Harris is that the Contract was validly terminated under s 9AC(2) of the SLA by reason of a proposed amendment of the plan of subdivision (Plan H) that materially affected the lot within the meaning of s 9AC of the SLA.[67] The material change between the Contact Plan E and Plan H, is the removal of a full length storage cage shown on the Contact Plan E.
[67]Amended Statement of Claim, [19].

K7 accepted that the full length storage cage shown on the Contract Plan E did not appear on Plan H, but denied that it materially affected the lot within the meaning of s 9AC of the SLA, or at all.[68] It was not the final version of the Plan. There was, accordingly, no basis to rescind the Contract under s 9AC(1) of the SLA.
[68]Further Amended Defence [19].

Interpretation

Division 1 of Part 1 of the SLA includes a group of sections dealing with the sale of land prior to approval of a plan of subdivision.[69] By s 9AA(7), in those sections a prescribed contract means a contract of sale of a kind referred to in s 9AA(1). Section 9AA(1) prohibits the sale of a lot in a plan of subdivision[70] if the plan has not been registered by the Registrar of Titles unless the contract provides for the deposit of not more than 10% of the purchase price to be held on trust (by certain kinds of person) until registration of the plan. So a contract that so provides is a contract of that kind. The Contract in this case is one of that kind, and thus a prescribed contract.
[69]SLA ss 9AA - 9AF, 10.
[70]Other than a contract of sale to a statutory body or authority.

Section 9AC concerns amendments to plans of subdivision and provides:

(1)If after a prescribed contract has been entered into and before the registration of the relevant plan of subdivision an amendment to the plan is required by the Registrar or requested by the vendor, the vendor shall within 14 days after the receipt of the requirement of the Registrar or the making of the request by the vendor (as the case requires) advise the purchaser in writing of the proposed amendment.
(2)The purchaser may rescind a prescribed contract of sale within 14 days after being advised by the vendor under subsection (1) of an amendment to the plan of subdivision which will materially affect the lot to which the contract relates.

Sub-section (1) thus imposes on the vendor an obligation to advise (in the sense of inform or notify) the purchaser of any amendment to the plan where, before registration of the plan, either the Registrar requires or the vendor requests an amendment. Sub-section (2) then gives the purchaser a right, one might call it an election, to rescind (meaning terminate) the contract within 14 days after being so advised of ‘an amendment to the plan of subdivision which will materially affect the lot to which the contract relates’. If the purchaser rightly rescinds the contract pursuant to s 9AC of the SLA, the purchaser is entitled to the immediate return of the deposit moneys: s 9AF(1).

It was common ground that the Contract was a prescribed contract and that K7 had requested a change to the plan of subdivision and was required to advise Harris in writing of the proposed amendment.

There are a number of matters arising out of these provisions that can be stated:

(a) the section is remedial in nature, the object of which is to protect purchasers of land where the sale takes place before the plan of subdivision is registered, that is sales off-the-plan.[71] It should therefore be interpreted beneficially and as generously, to give the most complete remedy, as the language of the section allows;[72]
[71]Recent amendments to the SLA substitute for ‘prescribed contract’ in s 9AC the newly defined term off-the-plan contract: Sale of Land Amendment Act 2019 (Vic) s 7.
[72]Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622, 638; Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594, 623 (McHugh J); Devenish v Jewel Food Stores Pty Ltd (1991) 172 CLR 32, 44 (Mason CJ); Webb Distributors (Aust) Pty Ltd v State of Victoria (1993) 179 CLR 15, 41; Nilant v Macchia (2000) 104 FCR 238, 247 (Weinberg J); In relation to s 9AC of the SLA, see JD No 6 (Dava) Pty Ltd & Anor v P Battlay Holdings Pty Ltd [2011] VSC 353, [42] (Croft J); Ausgrand [2016] VCC 942, [39] (MacNamara J).

(b) plan of subdivision is used in the section to refer to the unregistered plan. This follows from the wording of the provision. The plan at this stage has been given a plan number by the Registrar of Titles making such numbers available when a draft plan is submitted to a Council for certification, a referral authority for consent or lodged with the Registrar;[73]
[73]Subdivision (Registrar's Requirements) Regulations 2011(Vic) reg 6.

(c) plan of subdivision means the totality of the scheme and arrangement by which property is to be subdivided, including the lot entitlements and liabilities.[74] When considering whether an amendment materially affects a lot it is necessary to consider the ’lot’ as a bundle of rights, including the benefits and burdens that are determined by reference to the lot, such as the lot entitlements and liabilities and any other benefit or burden that depends on the contractual or putative proprietary rights accompanying the lot in question, such as storage cages and car parks;[75]
[74]Besser v Alma [2012] VSC 460, [8] (Besser).
[75]Besser [2012] VSC 460, [8]; Lockwood v PSP Investments Pty Ltd [2013] VSC 10, [36]-[42] (Lockwood).

(d) the words amendment to the plan … requested by the vendor should be construed broadly to include an amendment resulting from a stipulation by the Council or by a referral authority (as defined in the Subdivision Act 1988).[76] Indeed, an amendment made for the purpose of any building or architectural requirement would equally qualify as an amendment requested by the vendor. They are the vendor’s agents for that purpose. Moreover, amendments resulting from stipulations by the Council or a referral authority will usually be made by the surveyor at the request of the vendor and as a result of the vendor accepting that it must be made in order for the plan to be certified by the Council or approved by the referral authority;
[76]JD No 6 (Dava) Pty Ltd & Anor v P Battlay Holdings Pty Ltd [2011] VSC 353, [42]-[43] (Croft J), and Ausgrand [2016] VCC 942, [39]-[40] (MacNamara J).

(e) whether a proposed amendment of a plan of subdivision will materially affect the lot to which the contract relates must be determined objectively, by the objective facts and circumstances;[77]

(f) an amendment to the plan of subdivision which will materially affect the lot to which the contract relates may be established by production of the contract containing the initial plan and comparing it with the amended plan;[78]

(g) section 9AC does not limit the right of rescission to a time before registration of the plan.[79]

[77]Bassingthwaighte v Butt [1982] Qd R 670; Deming No 456 Pty Ltd v Brisbane Unit Development Corporation Pty Ltd (1983) 155 CLR 129 (Deming); Besser [2012] VSC 460, [10].

[78]Lockwood [2013] VSC 10, [44].

[79]Lockwood [2013] VSC 10, [21].

Materially affect the lot

There was ultimately no dispute between the parties concerning the application of the provision apart from whether the amendments revealed by the relevant differences between Contact Plan E and Plan H will ‘materially affect the lot’ to which the Contract relates. Although the source of the proposed amendments to the Contract Plan E evidenced by Plan H were not raised by the pleading, in opening or in the written outline of submissions, in oral submissions at one point Counsel for K7 suggested that the amendment in this case was not one requested by the vendor within the meaning of that expression in s 9AC(1) of the SLA.[80] Later, he denied that suggestion.[81] To avoid any doubt, for the reasons given above I reject that submission (see [88(d)]).
[80]Transcript 250-251.
[81]Transcript 269.

The word materially in this context means to an important degree, considerably.[82] There are a number of decisions concerning the corresponding, but different, legislation in Queensland, and an analysis of the differences by a Judge of this Court, that are of some assistance.
[82]Macquarie Dictionary (6^th ed, 2013) ‘materally’ (def 1).

In Deming[83] the Queensland Building Units and Group Titles Act 1980 required an original proprietor (in this case effectively the vendor) of a lot on certain plans of subdivision proposed to be registered to give to the purchaser certain information, including information about the proposed lot entitlements and aggregate lot entitlements and to give notice if there is any change. The purchaser was entitled, after becoming aware of the change, to avoid the contract if he proves his rights have been materially affected by the change.
[83](1984) 155 CLR 129.

The appeal in that case arose from a successful summary judgment application by the vendor, who sued for specific performance of the contract. The purchaser raised several arguments arising under the legislation. The only one relevant for present purposes is whether an approximate 10% change in unit entitlements arguably materially affect the rights of the purchaser so that the claim should have gone to trial rather than be determined on a summary judgment application.

The majority considered that the change raised a question as to material affectation that should have been allowed to go to trial.[84] Wilson J (who dissented in the appeal, but not on this point) was the only Judge who gave consideration to the meaning of the expression. He observed:

(a) the rights of the purchaser of the lot the subject of the purchase will be materially affected if the amendment will operate to the prejudice of the purchaser to a significant extent. It is a question of fact and degree;[85]

(b) if the amendment is not insignificant and has the effect of changing the substance of that contracted for, that will materially affect the rights of the purchaser.[86]

[84]Deming (1983) 155 CLR 129, 139 (Gibbs CJ), 152 (Mason, Deane and Dawson JJ), 168 (Wilson J).

[85]Deming (1983) 155 CLR 129, 166 (Wilson J).

[86]Ibid 169.

In a later case concerning the same Queensland legislation, it was held that materially affect means to affect the purchaser’s rights deleteriously in some way.[87]
[87]Gold Coast Carlton Pty Ltd v Wilson [1985] 1 Qd R 182, 189 (Andrews SPJ). But see the observations of Judd J in Lockwood [2013] VSC 10, [14]-[20].

The Queensland and Victorian provisions are obviously different, as Judd J noted in Lockwood:[88]

The reasoning of Wilson J concerned a different statutory regime. Section 49(4) of the Queensland Act was concerned with the ‘rights of the purchaser’. That of itself may invite a more wide‑ranging inquiry than one limited to the effect (sic) of an amendment on ‘the lot’. There may, however, be a significant overlap between factors that will materially affect a lot and those which affect the rights of the purchaser under the contract. After all, s 9AC(2) refers to ‘the lot to which the contract relates’, in the context of a purchaser’s right to rescind that contract.
There is much to be said for the proposition that an amendment to a plan that has a material effect on the lot to which the contract relates, has a corresponding effect on the rights of the purchaser. On the other hand, the rights of the purchaser may be affected by factors other than those that affect the lot. …

[88][2013] VSC 10, [14]-[15].

The provisions of the Queensland Act are significantly different from the Victorian in both the extent of the obligations cast on the vendor and the content of the rights of the purchaser to avoid the contract. In particular, in Queensland the purchaser’s right to avoid the contract is conditioned by reference to their rights having been materially affected. The differences in the legislation may well justify the introduction in the Queensland legislation of an implied requirement that the rights of a purchaser be deleteriously or adversely affected, but there is no need for any such implication in s 9AC(2) of the SLA.[89] Nevertheless, a change found to be adverse to the interests of a purchaser may more readily translate into one that will be found to ‘materially affect the lot’.[90]
[89]Lockwood [2013] VSC 10, [24].
[90]Ibid [26].

In Lockwood, Judd J referred to and quoted from the decision of Pagone J in Besser, and said:

I would respectfully agree with the conclusion of Pagone J that the amendment need not be detrimental. In my view, the purpose of the legislation requires no such qualification to be made to the requirement that the amendment ‘will materially affect the lot’. Section 9AC was inserted into the Sale of Land Act in 1985[91] and amended in 1988[92] to its present form. The second‑reading speeches offer little assistance in the construction of the provision, other than to disclose the obvious purpose to protect the interests of those purchasing ‘off the plan’ in the event of a change to the plan. …[93]

[91]Act No 10216.

[92]Act No 53/1988.

[93]Lockwood [2013] VSC 10, [20].

The effect of these decisions is that:

(a) The words materially affect the lot to which the contract relates mean that the proposed amendment will affect the lot considered as a bundle of rights to an important or significant degree;

(b) the proposed amendment need not be detrimental, deleterious or adverse to the lot for there to be a material affect on the lot;

(c) the degree of affect on the lot is a question of fact in the context of the particular plan of subdivision;

(d) a change found to be adverse to the interests of a purchaser may more readily translate into one that will be found to materially affect the lot.

K7 acknowledged in its pleading, evidence and submissions that the Contract required the provision of two storage cages to Harris at settlement and maintained that its obligations under the Contract would be fulfilled by the provision of two storage cages, including a cage or cages over the bonnet of the car park spaces, but without specifying how that would be achieved. Importantly to this issue, however, Plan H included no storage cage on the plan of subdivision as was provided by Contract Plan E, a standalone full length storage cage actually depicted on the plan itself as being a part of lot 306.

The evidence of the difference between an over the bonnet storage cage and a full length standalone storage cage was illustrated both by photographs[94] and by the evidence of Harris to which I refer below when considering the misleading or deceptive conduct claim.
[94]CB 288-9.

Harris submitted that the loss of the standalone storage cage from the plan was material, as the change from Contract Plan E to Plan H had the effect of removing all external storage to be provided to Harris. The existence or otherwise of external storage for the apartment was objectively capable of affecting whether or not a purchaser would have bought lots 306 and 307, making it material that the storage cage was removed.

Harris also submitted that the reference in s 9AC(2) of the SLA to an amendment to the plan of subdivision meant that the comparison process involved only comparing the contracted plan with the proposed amended plan, without reference to what is elsewhere provided under the Contract, in this case by reference to the Schedule of Finishes, Fixtures and Fittings in Annexure A to the Contract and the Architects drawings, which is where the over the bonnet storage cage or cages were specified.

The alternate construction is that whether an amendment to the plan of subdivision will materially affect the lot to which the contract relates involves a consideration of the Contract as a whole and not just, in this case, the difference between Plan E and Plan H. It is possible that the words the lot to which the contract relates bring with them a comparison between the Contract Plan E and Plan H in the context of the Contract as a whole. In this case that would involve assessing the materiality of the amendments made in Plan H by reference to the total storage space provided under the Contract.

In my view the proper construction of s 9AC of the SLA does not involve bringing into account the other benefits given under the Contract and not referred to in the plan of subdivision. That is, the material affectation must be evident from a comparison of the two plans of subdivision, in this case Contract Plan E and Plan H.

The decisions in Besser, Lockwood and Ausgrand all turn on their own facts on this issue. To the extent that they assist, the closest analogue is the decision in Ausgrand where Judge MacNamara concluded that the reduction of a car park from 2.73m wide to 2.6m wide was material, holding:

[i]t is difficult to accept that one’s lot is not materially affected, and aversely for that matter, by having its car park transformed from one of superior dimensions to the minimum statutory requirement.[95]

[95]Ausgrand [2016] VCC 942, [46].

In addition, his Honour concluded that the addition of a tilt up concrete wall, abutting more than half of the parking space, was a material change.[96] The alterations to the car park in Ausgrand affected its usability.
[96]Ausgrand [2016] VCC 942, [45].

The change in Plan H when compared with Contract Plan E removed the standalone storage cage altogether. This goes further than merely affecting the usability of the lot sold. This amendment would affect the lot and the rights of the lot owner adversely, by removing a not inconsiderable amount of basement floor space as a part of Harris’ title which K7 contracted to provide. In that sense, the removal of the full length standalone storage cage would materially affect lot 306 by removing a material part of it. The storage cage depicted on Contract Plan E ‘belonged’ to the apartment comprising lots 306 and 307. Taking it away affects Lot 306, as those two lots became.

Further, in my view, both the photographic evidence, and the evidence given by Harris of his experience, establish that there is a material difference between over the bonnet storage cages and standalone storage cages in that over the bonnet storage cages limit the items that can be stored based on weight, volume and manoeuvrability that do not exist with standalone storage cages. The presence of a standalone storage cage to be provided under the Contract Plan E was objectively capable of affecting whether or not a purchaser would have bought lots 306 and 307. Thus by removing the standalone storage cage, the amendment to the plan of subdivision proposed by Plan H was one which will materially affect the lot to which the contract relates.

Accordingly, under this claim the plaintiff is entitled to succeed and to recover the deposit paid, plus interest and costs.

Misleading or deceptive conduct claim

In his Amended Statement of Claim, Harris claims that on 13 December 2014 it was represented to him that if he purchased two lots, he would receive two storage cages and they would both be full length (as in, not over the bonnet in the car spaces).[97]
[97]Amended Statement of Claim, [5(b)(iii)] and [6]].

In evidence, Harris said the representation as to the storage cages was made to him by Ms Wickham of CBRE shortly before he signed the Contract on 19 February 2015. He identified a version of the proposed plan of subdivision shown to him by the agent before he signed the Contract (Pre-contact Plan E). This version of the Plan shows two storage cages at ground level, one marked ‘306’ and the other as ‘307.’ It also shows two car spaces, one freestanding (marked pt 307) and the other in a stacker identified as CP 3 (common property No 3) indicated by the number ‘306’.

Harris gave evidence that:

(a) he had been living in a unit in Camberwell Road Camberwell which had an over the bonnet storage cage that was ‘a nightmare’ because the vehicle had to be moved to access the storage, a ladder was needed to get things in and out and it was not practical for heavy items.[98]

(b) Wickham offered, as an incentive to get Harris to purchase the combined lots, two full-length storage cages, and she said that that was quite unusual for the developer to offer, and that that was an incentive for him to purchase.[99] This happened very shortly before Harris signed the Contract, and as an incentive for Harris to sign before the price of the units went up.

(c) the two full length storage cages that Ms Wickham represented would be included in the Contract were incredibly important to him and without them he would not have purchased the property.[100] Ms Wickham was not called to give evidence.

[98]Transcript 33.

[99]Transcript 34.

[100]Transcript 39-40.

The conversations constituting the alleged representations by Ms Wickham occurred after the other terms of the Contract, including the sketch plan and special condition for the combination of lots 306 and 307 into one lot and SC 38, had been negotiated and agreed.

The cross-examination of Harris focused on two matters. First, until the amended statement of claim was filed in June 2017, there was no positive allegation of this representation, particularly by Ms Hani in correspondence leading up to the rescission, and in rescinding, the Contract. Second, that even in the amended statement of claim, the date on which the representation was allegedly made was wrong.

In relation to the first matter, the explanation for there having been no earlier mention of the misleading or deceptive conduct is substantially the result of Ms Hani having received Pre-contract Plan E as a part of the vendor’s statement supposedly attached to the Contract. Although Ms Hani was not called to give evidence, the admission into evidence of the email of 20 February 2015 and its attachments (referred to above at [31]) clearly showed on the balance of probabilities that Ms Hani was writing on the basis that Pre-contract Plan E was in fact what was included as a part of the vendor’s statement attached to the Contract. No reference to any misrepresentation would have been relevant to her contention that Harris was entitled to receive the two storage cages as depicted on the Pre-contract Plan E.

This conclusion is reinforced by the evidence that Harris gave about the making of the representations by Ms Wickham of CBRE. His evidence was clear and, despite the quite vigorous cross-examination undertaken by Counsel for K7, unshaken. I was impressed with Harris’ evidence and consider it to be truthful and was corroborated by the Pre-contract Plan E sent on 20 February 2015 by CBRE to Ms Hani. Harris appeared to me to present his evidence in an honest, forthright and genuine manner.

An error by the plaintiff or the plaintiff’s lawyers as to the date of the pre-contractual representation is not a basis for finding that his evidence is untruthful and should not be accepted. It is notorious that witnesses’ recollection of dates is often imperfect.

Further, Ms Wickham has not been called to give evidence in answer to the plaintiff’s evidence. No explanation has been given as to why she was not called. In accordance with Jones v Dunkel, this unexplained failure to call Ms Wickham may lead to an inference that the uncalled evidence would not have assisted K7’s case.[101] I am in no doubt that this is a case where that inference must apply. There was no serious argument to the contrary. Accordingly, this reinforces my conclusion that the balance of probabilities favours a finding that the representation was made.
[101](1959) 101 CLR 298, 312, 319.

Harris’ evidence was clear that he entered into the Contract in reliance on the representation. Harris attested to the importance of standalone storage cages to him, and he made this known to Ms Wickham. I accept that he was induced to enter into the Contract by the representation that he would receive two full-length storage cages as depicted in Pre-contract Plan E and which his solicitor plainly thought he had a contractual right to receive. I do so notwithstanding that Harris signed the Contract which was at variance with the representation.

Counsel for K7 submitted that Harris should be taken to have entered into the Contract with his eyes open. K7 relied on the execution of the Contract by Harris in circumstances where:

(a) the Contract did not mandate that there would be two standalone full length storage cages;

(b) SC 17 empowered K7, in its absolute discretion, to unilaterally allocate any storage cage to a lot prior to the settlement date;

(c) SC 20 empowered K7 to make such alterations to the plan of subdivision as it requires.

In relation to this point there are several answers. First, the Contract had been negotiated against the backdrop of Pre-contract Plan E which clearly included two full length standalone storage cages. That particular version of the plan was even sent to Harris’s solicitor as a part of the vendor’s statement attached to the Contract. Second, it takes a close analysis of the plan contained in the vendor’s statement to identify the fact that the Contract Plan E is different from the Pre-contract Plan E. The failure to identify the change at the time of execution is easily understood when these facts are taken into account. Third, there was no cross-examination of Harris about whether he noticed that the Contract Plan E included in the vendor’s statement attached to the Contract was different from the Pre-contract Plan E that he was shown by Ms Wickham before the Contract was executed.[102]
[102]Transcript 35-6.

The representations were as to future matters. Their veracity is to be assessed by reference to whether or not the defendant had a reasonable basis when making them.[103] The defendant is presumed to lack any reasonable basis unless evidence is adduced to the contrary.[104] No such evidence was adduced. There was no dispute that the Contract did not provide for two standalone full length storage cages at its inception. When Plan H was notified to Harris that position continued without change. The burden of proof to establish that the representation was not misleading rests on K7 and it has not been discharged, indeed in the face of Pre-contract Plan E it is difficult to see how the burden could be discharged.
[103]Competition and Consumer Act 2010 (Cth) sch 2; ACL s 4(1).
[104]ACL s 4(2).

K7 contended that whether the representation was false cannot be determined until the time for settlement arose, that is after registration of the plan of subdivision. That time was far into the future and the Contract was brought to an end before K7 had an opportunity to finalise the allocation of storage cages and complete the Contract. In my view, the notification of the Plan H must be taken to be a statement of what K7 intended to deliver under the Contract, for the same reasons I have given in my consideration of the same argument advanced by K7 in relation to the repudiation claim.

There is no dispute that s 18 of the ACL is applicable and proscribes conduct in trade or commerce that is misleading or deceptive or likely to mislead or deceive.[105] Nor is it in dispute that neither SC 17 nor SC 20 can oust the operation of s 18 of the ACL and the consequential power of the Court under s 237 of the ACL. Harris has suffered, or is likely to suffer, damage because of the false or misleading representation made by Ms Wickham. The damage is the loss of the deposit paid, in effect, by the provision of a bank guarantee, at least. That opens up the range of remedies available under s 237 of the ACL, which includes such order or orders as the Court thinks appropriate, including without limitation, those described in s 243 of the ACL.
[105]In this case s 30(1)(e) of the ACL is also applicable.

In this case, the appropriate order is a declaration that in the circumstances the purported rescission by Harris, if not otherwise valid, is declared to be effective to end the Contract and an order for the repayment of the deposit, with interest.

Section 49(2) of the PLA

In light of these conclusions, it is unnecessary to deal with the question whether in this case Harris should have an order under s 49(2) of the PLA for the return of the deposit.

Conclusions

The plaintiff succeeds in his claim for a declaration that he has validly rescinded the Contract and the return of the deposit of $85,000 together with interest. I will hear the parties as to the terms of the declarations and orders to be made.

“A”

Pre-contact Plan E

“B”

Contact Plan E

“C”

Plan H

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20 August 2019