Highfield Property Investments Pty Ltd v Commercial & Residential Developments (SA) Pty Ltd

[2012] SASC 165

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

HIGHFIELD PROPERTY INVESTMENTS PTY LTD v COMMERCIAL & RESIDENTIAL DEVELOPMENTS (SA) PTY LTD

[2012] SASC 165

Judgment of The Honourable Justice Blue

24 September 2012

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS

CONVEYANCING - STATUTORY OBLIGATIONS OR RESTRICTIONS RELATING TO CONTRACT FOR SALE - PROTECTION OF PURCHASERS - COOLING OFF PERIOD

CONVEYANCING - STATUTORY OBLIGATIONS OR RESTRICTIONS RELATING TO CONTRACT FOR SALE - PROTECTION OF PURCHASERS - OBLIGATIONS ON VENDOR: DISCLOSURE, WARNINGS AND LIKE MATTERS

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - IMPLIED TERMS - GENERALLY

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - REPUDIATION AND NON-PERFORMANCE - ELECTION AND RESCISSION

EQUITY - GENERAL PRINCIPLES - UNCONSCIONABILITY, UNCONSCIONABLE DEALINGS AND OTHER FORMS OF EQUITABLE FRAUD - GENERALLY

The plaintiff (Highfield) contracted with the first defendant (Commercial), acting as agent for the second defendant, as undisclosed principal, to sell a residential flats property after Commercial exercised an option pursuant to an option agreement. Clause 11 of the option agreement required Highfield to serve on Commercial a vendor’s statement pursuant to section 7 of the Land and Business (Sale and Conveyance) Act 1994 (SA).

Two days before settlement, Commercial purportedly rescinded the contract for misrepresentation because the property contained asbestos. Ultimately, Highfield purportedly terminated the contract for breach and/or repudiation.  Highfield claims damages for loss of the bargain and Commercial counterclaims for return of its deposit of $100,000.

The defendants contend that Commercial validly terminated the contract for breach of an essential term requiring service of a complete and accurate vendor’s statement (which was broken by non-disclosure of asbestos) or alternatively Highfield was not ready, willing and able to perform an interdependent condition being service of a complete and accurate vendor’s statement.

Whether it was a term of the land sale contract that Highfield serve an accurate vendor’s statement – whether service was required 10 days before or by settlement – whether the term was rendered void by section 33 of the Act – whether the vendor’s statement was required to disclose asbestos – whether the term was an essential term of the contract – whether Commercial was entitled to terminate for breach – whether Commercial’s acts were sufficient to effect termination of the contract – whether the term was interdependent with Commercial’s obligation to settle – whether Commercial was in breach of an implied term requiring cooperation – whether Commercial was guilty of unconscionable conduct – whether Commercial was ready, willing and able to settle – whether Highfield was ready, willing and able to comply with its obligation to serve a complying vendor’s statement – whether any breach of the term by Highfield precluded its terminating or claiming loss of bargain damages – whether Commercial by its conduct dispensed with further performance of the vendor’s statement obligation.

Held:

1. Clause 11 of the option agreement imposed an independent contractual obligation on Highfield. It required service of a vendor’s statement by settlement. It was not rendered void by section 33 of the Act.

2.      Clause 11 was not incorporated as a term of the land sale contract.

3. Highfield was not proved to be in breach of clause 11 because it was not proved that the property was not “a private residence” within the meaning of the Regulations.

4.      The term would not any event have been an essential term of the land sale contract.

5.      Commercial was not entitled to terminate the contract.

6.      If Commercial had been entitled to terminate the contract, its acts of repudiation were sufficient to have that legal effect.

7.      If the term had been an essential term, it would have been interdependent with the purchaser’s obligation to settle. As Commercial was not ready, willing and able to settle, Commercial was not entitled to terminate the contract.

8. If the vendor’s statement term was a term, but not an essential term, of the contract, it would have been independent of the purchaser’s obligation to settle. Section 7 of the Act did not postpone a purchaser’s obligation to settle in the absence of receipt of a complying vendor’s statement, nor did it imply a term into the contract to that effect. Any breach of the term would not therefore have disentitled Highfield from terminating.

9.      If the term was interdependent, Commercial by its conduct dispensed with further performance of the obligation.

10.    Commercial was not in breach of an implied term requiring cooperation nor was it guilty of unconscionable conduct so as to preclude it from terminating the Contract or resisting Highfield’s termination.

11.    Highfield validly terminated the contract for breach and repudiation. Highfield is entitled to judgment against either Commercial or College at its election for $2,420,247.93 calculated to 13 August 2012.

Acts Interpretation Act 1915 (SA) s 14A, s 26; Fair Trading Act 1987 (SA) s 84, s 85; Land and Business Agents Act 1973 (SA); Land and Business (Sale and Conveyancing) Act 1994 (SA) s 5, s 7, s 10, s 11, s 14, s 15, s 16, Part 2, 241; Land and Business (Sale and Conveyancing) Regulations 1995 (SA) Regs 7, 8, 9, 18; Sale of Goods Act 1895 (SA) s 28; Statutes Amendment (Real Estate Industry Reform) Act 2007 (SA); Occupational Health, Safety and Welfare (Asbestos) Regulations Act 1991 (SA); Occupational Health, Safety and Welfare Regulations 1995 (SA) 4.2.10; Body Corporate and Community Management Act 1997 (Qld) s 206, s 213; Conveyancing Act 1919 (NSW) s 52A, s 66S, s 66U; Civil Law (Sale of Residential Property) Act 2003 (ACT) s 10, s 12; Sale of Land Act 1962 (Vic) s 31, s 32; Strata Titles Act 1985 (WA) s 69; Property Agents and Land Transactions Act 2005 (Tas) s 186; Property Agents and Motor Dealers Act 2000 (Qld) s 369; Trade Practices Act 1974 (Cth) s 51AA, s 51AC s 52, s 53A, s 82, s 87, referred to.
Commonwealth Homes and Investment Co Ltd v MacKellar (1939) 63 CLR 351; Foran v Wight (1989) 168 CLR 385; Landers v Schmidt [1983] 1 Qd R 188; NCR Securities Pty Ltd v Ballard [2004] QSC 31; Park v Brothers [2005] HCA 73; (2005) 80 ALJR 317, applied.
Amann Aviation Pty Ltd v Commonwealth of Australia (1990) 22 FCR 527 ; British and Benningtons Ltd v NW Cachar Tea Company Ltd [1923] AC 48; Cobbold v Abraham [1933] VLR 385; Grant v Langston [1900] AC 383; Ilford Park Estate Limited v Jacobs [1903] 2 Ch 522; Kimber v Admans [1900] 1 Ch 412; Minion v Graystone Pty Ltd [1990] 1 Qd R 157; Myles Pearce & Co Pty Ltd v Leuci [1997] SASC 6360; (1997) 193 LSJS 491; Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235; Post Investments Pty Ltd v Wilson (1990) 26 NSWLR 598; Roadshow Entertainment Pty Ltd v CEL Home Video Pty Ltd (1997) 42 NSWLR 462; Rogers v Hosegood [1900] 2 Ch 388; Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359; The Yorkshire Fire and Life Insurance Company v Clayton (1881) 8 QBD 421; Williams v Frayne (1937) 58 CLR 710, discussed.
ACN 096 278 483 Pty Ltd v Vercorp Pty Ltd [2011] QCA 189; Alati v Kruger (1955) 94 CLR 216; Alcatel Australia Limited v Scarcella (1998) 44 NSWLR 349; AR Cos Ltd v EA Ronaasen & Son [1933] AC 470; Ashdown v Kirk [1999] 2 Qd R 1; Astill v South Esplanade Developments Pty Ltd [2007] SASC 231; (2007) 249 LSJS 334; Associated Newspapers Ltd v Banks (1951) 83 CLR 322; Attorney-General v Mutual Tontine Westminster Chambers Association (1876) 1 Ex D 469; Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435; Burger King Corporation v Hungry Jack’s Pty Ltd [2001] NSWCA 187; Byrne v Australian Airlines Ltd (1995) 185 CLR 410; Canberra Advance Bank Ltd v Benny [1992] FCA 530; (1992) 38 FCR 427 ; Gator Shipping Co v Trans-Asiatic Oil Ltd SA (the Odenfeld) [1978] 2 Lloyd’s Rep 357; Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (1992) 11 WAR 40; Green v Summerville (1979) 141 CLR 594; Highmist P/L v Tricare Ltd [2005] QCA 357; Holland v Wiltshire (1954) 90 CLR 409; Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91; Huntoon Co v Kolynos (Inc) [1930] 1 Ch 528 ; Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26; Jeppesons Road P/L v Di Domenico [2005] QCA 391; Kennedy v Panama Royal Mail Co (1867) LR 2 QB 580; Khoury v Government Insurance Office of New South Wales (1984) 58 ALJR 502; Lakshmijit v Sherani [1974] AC 605; Legione v Hateley (1983) 152 CLR 406; Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286; Maguire v Makaronis (1996) 188 CLR 449; Mathews v Brodie (Unreported, McGarvie J, Supreme Court of Victoria 2 April 1980); McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457; Motor Accident Commission v Curzons [2012] SASCFC 22; Munns v Watson [1937] VLR 178; Newbon v City Mutual Life Insurance Society Ltd (1935) 52 CLR 723; Newcombe v Newcombe (1934) 34 SR (NSW) 446; Nina's Bar Bistro Pty Ltd v MBE Corporation (Sydney) Pty Ltd [1984] 3 NSWLR 613; Pordage v Cole (1669) 1 Saund 319; 85 ER 449; R v Staker [2011] SASCFC 87; Rawson v Hobbs (1961) 107 CLR 466 at 480; Renard Constructions (ME) Pty Ltd v Minister of Public Works (1992) 26 NSWLR 234; Sargent v ASL Developments Ltd (1974) 131 CLR 634; Secured Income Real Estate (Australia) Pty Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596; Shipton, Anderson & Co v Weil Bros & Co [1912] 1 KB 574; State Trading Corporation of India Ltd v M Golodetz Ltd [1989] 2 Lloyds Rep 277; Stern v McArthur (1988) 165 CLR 489; Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245; Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; Symbion Medical Centre v Alexander [2010] NSWSC 1047; Tanwar Enterprises Pty Ltd v Cauchi (2003) 201 ALR 359; Tropical Traders Ltd v Goonan (1964) 111 CLR 41; Vitol SA v Norelf Ltd [1996] AC 800; Walsh v Tattersall [1996] HCA 26; (1996) 188 CLR 77; Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105, considered.

HIGHFIELD PROPERTY INVESTMENTS PTY LTD v COMMERCIAL & RESIDENTIAL DEVELOPMENTS (SA) PTY LTD
[2012] SASC 165

Table of Contents

A. COURSE OF THE LITIGATION

The proceedings

The trial

B. FACTUAL BACKGROUND

The parties

The College Street land parcels

The option agreement

The proposed development

The contract

The proposed development

Commercial’s notice of rescission

Highfield’s attendance for settlement and subsequent communications

Highfields’s notice of termination

C. DISPUTED FACTS

Existence of asbestos

Knowledge of purchaser of asbestos

Knowledge of vendor of asbestos

Decision not to proceed with purchase

Decision to terminate contract

D. CONSTRUCTION OF THE ACT

The legislative regime

Primary obligations
Consequences of non compliance
Exceptions to the right of rescission
The original legislative regime
The 1974 amendments
The 1982 and 1985 amendments
The 1990 amendments
Interstate mandatory disclosure regimes

Legislative purpose of vendor’s statements for corporate purchasers

Legislative effect on settlement of land purchase contracts

Implication of term into land purchase contracts
Implication of term requiring vendor’s statement
Implication of term postponing settlement obligation until complying vendor’s statement

E. CONSTRUCTION OF THE CONTRACT

1. Contractual v statutory obligation

2. Timing of obligation

3. Invalidation of clause 11 by section 33

4. Incorporation of clause 11 as a term of the Contract

5. Vendor’s statement term an essential term

6. Independent or interdependent obligations under the Contract

Independent and dependent obligations
Is the vendor’s statement term independent or interdependent?

7. Implication of term postponing settlement obligation until complying vendor’s statement

F. BREACH OF THE CONTRACT

Private residence

OHSW regulations
Pro forma vendor’s statement
Authorities in other contexts
Construction of the Pro forma vendor’s statement
Application to the facts

Breach of disclosure obligation by Highfield

Position as at 28 April 2009
Position as at 30 April 2009
Position as at 27 May 2009

G. TERMINATION OF CONTRACT BY COMMERCIAL

1.  Incorporation of clause 11 as a term of the Contract

2. Essential term of the Contract

3. Breach of vendor’s statement term

4. Entitlement to terminate

5. Exercise of election to terminate

Characterisation of letters of 28 April and 27 May
Effecting termination of contract
Effecting rescission of contract
Substantive differences between rescission and termination
Legal requirement to effect termination
Application to the facts

6. Readiness and willingness of purchaser to settle

Breach of an interdependent obligation
Right to terminate when interdependent obligations
Application to the facts

7.  Implied term of cooperation

Implied term requiring cooperation
Application to the facts

8.  Unconscionable conduct

Equitable relief against unconscionable termination of contract

Categories of unconscionable conduct
Characterisation as unconscientious
Categories of unconscientiousness
Application to the facts
Statutory relief against unconscionable termination of contract: s 51AA
Statutory relief against unconscionable termination of contract: s 51AC.

Application to sale of land

Stage at which conduct occurs
Unconscionable conduct

H. TERMINATION OF CONTRACT BY HIGHFIELD

1.  Incorporation of clause 11 as a term of the Contract

2. Breach of vendor’s statement term

3. Condition of readiness and willingness of vendor to perform

4. Act postponing settlement obligation until complying vendor’s statement

5. Implied term postponing settlement obligation until complying vendor’s statement

6.  Relevance of non essential term or non repudiation to readiness

7.  Dispensation with further performance of vendor’s statement term

The dispensation principle
Application to the facts

8.  Implied term of cooperation

9.  Unconscionable conduct

I. CONCLUSION

CIVIL:

1. BLUE J:                In October 2007, the plaintiff (“Highfield”) and first defendant (“Commercial”)[1] entered into an option agreement whereby Highfield granted to Commercial an option to purchase a property at 7 College Street Glenelg[2] for $3.5 million on the terms of an annexed contract.

   [1]    Then known as Urban Construct (SA) Pty Ltd.

   [2]    The property is located on the corner of College Street and St Johns Row and more commonly known as 3 St Johns Row.

2. Clause 11 of the option agreement provided for service by Highfield on Commercial of a vendor’s statement under section 7 of the Land and Business (Sale and Conveyancing) Act 1994 (SA) by settlement on a purchase of the property.

3. In May 2008, on exercise of the option, Highfield and Commercial entered into a contract for the sale of the property on the terms of the contract annexed to the option agreement. Commercial entered into the contract as nominee and agent for the second defendant (“College”) as undisclosed principal.

4. In June 2008, Highfield served on Commercial a vendor’s statement under section 7 of the Act.

5. Settlement of the transaction was due on 30 April 2009. By letter dated 28 April 2009, Commercial informed Highfield that it was rescinding the contract because the property contained asbestos.  The defendants contend in the action that the service of the vendor’s statement without disclosure of asbestos breached an essential term of the contract entitling Commercial to terminate it and that it did so by the letter dated 28 April or by a further letter dated 27 May 2009.

6. Highfield by its conveyancer attended for settlement on 30 April 2009 and, after serving notice to complete, on 27 May 2009.  Commercial did not attend.

7. In September 2010, Highfield informed Commercial and College that it was terminating the contract for breach and/or repudiation.  The defendants contend (in the alternative) that Highfield was not, between 30 April 2009 and 1 September 2010, ready, willing and able to settle because it had not served on Commercial a complete and accurate vendor’s statement in compliance with the contract.

8. Highfield claims damages for breach of contract from either Commercial or College (collectively “the purchaser”) at its election.[3] Highfield claims $1,902,500, being the difference between the contract price and the market value of the property at the relevant date less the deposit, together with contractual and statutory interest totalling $517,747.93, giving a total claim of $2,420,247.93 calculated to 13 August 2012.

   [3]    It is common ground that, if Commercial is liable to Highfield, Highfield is entitled to elect to obtain judgment against either Commercial or College but not both under the undisclosed principal doctrine.

9. Commercial counterclaims against Highfield for return of the deposit of $100,000 together with statutory interest of $15,589.04, giving a total claim of $115,589.04 calculated to 13 August 2012.

10. The defendants accept that Highfield is entitled to the relief claimed unless the defendants are successful on one of their two defences, namely that Commercial validly terminated the contract for breach in April or May 2009 or alternatively that Highfield was not thereafter ready, willing and able to comply with its obligation to serve a complying vendor’s statement and this precluded its terminating or claiming loss of bargain damages. In turn, the plaintiff accepts that Commercial is entitled to the relief claimed if it is successful on one of the defences.

11. The principal questions in the action are as follows.

    1.Did clause 11 of the option agreement impose an independent contractual obligation, or rather did it (purportedly) modify the statutory obligation, to serve a vendor’s statement?

    2.Did clause 11 provide for service by settlement or 10 days before settlement?

    3.Was clause 11 rendered void by section 33 of the Act?

    4.Was clause 11 incorporated as a term of the sale contract (“the vendor’s statement term”)?

    5.Was the vendor’s statement term an essential term of the sale contract?

    6.Was the vendor’s statement term interdependent with the purchaser’s obligation to settle?

    7.Does section 7 of the Act postpone a purchaser’s obligation to settle in the absence of receipt of a complete and accurate vendor’s statement (“complying vendor’s statement”)?

    8.Does section 7 of the Act imply a term into a land sale contract that a purchaser is not obliged to settle until receipt of a complying vendor’s statement?

    9.Was Highfield in breach of the vendor’s statement term at the relevant times?

    10.Did Commercial act on 28 April or 27 May 2009 in a manner which had the effect of terminating the contract?

    11.Was Commercial not ready, willing and able to perform its own obligations under the contract and if so precluded from terminating it.?

    12.Was Highfield not ready, willing and able to perform its obligations under the vendor’s statement term and, if so, precluded from terminating the contract?

    13.Was Highfield’s breach irrelevant to its readiness, willingness and ability to perform its own obligations because the vendor’s statement term was not an essential term and Highfield was not repudiating its obligations under the contract?

    14.Did Commercial by its conduct dispense with further performance of the vendor’s statement obligation?

    15.Was Commercial in breach of an implied term requiring cooperation and if so precluded from terminating the contract or resisting Highfield’s termination?

    16.Was Commercial guilty of unconscionable conduct and, if so, precluded from terminating the contract or resisting Highfield’s termination?

    A. COURSE OF THE LITIGATION

    The proceedings

1. On 18 June 2009, Highfield instituted the action against Commercial seeking specific performance of the contract and alternatively damages for breach of contract.

2. On 17 July 2009, Commercial filed a defence and counterclaim against Highfield and Mr Hurley seeking declarations that Commercial had validly rescinded the option agreement and contract for misrepresentation and restitution of the amounts paid thereunder or similar relief under section 87 of the Trade Practices Act 1974 (Cth).[4]

   [4]    Or section 82 of that Act or section 84 or 85 of the Fair Trading Act 1987 (SA).

3. On 17 September 2010, Highfield joined College as an additional defendant (as undisclosed principal of Commercial) and amended its statement of claim to withdraw the claim for specific performance and pursue only the claim for damages (following its purported termination of the contract on 1 September 2010).

   The trial

4. The trial commenced on 13 August 2012.

5. By application filed on 6 August, the defendants sought permission to amend their defence to insert a plea (paragraph 15.4) that the plaintiff was not ready, willing and able to settle at any time up to 1 September 2010 due to its failure to serve a complying vendor’s statement pursuant to the Act and in breach of clause 11 of the option agreement. On 7 August, I gave permission to the defendants to amend their defence. Thereby, they pleaded for the first time what later became known as Defence 2A and 2B.

6. On 12 August, the defendants gave notice that they were effectively abandoning their case that they had rescinded the contract for misrepresentation or were entitled to similar relief for misleading conduct. On the first day of trial, I gave permission to the defendants to amend their defence and cross-claim to delete various paragraphs to reflect that abandonment. 

7. The plaintiff opened its case, called its conveyancer Mr Gill to give oral evidence, tendered various documents and closed its case. There is no attack on the credibility, reliability or accuracy of Mr Gill’s evidence.

8. On the second day of trial, the defendants opened their case.  They articulated two defences to the plaintiff’s claim.

   1.Commercial had validly terminated the contract on 28 April or alternatively 27 May 2009 for breach by the plaintiff of an essential term of the contract requiring service of a complying vendor’s statement by 19 or alternatively 30 April 2009 (designated “Defence 1” for ease of reference).

   2.Alternatively, by reason of its continuing breach of a term of the contract requiring service of a complying vendor’s statement, the plaintiff was never ready, willing and able to perform its own obligations which were interdependent with the purchaser’s obligation to settle and hence the plaintiff could not validly terminate or recover loss of bargain damages (designated “Defence 2”).  This defence was put on three alternative bases:

   (a)it was an express interdependent term of the contract that the vendor serve a complying vendor’s statement (“Defence 2A”);

   (b)alternatively, section 7 of the Act of its own force postponed a purchaser’s obligation to complete settlement until service of a complying vendor’s statement (“Defence 2B”);

   (c)alternatively, it was an implied term of the contract, implied by the Act, that the purchaser’s obligation to complete settlement was postponed until service of a complying vendor’s statement (“Defence 2C”).

9. I ruled that Defences 2A and 2B were open to the defendants on the basis of their recently amended pleading (albeit economically pleaded).  I ruled that Defence 1 and Defence 2C were not pleaded and were not open to the defendants in the absence of amendment.

10. On the third day of trial, the defendants sought and I gave permission to amend their defence to plead Defence 1 (paragraphs 3.5 to 3.12) and Defence 2C (paragraph 15.4.3) and better to plead Defence 2A (paragraph 15.4.1) and Defence 2B (paragraph 15.4.2).

11. The defendants did not call any oral evidence, but tendered various documents. The plaintiff then tendered various documents in its rebuttal case.

    B. FACTUAL BACKGROUND

    The parties

12. Highfield purchased 7 College Street Glenelg (“the Property” or “7 College Street”) in June 2005. Built on the land was a single storey block of 13 flats. Mr Hurley was Highfield’s sole director.

13. Commercial and College are subsidiaries of or related to Urban Construct Pty Ltd (“Urban Construct”).  The Urban Construct group carry on business as property developers. 

    The College Street land parcels

14. College Street runs east-west from Moseley Street to St Johns Row.  On the northern side of College Street at its eastern end is a property on which is situated a nine storey building owned by Elderly Citizens Homes (“ECH”).

15. Between the ECH property and St Johns Row are five parcels of land with total frontage of 78 metres.[5]  Proceeding westward from the ECH property, the parcels were at material times (between 2007 and 2009) disposed as follows.

    1.1A College Street contained an enclosed car park with a frontage of 18 metres.

    2.1 College Street contained a single storey dwelling with a frontage of 15 metres.

    3.3 College Street contained a two storey semi-detached dwelling with a frontage of 11 metres.

    4.5 College Street contained a two storey semi-detached dwelling with a frontage of 11 metres.  (The dwellings at 3 and 5 comprised two halves of a two storey terrace house.)

    5.7 College Street (the Property) contained a single storey block of 13 flats with a frontage of 22 metres.

    [5]    All measurements are rounded to the nearest metre.

16. By June 2002, the Urban Construct group held contractual interests (presumably under options or contracts to purchase) in several of the five parcels of land for the purpose of redevelopment.[6]  Urban Construct had approached Dr Ryan, the owner of 5 College Street, expressing interest in purchasing it.[7] 

    [6]    I infer this from a letter dated 8 January 2009 from Commercial’s solicitors to Dr Ryan’s solicitors coupled with a letter from the City of Holdfast Bay to Urban Construct dated 9 July 2002. I cannot identify precisely which parcels were the subject of Urban Construct’s interest, but infer that they included at least 1 and 3 College Street.

    [7]    I infer this from a letter dated 8 January 2009 from Commercial’s solicitors to Dr Ryan’s solicitors coupled with a letter from Urban Construct to Dr Ryan dated 19 August 2002.

17. Urban Construct negotiated with Dr Ryan with a view to purchasing 5 College Street between August 2002 and December 2007.

18. In January 2003, Urban Construct incorporated College.  Urban Construct was the sole shareholder, and directors of Urban Construct were the sole directors, of College.

19. In March 2003, a director of Urban Construct entered into a contract with the then owner of 7 College Street to purchase that property (this purchase was not ultimately completed).

20. College settled on the purchase of 1 and 3 College Street in June 2003 and 1A College Street in January 2005.

21. In April 2004, Commercial was incorporated.  Its directors were also directors of Urban Construct. 

22. In June 2005, Highfield purchased 7 College Street.  In about March 2007, Highfield began renting the flats to tenants.  Highfield continued to do this until May 2008, when Commercial became entitled to vacant possession of the Property.[8] 

    [8]    This was for a specific purpose addressed in more detail below.

    The option agreement

23. Between April and September 2007, Commercial negotiated with Highfield for the grant of an option to purchase the Property.

24. On 26 October, College authorised Commercial to enter into a contract for the purchase of the Property.

25. On 29 October, Highfield and Commercial entered into an Option Agreement (“the Option Agreement”).  Highfield granted to Commercial an option to purchase the Property for $3.5 million[9] on the terms set out in the annexed Commercial Contract (“the Annexed Commercial Contract”).  The option was to be exercised by 30 April 2008. Upon exercise, the terms of the Annexed Commercial Contract were to become immediately binding but, in addition, the parties were to execute within 14 days a contract in terms of the Annexed Commercial Contract.

    [9]    All figures quoted herein are exclusive of GST.

26. Under the Option Agreement, an option fee of $56,000 was payable on execution of the Option Agreement and it was paid on 1 November.  In addition, upon exercise of the option, “compensation amounts” of $24,000 per quarter (payable in advance) were payable by Commercial until settlement under the Contract.

    The proposed development

27. From 26 October, Urban Construct conducted weekly project meetings for a proposed multi-storey residential development on College Street. They were attended also by its architect, engineer, planner and proposed builder (Baulderstone Hornibrook).

28. On 18 December, Commercial, acting as agent for College, entered into a contract with Dr Ryan to purchase 5 College Street for $3 million with settlement to take place on 31 December 2008.

29. On 19 December, the planner on behalf of College applied for planning consent for a 12 storey residential apartment complex situated at 1-7 College Street. 

30. In January 2008, Urban Construct issued a media release announcing plans to develop a 12 storey residential tower entitled “Latitude” at a cost of $110 million.  The complex was proposed to comprise 162 residential apartments with associated amenities and car parking.  This generated publicity (including an article in The Advertiser), resulting in Urban Construct being “inundated” with calls from potential buyers of apartments seeking to register interest.[10]

    [10]   Original media release dated 10 January, The Advertiser article dated 16 January and subsequent media release about Urban Construct being inundated dated 17 January.

31. In February 2008, Commercial’s architect prepared a detailed design of the proposed display suite on the Property.  I received the document into evidence on the basis that its use was confined to its relevance to the plaintiff’s unconscionable conduct case (in reply) against the defendants.

    The contract

32. On 28 April, Commercial exercised the option to purchase the Property pursuant to the Option Agreement. Commercial paid the first quarterly compensation amount of $24,000.

33. On 6 and 7 May, Highfield and Commercial executed a contract for the sale of the Property (“the Contract”).  The terms of the Contract were identical to the terms of the Annexed Commercial Contract.  The Contract provided for settlement on 30 April 2009.[11] 

    [11]   Commercial had an option to bring forward settlement on 14 days’ notice. It did not do so and I ignore this provision.

34. The Contract contained a term (special condition 4) that Highfield granted to Commercial an exclusive licence over, and entitlement to vacant possession of, the land for the purpose of constructing and using a display and sales office for the marketing and sale of dwelling product intended to be built on the land and adjacent properties.   

35. On 12 May, Commercial “paid” the deposit by providing to Highfield a bank guarantee for $100,000.

36. By June, Highfield had yielded vacant possession of the Property (having terminated the occupancies of its tenants) pursuant to special condition 4 to the Contract.[12] Urban Construct decided however to construct the display office offsite instead and located a site in Holdfast Walk, Moseley Square for that purpose.

    [12]   I infer this from the entitlement to vacant possession under special condition 4, a letter from Commercial to Highfield dated 23 May 2008,  invoices showing rent paid by tenants  and the board report of Urban Construct dated July 2008.

37. On 15 June, Mr Gill wrote to Commercial enclosing a vendor’s statement (“the Form 1 Statement”) under the Land and Business (Sale and Conveyancing) Act 1994 (SA) (“the Act”) and regulations 7 and 8 and Schedule 1 Form 1 (“the Pro Forma Vendor’s Statement”) of the Land and Business (Sale and Conveyancing) Regulations 1995 (SA) (“the Regulations”). Before issuing the Form 1 Statement, Mr Gill was instructed by Mr Hurley that the Property was last used for residential purposes and advised Mr Hurley that the Pro Forma Vendor’s Statement did not require disclosure concerning asbestos.

38. Between August and November, Highfield’s conveyancer made several written and telephone requests for the return of the signed acknowledgment of receipt of the Form 1 Statement to no avail. 

    The proposed development

39. On 28 May, the Development Assessment Commission informed Urban Construct’s planner that development plan consent had been granted for the Latitude project on 22 May 2008.  It was a condition of consent that College substantially commence the project within 12 months, ie by 22 May 2009.

40. On 23-24 September, Urban Construct’s proposed builder received two quotations from contractors for the demolition of, and removal of asbestos from, the buildings at 1-7 College Street.  The quotations referred to removal of asbestos from the residential flats building at 7 College Street (described respectively as “roof sheeting/eave and soffit linings 560 m²” and “deep 6 asbestos roof”).  One of the quotes showed a separate price for asbestos removal (which also included removal of asbestos eave linings to the single storey and double storey dwellings at 1 and 3-5 College Street) of $13,350.

41. At the end of September, Urban Construct issued a media release saying that over 1,500 people had registered interest in purchasing an apartment at Latitude and that sales would commence to pre-registered parties on 8 October and to the public on 11 October.

42. On 8 October, Urban Construct opened the display suite in Holdfast Walk.  Later that day, it issued a media release saying that it had sold 23 per cent of the value of the apartments.  Between 3 October and 10 December 2008, College entered into contracts with 13 purchasers of apartments.

43. On 19 December, Commercial wrote to Dr Ryan’s solicitors stating that:

    Due to unforeseen circumstances as a consequence of the global financial crisis, we confirm that we are not in a position to settle on the Contract on 31 December 2008 as the pre-sales for the development that is to take place on part of the Property have not been to the level we anticipated.

44. On 8 January 2009, Commercial’s solicitors wrote to Dr Ryan’s solicitors saying that the contract for the purchase of 5 College Street was void, or avoided by Commercial, ab initio due to unconscionable conduct by Dr Ryan.  On 11 February 2009, Dr Ryan issued a notice to Commercial saying that she was terminating the contract due to Commercial’s failure to settle.

45. On 9 April, Urban Construct’s planner wrote to the Development Assessment Commission requesting an extension of time for the substantial commencement of the project (which was due by 22 May).  The planner said:

    The global economical conditions have contributed to inadequate pre-commitment to commence construction.

46. On 20 April, the Development Assessment Commission wrote to Urban Construct’s planner advising that the Commission had granted a 12 month extension for substantial commencement of the project.

47. On 11 May, an article appeared in The Advertiser stating that Urban Construct had said that the Latitude project was in a holding pattern because of the economic crisis and a slowing of sales, with sales to date totalling 23 per cent of the complex.

48. By June, the display centre in Holdfast Walk had been dismantled and sales of apartments had ceased (the last actual sale had been in December). Urban Construct announced in response to media enquiries that:

    The Latitude at Glenelg Residential Property will not proceed due to issues surrounding the development site.

    Commercial’s notice of rescission

49. On 22 April, Commercial sent an email to Highfield attaching a letter dated 21 April foreshadowing a substantive letter “shortly”.

50. By 23 April 2009, the purchaser was required by the Contract to submit an executed transfer to the vendor but did not do so.

51. On 27 April, Highfield’s conveyancer informed Commercial that settlement was to be on 30 April at 11.30am at the Lands Titles Office.[13]

    [13]   The conveyancer enclosed an adjustment statement and transfer executed by Highfield.

52. On 28 April, Commercial’s solicitors wrote to Highfield’s solicitors saying  that:

    1.Commercial had ascertained that the Property was substantially affected by asbestos;

    2.Mr Hurley on behalf of Highfield had verbally represented to Commercial in May 2007 that there was no asbestos contained within the Property; Highfield had breached its obligations to identify, record, control and remove asbestos under the Occupational Health Safety and Welfare Regulations 1995 (SA) (“the OHSW Regulations”) and to disclose details of the asbestos in the Form 1 Statement; and that Highfield and Mr Hurley had breached sections 52 and 53A of the Trade Practices Act 1974 (Cth);

    3.Commercial had been induced thereby to transact with Highfield including entry into the Option Agreement, exercise of the option and entry into the Contract;

    4.Commercial rescinded the Contract and alternatively was entitled to have the Option Agreement and Contract avoided under section 87 of the Trade Practices Act 1974 (Cth);

    5.Commercial was entitled to the return of all amounts paid under the Option Agreement and Contract and to damages against Highfield and Mr Hurley.

    Highfield’s attendance for settlement and subsequent communications

53. On 30 April, Mr Gill attended for settlement at the Lands Titles Office (with a signed transfer and duplicate certificate of title).  Commercial did not attend.

54. On 30 April, Commercial’s solicitors wrote to Highfield’s conveyancer saying that, by the letter dated 28 April, they had notified Highfield that Commercial rescinded the Contract.

55. On 30 April, Mr Gill sought instructions from Highfield whether to prepare an amended vendor’s statement. He did not subsequently receive instructions one way or the other.

56. On 5 May, Highfield obtained a quotation for the removal of asbestos from the roof sheeting, eaves and veranda cladding of the Property for $14,500.

57. On 6 May, Highfield’s solicitors wrote to Commercial’s solicitors. They:

    1.denied the alleged representation;

    2.claimed that the OHSW Regulations did not apply to the Property and disclosure concerning asbestos was not required in the Form 1 Statement because the building on the land was a “private residence”;

    3.said that there was a small quantity of asbestos on the Property;

    4.claimed that the presence of asbestos was irrelevant to Commercial given its plans to build a development on the Property and adjoining land;

    5.enclosed the quote for  removal of the asbestos dated 5 May and offered (without conceding liability) to meet the cost of removal on condition that it would be removed within four weeks of settlement of the Property proceeding.

58. On 22 May, Highfield’s solicitors wrote to Commercial’s solicitors giving formal notice to complete the purchase on 27 May.

59. On 27 May, Commercial’s solicitors wrote to Highfield’s solicitors in response to their letter dated 6 May.  The letter answered various contentions and reiterated that Commercial had rescinded the Contract.

60. On 27 May, Mr Gill attended for settlement at the Lands Titles Office.  Commercial did not attend.

    Highfields’s notice of termination

61. On 27 August 2010, Highfield presented the bank guarantee and received payment of $100,000.

62. On 1 September, Highfield gave notice of termination of the Contract to Commercial and College. 

    C. DISPUTED FACTS

63. Most of the facts are not in dispute. The only significant factual disputes concern:

    1.when the purchaser and vendor each learnt of the existence of asbestos on the Property;

    2.when the purchaser decided not to proceed with the purchase;

    3.when the purchaser decided to terminate the Contract due to non-compliance with the vendor’s statement obligation.

    Existence of asbestos

1. The existence of asbestos (as defined in the Regulations) on the Property is not in dispute.

2. The roof of the residential flats building is made of asbestos sheets known as “deep 6” which have a corrugated 6 inch profile.  The asbestos sheets extend over approximately 400 square metres and accordingly comprise the entire roof of the building. 

3. The eaves and soffit linings are also made of asbestos, which I infer is flat sheet.  It comprises approximately 120 lineal metres. 

4. Because the building is only a single storey on a corner block, I infer that both the roofing and eaves are readily visible upon inspection. Given that the roofing is made of 6 inch corrugated sheets, I infer that it would be readily recognisable as asbestos sheets by anyone with experience in the property or property development business.

   Knowledge of purchaser of asbestos

5. The plaintiff invites me to find that the purchaser was aware of the existence of asbestos on the Property by October 2007 or alternatively by September 2008.

6. The Option Agreement annexed the Commercial Contract which included Special Condition 4 giving Commercial the right to construct and use a display suite on the land.  This indicates that, by October 2007, the Urban Construct group had formed an intention to construct a display suite if it exercised the option to purchase.  The architect prepared a design drawing of the display suite by 19 November 2007. Given the intention to use the building (rather than immediately demolish it to make way for the multi-storey development), it is likely that the Urban Construct group inspected the building to determine its suitability for construction and use as a display suite before executing the Option Agreement in October 2007.

7. As I have found above, the 6 inch corrugated roof was readily recognisable to someone in the property development business as asbestos and the roof was readily visible. The other buildings on the five parcels of land (the terrace house at 3-5 and the house at 1 College Street) also contained asbestos.

8. In considering whether I ought to infer that Commercial became aware of the existence of asbestos at this point, I take into account the letter from Commercial’s solicitors dated 27 April 2009 and its pleading in which it is said that Commercial learnt of the asbestos but it is not disclosed when or how it learnt of it. 

9. On the basis of a combination of the above circumstances, I find on the balance of probabilities that the Urban Construct group (and in particular Commercial) was aware of the existence of asbestos in the building before executing the Option Agreement. 

10. On 27 August 2008, Baulderstone personnel sent an internal email attaching a construction program.  The construction program showed five days’ asbestos removal scheduled for March 2009 as part of the demolition works.  This proves that Baulderstone was aware of the existence of asbestos on the five parcels of land, but does not indicate which parcels contained the asbestos scheduled for removal.

11. On 23 and 24 September 2008, Royal Park Salvage and McMahon Services issued quotations to Baulderstone for demolition works.  Each quotation referred to asbestos roof sheeting of the residential flats, and the McMahon quotation referred also to removal of the asbestos eave and soffit linings.  These quotes prove that Baulderstone was aware of the existence of asbestos on the Property by the end of September 2008. There is no direct evidence that Baulderstone informed Commercial of the existence of the asbestos.  However, it is inherently likely that a builder in the position of Baulderstone would have informed an owner in the position of Commercial of the existence of asbestos.

12. In all of the circumstances, I am satisfied on the balance of probabilities that, if it did not know previously, Commercial knew of the existence of asbestos on the Property by the end of September 2008.

    Knowledge of vendor of asbestos

13. The defendants invite me to find that Highfield was aware of the existence of asbestos on the Property by October 2007 or alternatively by September 2008.

14. Highfield purchased the Property in June 2005. It started renting flats to tenants in about March 2007. I have found above that both the roofing and eaves are readily visible upon inspection and the 6 inch corrugated roofing was readily recognisable to someone in the property business as asbestos. It is evident from Highfield’s name, its 2005 financial statements implying substantial activities (resulting in large carry forward losses) before acquiring the Property and the nature and cost of the Property itself that Highfield was a participant in the property industry.

15. I find on the balance of probabilities that Highfield (and in particular Mr Hurley) was aware of the existence of asbestos in the building before purchasing or at least by about March 2007.

16. On 9 June 2008, Mr Gill sent an email to Mr Hurley attaching the draft Form 1 Statement.  The email included the following:

    Can you also confirm that the last use of the property was residential because if the last use was commercial I will need to provide a report for asbestos?

    and on 10 June, Mr Hurley responded by attaching the executed Form 1 Statement and stating “previous use residential”.

17. These email communications do not prove that Mr Hurley believed that asbestos was present, but they do prove that his attention was specifically drawn to the topic of asbestos on the Property.

18. On 1 May 2009, after receipt of the 28 April letter from Commercial’s solicitors, Mr Hurley sent an email to Mr Gill.  He referred to having met with Urban Construct’s architects and builders on site in about August 2008 when they inspected the building with regard to the construction of a display unit.  He went on to say:

    Unless they were completely blind they would have become aware of the existence of Asbestos at that time unless of course James has had a Divine revelation like St Paul on the road to Damascus.

19. Mr Hurley in his email went on to say that the roof was made of deep 6 asbestos and it could be removed at a cost of not more than $11,000. 

20. By Mr Hurley’s logic, if the existence of asbestos must have been obvious to the architects and builders on site unless they were completely blind, he must also have become aware of the existence of the asbestos when he inspected the building.

21. Mr Hurley’s email contains other passages which, standing alone, might be read as suggesting that he did not know of the existence of asbestos until the letter of 28 April. However, read with the above passage, I do not so construe them.

22. In all of the circumstances, I am satisfied on the balance of probabilities that, if it did not know previously, Highfield knew of the existence of asbestos on the Property by the end of September 2008. I note that Highfield’s solicitors’ letter dated 6 May 2009 expressly says that Mr Hurley denied he had any knowledge of asbestos and I have taken this into account, but consider the evidence that Mr Hurley was previously aware of asbestos compelling.

    Decision not to proceed with purchase

23. The plaintiff invites me to find that the purchaser had decided not to proceed with the purchase of the Property by December 2008.

24. The plaintiff principally relies on the evidence that the last contract for sale of an apartment in the Latitude complex was on 10 December coupled with Commercial’s letter to Dr Ryan’s solicitors of 19 December 2008 saying that it was not in a position to settle on the purchase of her property in December because anticipated pre-sales for the development had not transpired due to the global financial crisis.  These facts in themselves are insufficient to allow the inference to be drawn, on the balance of probabilities, that the Urban Construct group had decided not to proceed with the multi-storey development by December 2008, let alone decided not to proceed with the purchase of 7 College Street.

25. By 11 February 2009, the Contract for the purchase of 5 College Street from Dr Ryan had been terminated on any view (either by Commercial on 8 January or by Dr Ryan on 11 February).  Dr Ryan’s property was between the Property at 7 College Street and the other three parcels of land at 1A-1-3 College Street.  The Property was only 22 metres wide and 25 metres deep and too small itself to support a multi-storey apartment complex of the type contemplated as the Latitude. 

26. On the basis of these matters, coupled with there being no further sales of apartments after 10 December 2008, I find on the balance of probabilities that by February 2009 the Urban Construct group had decided not to proceed with the Latitude development (at least in the foreseeable future including the calendar year 2009).  It may well have been contemplated that the group might resuscitate the development in the future, but that would require a fresh negotiation with Dr Ryan and acquisition of her property, which was impeded in the immediate future by the existence and tone of Commercial’s letter to her dated 8 January.

27. However, it does not follow from the fact that the group had decided not to proceed with the Latitude development at that time that it had also decided not to proceed to settle on the purchase of the Property from Highfield.

28. On the one hand, the market value of the Property absent a multi-storey development was only of the order of $1.5 million compared to the contract purchase price of $3.5 million.  Once the group decided not to proceed with the purchase of 5 College Street, it was not in its commercial interest to settle on the purchase of 7 College Street if it could avoid doing so.  Its conduct in writing to Dr Ryan on 8 January demonstrates that it was prepared to take the risk of being held to have wrongfully repudiated the contract to avoid settling on the adjoining property.

29. On the other hand, the evidence is consistent with the group adopting the attitude from January or February 2009 onwards that it would not complete the purchase from Highfield if it could identify a sufficient basis to rescind or terminate the Contract, but that it had not yet formed an intention to do so. The first specific (albeit circumstantial) evidence that the group had formed an actual intention to do so is the letter dated 21 April 2009 foreshadowing a substantive letter. I infer that the letter foreshadowed was the letter dated 28 April. This is corroborated by the failure of Commercial to submit an executed transfer which was due on 23 April.

30. In the circumstances, I am not persuaded on the balance of probabilities that the purchaser had decided as early as January or February 2009, or indeed a substantial time before 21 April 2009, that it would not complete the purchase.

    Decision to terminate contract

31. The plaintiff invites me to find that the purchaser had decided to terminate the Contract due to non compliance with the vendor’s statement obligation by December 2008 or alternatively February 2009 or alternatively well before 28 April 2009.

32. I am not prepared to make such a finding.  For reasons which appear below, I find that Commercial’s solicitors’ letter dated 28 April 2009 does not purport to terminate the Contract for breach (whether for breach of the vendor’s statement term or otherwise) and only purports to rescind the Contract ab initio for misrepresentation or misleading conduct.

33. As stated at [20] above, I ruled during the trial that, when it filed its original defence and counterclaim, Commercial did not plead that it terminated the Contract for breach. That case was not articulated by Commercial until its opening on the second day of trial and was not pleaded until the defendants amended their pleading on the third day of trial.

34. In these circumstances, I find that Commercial made no decision before 1 September 2010 to terminate the Contract for breach.

    D. CONSTRUCTION OF THE ACT

35. An understanding of the legislative regime for mandatory vendor disclosure is necessary:

    1.as part of the background and context in which to construe clause 11 of the Option Agreement;

    2.because the defendants’ case is that it was an express term of the Contract that Highfield serve a complying vendor’s statement within the meaning of section 7 of the Act;

    3.because the defendants’ alternative case is that section 7 of the Act itself postponed, or implied a term into the Contract postponing, the purchaser’s obligation to settle until receipt of a complying vendor’s statement.

    The legislative regime

36. The legislative regime relating to vendor’s statements and “cooling off” rights in relation to the purchase of land in 2008 and 2009 was (and is) contained in Part 2 of the Act.

37. The evident purpose of Part 2 of the Act is to ensure that purchasers of land in the ordinary[14] case:

    1.receive mandatory disclosure by the vendor before contracting so that they can choose not to contract, or after contracting but before settling so that they can choose to exercise a statutory right to rescind the contract, if facts are disclosed which are material to their decision to purchase; and

    2.are given a statutory right to change their mind and rescind (“cool off”) for any reason within two business days of contracting or receiving the mandatory disclosure (whichever is later).

    Primary obligations

    [14]   There are exceptions which are of especial importance in this case and are addressed at [124] to [127] below.

38. Section 7 requires a vendor of land (or small business), at least 10 days[15] before settlement, to serve on the purchaser a statement (“vendor’s statement”) in the prescribed form setting out the rights of a purchaser under section 5 and prescribed particulars relating to the land.

    [15]   All days (or business days) referred to herein are expressed in the legislation to be “clear” days.

39. Section 5 entitles a purchaser under a contract for the purchase of land (or small business) - subject to important exceptions addressed below - to rescind the contract by written notice at any time up to the end of the second business day from the later of the making of the contract and the service of the vendor’s statement (but in any event before settlement).

40. Section 10 requires that a vendor’s statement must be accurate as of the date of service on the purchaser or the date of the contract, whichever is later.[16]

    [16] Section 10(1) requires it to be accurate at time of service. Section 10(2) requires a vendor’s statement to be amended if circumstances change between date of service and date of contract to make it accurate.

41. Regulations 8 and 9 of the Regulations prescribe the form and substance of the particulars required to be contained in a vendor’s statement pursuant to section 7 by reference to the Pro Forma Vendor’s Statement contained in Form 1 in the First Schedule.

42. The Pro Forma Vendor’s Statement contains a prescribed statement of cooling off rights pursuant to section 5 (Part B) which is applicable in those cases in which a purchaser is entitled to rescind pursuant to section 5. It also prescribes extensive particulars of matters required to be disclosed pursuant to section 7 (Part C).

43. One section in Part C is entitled “Particulars relating to asbestos in buildings on the land”. It applies if there is a building on the land other than a “private residence”.  The prescribed particulars are as follows:

    Is there a building on the land (other than a private residence) where material that consists of or contains asbestos is installed?

    *YES/NO

    If YES-

    (a) Is there a register of the type, condition and location of the asbestos?

    *YES/NO

    (b) Have policies and procedures been established to control the asbestos and prevent or minimise the exposure of any person to airborne asbestos?

    *YES/NO

    If YES, give details

    (c) Is any asbestos to be removed before settlement?

    *YES/NO

    If YES, give details.

    Consequences of non compliance

44. Section 14 creates an offence of failing to comply with section 7 (amongst other provisions).

45. Section 15 gives jurisdiction to a court to avoid the contract, award damages or grant other relief if satisfied that:

    1.a vendor’s statement was not given or certified as required or was defective; and

    2.the purchaser has been prejudiced thereby.

46. Section 16 creates three defences to criminal or civil proceedings under Part 2 of the Act arising from an alleged non-compliance with section 7 (amongst other provisions). One defence is that the alleged non-compliance was not intentional or negligent. Another defence applies whenever the purchaser receives certified independent legal advice and, pursuant to that advice, explicitly waives the right to a vendor’s statement.

47. In Myles Pearce & Co Pty Ltd v Leuci,[17] the Full Court held that, where a purchaser has a right to cool off,[18] the cooling off period does not begin to run upon service of an incomplete or inaccurate vendor’s statement which does not comply with the Regulations. In general, because materiality of the required disclosure is determined by the Regulations, it does not matter whether the incompleteness or inaccuracy is material to the purchaser’s decision not to proceed with the purchase. The Full Court left open the degree to which (if at all) incompleteness or inaccuracy can be ignored if intrinsically trivial.

    [17] [1997] SASC 6360; (1997) 193 LSJS 491. See also Astill v South Esplanade Developments Pty Ltd [2007] SASC 231; (2007) 249 LSJS 334.

    [18]   This was under the predecessor Act but the material provisions are the same: see Land Agents, Brokers and Valuers Act 1973 (SA) s 88 and s 90.

48. Where a purchaser has cooling off rights, the following avenues are potentially available not to proceed with the proposed purchase.

    1.The purchaser can elect not to sign the contract until receipt of a vendor’s statement (if not already proffered by the vendor) and, on reading the vendor’s statement, choose not to execute the contract.

    2.The purchaser can proceed to sign the contract after receiving the vendor’s statement but then “cool off” within two business days thereafter.

    3.The purchaser can sign the contract without receiving a vendor’s statement and then cool off within two business days of subsequent receipt thereof.

49. Where a purchaser has cooling off rights, has received an inaccurate or incomplete vendor’s statement and has permitted the prima facie cooling off period to expire, the purchaser can nevertheless not proceed with the contract if:

    1.the vendor’s statement was relevantly non-compliant with the Regulations (“deficient”) within the meaning of the decisions in Leuci and Astill and the purchaser rescinds the contract pursuant to section 5; or

    2.the vendor’s statement was “defective” and the purchaser was prejudiced thereby within the meaning of section 15 and the purchaser obtains an order from a court in its discretion under section 15 avoiding the contract.

    Exceptions to the right of rescission

50. Section 5 does not confer a right of rescission upon a purchaser:

    1.who contracts to purchase at or on the day of auction, but section 11 requires the vendor’s statement to be available three business days before the auction;

    2.who contracts to purchase pursuant to a tender or exercise of an option to purchase and received the vendor’s statement two business days before entry into the contract;[19]

    3.who purchases a small business with the land and received the vendor’s statement five business days before entry into the contract.

    [19]   And the tender closed or the option was granted at least five business days before the contract.

51. In those circumstances, while the purchaser has no right to rescind, the purchaser does have the opportunity to choose not to enter into the contract in the first place in light of matters disclosed in the vendor’s statement. The purchaser will therefore have the right to seek an order under section 15 avoiding the contract (or damages) if the vendor’s statement was defective and the defect was material to the purchaser’s decision to purchase.

1. Section 5 does not confer any right of rescission upon a purchaser (an “exempt purchaser”) who:

   1.is a body corporate;

   2.purchases a business (not being a small business) with the land; or

   3.receives independent legal advice about the contract certified by a legal practitioner before entering into the contract (“certified legal advice”).

2. An exempt purchaser who enters into the contract before receiving a vendor’s statement has no statutory right to rescind the contract after receiving a vendor’s statement. Such a purchaser must still be provided with a vendor’s statement 10 days before settlement,[20] but this will ordinarily be of no direct use to a purchaser who does not wish to settle due to learning of matters disclosed in the vendor’s statement. The fact that service of a vendor’s statement on these three classes of purchasers cannot achieve the primary purpose of sections 5 and 7 of enabling an informed choice to proceed or not proceed suggests that the obligation to serve a vendor’s statement on those classes under section 7 may be an unintended consequence in the drafting of the legislation.

   [20] Unless the purchaser, after receipt of certified legal advice, waived the right to receive a vendor’s statement pursuant to section 16(c) of the Act and regulation 18 of, and Form 3 in the First Schedule to, the Regulations.

3. This may be better understood by examining the legislative history of mandatory disclosure in South Australia.

   The original legislative regime

4. The Land and Business Agents Act 1973 (SA)[21] (“the Predecessor Act”) first enacted mandatory disclosure obligations and cooling off rights in South Australia. 

   [21]   Later known as the Land Agents, Brokers and Valuers Act 1973 (SA).

5. Subsection 90(1) of the Predecessor Act was the equivalent of section 7 of the Act. It applied to the sale of land and any business. It required a vendor’s statement (containing particulars of prescribed encumbrances)[22] to be annexed to the contract before execution by the purchaser. 

   [22] These particulars were extremely circumscribed compared to the very extensive particulars now potentially required by the Act.

6. Subsections 90(6), (7) and (8) gave to a purchaser who suffered loss due to negligent non-compliance with the section[23]  the right to apply to a court, in the exercise of its discretion, to avoid the contract or award damages to compensate such loss.

   [23]   The onus of proof in relation to absence of negligence being on the vendor.

7. Section 91 applied to the sale of a small business.  It required a vendor’s statement (containing financial particulars of the business) to be given to the intending purchaser before execution of the contract.  Section 91(2) gave a purchaser a right to rescind the contract if a vendor’s statement was not given before contract or was false or inaccurate in a material particular, which right could be exercised until one month after the purchaser obtained possession of the business (usually settlement of the contract).

8. Section 88 gave to a purchaser of land (but not a business) a right to rescind the contract in similar terms to that given by section 5 of the Act. Section 88 did not apply to purchases:

   1.by a body corporate;

   2.by a purchaser receiving certified legal advice before executing the contract;

   3.by a purchaser at auction; or

   4.by a land or business agent, legal practitioner, licensed land broker, or registered manager or salesman.

9. Where one of the exceptions to section 88 applied (eg the purchaser was a body corporate), sections 90 and 91 still required the prescribed particulars to be given before execution of the contract and accordingly the purchaser still had an opportunity after receiving the prescribed particulars to decide not to enter into the contract.

10. The purpose of section 90 was identified in the Attorney-General’s second reading speech as follows:

    This clause serves a very important purpose.  It is well known that the system of conveyancing in South Australia differs very materially from the traditional English system and from the system obtaining in the other States.  In the other States, the parties are referred to solicitors at a relatively early stage in the transaction … generally speaking, the solicitor for the purchaser will satisfy himself by requisitions to the vendor’s solicitor that there is no encumbrance or restriction on the use and enjoyment of the premises, before settlement takes place.  This conveyancing system provides the maximum protection to the parties, and minimises the danger, in particular, of the purchaser paying out his money and acquiring a defective title or a title which is affected by some restriction as to use or enjoyment.  For this protection, however, the parties have to pay fees which are substantially higher than the fees payable on a land transaction in South Australia. … the system is inexpensive, but the protections given by the more formal and elaborate system of having the parties separately represented and by the exchange of requisitions is lost.  Certain of the provisions of this Bill are designed to endeavour to give the public of South Australia more of the protections which are enjoyed under the more formal conveyancing system without the loss of the economies inherent in the South Australian system.  This clause is an important provision in this regard.  It seeks to protect the purchaser against the danger of paying for land which is subject to encumbrances or restrictions which affect its value and utilities.  As there is no separate representation of the parties and no requisitions in most cases, it is thought to achieve this result by imposing on the land agent an obligation to take reasonable steps to ascertain the existence of such encumbrances and restrictions and to disclose them to the purchaser.[24]

    [24]   Parliamentary Debates, House of Assembly, 4 October 1973 p 1081.

11. The Attorney-General identified the purpose of section 88 as follows:

    Clause 88 provides for a cooling off period. … to the ordinary man in the street, the purchase of land or a house property is usually the biggest financial transaction which he enters into during the course of his life.  Even when no undue persuasion is used, a salesman will sometimes use every reasonable means of encouragement to persuade potential purchasers to buy a property and forthwith to sign an offer or contract to purchase.  Many contracts are signed immediately after the purchaser has inspected a property and without any proper opportunity for reflection upon the financial consequences to him of so signing, or to investigate or check the title as to identity of the land or to receive advice about the condition of the property.[25]

    [25]   Parliamentary Debates, House of Assembly, 4 October 1973 p 1080.

12. The Attorney-General identified the reason for the exceptions to section 88 as follows:

    The clause will not apply in relation to persons who, generally speaking, are qualified to look after their own interests.  Where the purchaser is a body corporate, or an agent [etc], he will not have the benefit of the provision.  Again, where the purchaser, before executing the contract, has received independent legal advice in relation to the purchase of the land or business, he will not have the benefit of the provision.

    With regard to auction sales, it would be impracticable for the cooling off period to be applied … the purchaser usually has ample opportunity to consider the nature of the transaction and his financial and other responsibilities if, at the subsequent auction, he is the successful bidder.[26]

    The 1974 amendments

    [26]   Parliamentary Debates, House of Assembly, 4 October 1973 p 1080.

13. The Land and Business Agents Act Amendment Act 1974 (SA) made a very significant change to section 90. Section 90(1) was amended to permit the vendor’s statement to be given after contract. It only required the vendor’s statement to be given 10 days before settlement. Section 91 was not so amended.

14. The effect of the 1974 amendments was to introduce a marked differentiation between the sale of land and a small business in the case of exempt purchasers.  Purchasers of a small business still had the opportunity to decide not to execute the contract after mandatory receipt of a vendor’s statement before contract.[27]  However, that opportunity was no longer mandated in the case of exempt purchasers of land. A body corporate which purchased land and entered into a contract before receiving a vendor’s statement was not given by the Act any means to avoid proceeding to settlement upon later mandated receipt of the vendor’s statement.

    [27] Section 91 was also amended to remove the automatic right of rescission and substitute a regime for application to the Court in its discretion to award damages or avoid the contract similar to the regime under section 90 for land.

15. The Attorney-General in his second reading speech identified the nature of the relevant amendment to section 90 in very brief terms as follows:

    First, the requirement that the statements be given before execution of the contract by the purchaser is deleted, and in its place a requirement is inserted that the statements be given at least before the date of settlement …

16. There is nothing in the Parliamentary Debates addressing the consequence of this change for exempt purchasers who had no cooling off rights under section 88 and no longer any legislative right to receive the vendor’s statement before contracting. The evident purpose of mandatory provision of vendor’s statements of allowing a purchaser to elect not to proceed with the purchase on learning of matters disclosed in the vendor’s statement no longer applied to exempt purchasers. Mandatory provision to exempt purchasers ten days before settlement did not and could not achieve that purpose. It is to be remembered that, at the time of the 1974 amendments, the disclosure required was relatively confined compared to the position today (prescribed encumbrances only).

17. These considerations suggest that Parliament gave no consideration to whether there remained any purpose (and if so what purpose) in requiring mandatory provision of vendor’s statements to exempt purchasers only ten days before settlement. This is not to suggest that provision of vendor’s statements could not serve any purpose in those cases, but that any ongoing purpose served was not a purpose adopted by Parliament.

    The 1982 and 1985 amendments

18. The Land and Business Agents Act Amendment Act 1982 (SA) amended section 90 by removing its application to the sale of a business.[28]

    [28] It was also amended to require the vendor’s statement to incorporate a statement in prescribed form of the rights of a purchaser under section 88 to cool off.

19. The Land and Business Agents Act Amendment Act 1985 (SA) amended section 91 to change the regime for vendor’s statements to make it substantially similar to the regime in the case of sale of land under section 90. It now permitted a vendor’s statement to be served after contract and up to five business days before settlement. 

20. Section 91a was enacted to give to a purchaser of a small business similar “cooling off” rights to those given to a purchaser of land under section 88, bringing the regime for small businesses further into line with that for land.

21. The 1985 amendments also introduced a new Part VIIIB into the Act, including section 82 which implied a condition into every rental accommodation referral contract. A new section 92 was inserted rendering void any purported exclusion, limitation, modification, or waiver of a right conferred, or contractual condition implied, by the Act. This prevented contractual exclusion of the new section 82 implied term.

    The 1990 amendments

22. The Land Agents, Brokers and Valuers Act Amendment Act 1990 (SA) replaced sections 80, 90, 91 and 91a and enacted new sections 91b to 91i. Apart from retaining separate sections addressing vendor’s statements on the sale of land and small businesses (sections 90 and 91 respectively), this Act introduced the regime which was later adopted by the Act in 1994.

23. The changes effected by the 1990 amendments included permitting a purchaser in receipt of certified legal advice to waive the right to a vendor’s statement and extending the exemptions to section 88 to encompass all of those included in the Act in 1994.

    Interstate mandatory disclosure regimes

24. Other States and the Australian Capital Territory introduced mandatory disclosure regimes well after South Australia, ranging from 1982 in Victoria to 2005 in Tasmania.[29] Most of those jurisdictions also introduced cooling off rights, at least for residential land purchasers, ranging from 1982 in Victoria to 2005 in Tasmania.[30]

    [29]   Sale of Land Act 1962 (Vic) s 32 introduced in 1982.

    Conveyancing Act 1919 (NSW) s 52A introduced in 1985.

    Strata Titles Act 1985 (WA) s 69 introduced in 1995 (confined to strata title land).

    Body Corporate and Community Management Act 1997 (Qld) s 206 and 213 (confined to strata title land).

    Civil Law (Sale of Residential Property) Act 2003 (ACT) s 10.

    Property Agents and Land Transactions Act 2005 (Tas) s 186.

    [30]   Sale of Land Act 1962 (Vic) s 31 introduced in 1982.

    Conveyancing Act 1919 (NSW) s 66S and 66U introduced in 1987.

    Property Agents and Motor Dealers Act 2000 (Qld) s 369.

    Civil Law (Sale of Residential Property) Act 2003 (ACT) s 12.

    Property Agents and Land Transactions Act 2005 (Tas) s 186.

25. In all other jurisdictions, the disclosure is required to be made on or before contract and the cooling off period runs from contracting (akin to the original position in South Australia in 1973). The complications identified above in the case of exempt purchasers in South Australia in 1974 (land and business) and 1985 (small business) do not arise elsewhere.

    Legislative purpose of vendor’s statements for corporate purchasers

26. The legislative purpose of requiring provision of a vendor’s statement to exempt purchasers was, when the Predecessor Act was enacted in 1973, to enable them to choose not to enter into the contract in the first place upon receipt of the mandatory disclosure contained in the vendor’s statement.  That legislative purpose ceased to exist for exempt purchasers of land in 1974 and of small businesses in 1982 when the vendor’s statement was no longer required to be provided before contract. 

27. While there is nothing in the 1974 amendments to suggest that a new purpose was intended to be achieved by service of vendor’s statements on exempt purchasers after contract but before settlement, a purpose might be served by such service in a minority of cases.

    1.If the terms of the contract included a promise by the vendor which is breached and either the term is an essential term or the breach is sufficiently serious, the purchaser might elect to terminate the contract as a result of learning of the breach through disclosure in the vendor’s statement before settlement. However, given typical terms of land sale contracts, the caveat emptor doctrine and the nature of Torrens title, this possibility is relatively remote.[31]

    2.If the vendor made a material misrepresentation before contract, the purchaser might elect to rescind the contract as a result of learning of the misrepresentation through disclosure in the vendor’s statement before settlement. This possibility is perhaps less remote but would still be relatively uncommon.[32]

    [31]   It is unlikely that this was Parliament’s purpose because it left the caveat emptor doctrine and freedom of contract undisturbed in the case of exempt purchasers.

    [32]   It is unlikely that this was Parliament’s purpose because it did not address misrepresentation either in respect of mainstream or exempt purchasers.

28. A corporation which receives a defective vendor’s statement after contract is not ordinarily able to obtain a remedial order under section 15 of the Act avoiding the contract. This is because, in the ordinary course, if proper disclosure had been made, ordinarily it could not have avoided the contract on proper disclosure and hence it could not show the requisite prejudice. It is conceivable that a corporation might seek damages if it could prove that it acted differently upon receipt of a defective vendor’s statement compared to the action it would and lawfully could have taken if it had received a non-defective vendor’s statement. For example, if after settlement the purchaser undertook activities on the land which it would not otherwise have undertaken, it might be able to recover damages in an action pursuant to section 15.

    Legislative effect on settlement of land purchase contracts

29. The defendants contend that section 7 operates of its own force to postpone the purchaser’s obligation to settle in the absence of receipt of a complying vendor’s statement.

30. I reject that construction of section 7.

31. Section 7(1) provides:

    A vendor of land must, at least 10 clear days before the date of settlement, serve, or cause to be served, on the purchaser a statement in the form required by regulation (signed by the vendor) setting out—

    (a) the rights of a purchaser under section 5; and

              (b)         the particulars required by regulation of—

                    (i)         all mortgages, charges and prescribed encumbrances affecting the land subject to the sale; and

                    (ii)         if the vendor acquired a relevant interest in the land within 12 months before the date of the contract of sale—all transactions relating to the acquisition of the interest occurring within that period; and

     (iii)         any prescribed matters.

32. Section 7 simply imposes an obligation to serve a vendor’s statement. It does not expressly provide that a purchaser need not settle in the absence of service of a vendor’s statement or complying vendor’s statement.

33. If section 7 had that operation, it would postpone the obligation to settle even where a vendor’s statement had been served which was substantially compliant but was subject to a minor defect. Similarly it would have that effect even where the failure to serve a complying statement caused no prejudice at all to the purchaser.

34. It would require a compelling manifestation of legislative intent to have this operation given the absence of any express provision and there is no such manifestation.

35. The Act provides that non-corporate purchasers have a right to rescind under section 5 (as construed by the Full Court in Leuci and Astill) and a right to seek relief from a court under section 15 if a defective vendor’s statement is served. The existence of these remedies suggests that section 7 does not provide a further “remedy” of postponing settlement obligations.

36. The primary purpose of requiring service of a vendor’s statement is to afford purchasers an opportunity not to enter into a contract or exercise cooling off rights in the knowledge of the matters disclosed by the vendor’s statement and this primary purpose would not be served by postponing the obligation of corporate purchasers to settle when they have already contracted and have no cooling off rights.

    Implication of term into land purchase contracts

37. The defendants contend alternatively that section 7 (in light of section 33) implies a term into every land purchase contract that:

    1.the vendor must serve a complying vendor’s statement on the purchaser ten days before settlement; and/or

    2.the purchaser’s obligation to settle on the purchase is postponed until receipt of a complying vendor’s statement.

38. The defendants’ contention is that section 33 contemplates the Act implying terms into contracts, no other provision of the Act implies a term into a contract and section 7 must therefore be the provision which does so.

    Implication of term requiring vendor’s statement

39. The defendants’ first contention is that the Act implies into every contract an implied term requiring the vendor to serve a complying vendor’s statement on the purchaser ten days before settlement

1. For the reasons given at [188] to [198] above, clause 11 did not become a term of the Contract.

   2. Breach of vendor’s statement term

2. For the reasons given at [224] to [244] above, Highfield has not been proved to have been in breach of the term (if incorporated).

   3. Condition of readiness and willingness of vendor to perform

3. The defendants contend that the plaintiff was not entitled to terminate the Contract, and is not entitled to loss of bargain damages, because the plaintiff was itself in breach of the vendor’s statement term and was thereby not ready, willing and able to perform its own obligations.  The defendants contend that this was because the vendor’s statement term imposed an obligation which was interdependent with the purchaser’s obligation to settle (Defence 2A).

4. I have concluded at [199] to [207] and [216] above that the vendor’s statement term was not an essential term of the Contract and on that basis  the purchaser’s obligation to settle was independent of Highfield’s posited breach of the vendor’s statement term. It follows that I reject the defendants’ contention.

5. The defendants concede that, if the vendor’s statement term is (as I have found) independent of the purchaser’s obligations, the vendor was not precluded from terminating because it was (on the defendants’ case) in breach of the vendor’s statement term. This concession was rightly made because the rationale for the ready, willing and able doctrine is the inter-connected nature of the obligations: that rationale does not apply to independent obligations.[156] A party is precluded from terminating if the other party’s breach was caused in turn by the first party’s breach of an independent term, [157] but that is not suggested here. It has been suggested that a party may be precluded from terminating if it is itself a repudiating party,[158]  but if so that could have no application here because there is no suggestion that Highfield was guilty of repudiation.

   [156] State Trading Corporation of India Ltd v M Golodetz Ltd [1989] 2 Lloyds Rep 277 at 285-287 per Kerr LJ (Lloyd LJ and Butler-Sloss LJ agreeing); Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (1992) 11 WAR 40 at 50-51 per Ipp J (Pidgeon ACJ and Franklyn J agreeing). See also Roadshow Entertainment Pty Ltd v CEL Home Video Pty Ltd (1997) 42 NSWLR 462 at 479-480 per Gleeson CJ, Handley JA and Brownie AJA.

   [157] See Roadshow Entertainment Pty Ltd v CEL Home Video Pty Ltd (1997) 42 NSWLR 462 at 479-480 per Gleeson CJ, Handley JA and Brownie AJA referring to Nina's Bar Bistro Pty Ltd v MBE Corporation (Sydney) Pty Ltd[1984] 3 NSWLR 613 at 614, 620-1, 632.

   [158] See Roadshow Entertainment Pty Ltd v CEL Home Video Pty Ltd (1997) 42 NSWLR 462 at 479-480 per Gleeson CJ, Handley JA and Brownie AJA where the Court of Appeal merely negated repudiation on the facts.

6. I add for completeness that, if (contrary to my conclusion) the vendor’s statement term was an essential term of the Contract, I have concluded above that the purchaser’s obligation to settle would have been interdependent with the purchaser’s obligation to settle. As Highfield did not serve a complying vendor’s statement, prima facie (subject to the plaintiff’s various contentions addressed below), it would have been not ready, willing and able to settle and thereby precluded from terminating for breach and repudiation by the purchaser on 1 September 2010 (assuming, contrary to my conclusion expressed above, that Highfield was in breach of a vendor’s statement term).

   4. Act postponing settlement obligation until complying vendor’s statement

7. The defendants contend in the alternative that section 7 of the Act postponed the purchaser’s obligation to settle in the absence of receipt of a complying vendor’s statement (Defence 2B).

8. I reject the defendants’ contention for the reasons given at [154] to [161].

   5. Implied term postponing settlement obligation until complying vendor’s statement

9. The defendants contend in the alternative that section 7 of the Act implied a term into a land sale contract postponing the purchaser’s obligation to settle in the absence of receipt of a complying vendor’s statement (Defence 2C).

10. I reject the defendants’ contention for the reasons given at [162] to [172].

    6.  Relevance of non essential term or non repudiation to readiness

11. The plaintiff contends that, if it was in breach of the vendor’s statement term, it was no bar to termination by Highfield because it was not an essential term nor was Highfield’s conduct repudiatory.

12. The premise for consideration of this contention is that the vendor’s statement obligation was interdependent with the purchaser’s obligation to settle.[159]  On this premise, I reject the plaintiff’s contention.

    [159] Otherwise, the plaintiff will already have succeeded on issues 3, 4 and 5 immediately above and the defendants accept that, absent interdependence, Defence 2 fails.

13. The plaintiff relies on the decision of the New South Wales Court of Appeal in Roadshow Entertainment Pty Ltd v CEL Home Video Pty Ltd. [160] The plaintiff relies on the following passage from the judgment of Gleeson CJ, Handley JA and Brownie AJA:

    A party in breach of non essential terms who has not repudiated may rescind for fundamental breach. See Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26; State Trading Corporation of India Ltd v M Golodetz Ltd [1989] 2 Lloyd's Rep 277 at 286-7. A party in breach of an essential but independent term may also rescind for fundamental breach. See State Trading Corporation of India Ltd v M Golodetz Ltd at 285-7. Compare Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (1992) 11 WAR 40 at 50-1. Roadshow, we consider, was not, by reason of its conduct, unable to terminate on the ground of CEL/Vision's repudiation.[161]

    [160] (1997) 42 NSWLR 462.

    [161] 42 NSWLR 462 at 480.

14. However, that passage is preceded, and qualified, by the passage which appears just before it:

    Timely payment by Roadshow was not a condition precedent to be performed before CEL/Vision became bound to perform the obligations repudiated by the sale and was independent of those obligations.[162]   (Emphasis added]

    [162] 42 NSWLR 462 at 479.

15. Moreover, in Jeppesons Road Pty Ltd v Di Domenico,[163] the Queensland Court of Appeal held that, where a term is interdependent, it is no answer for a party not willing to perform it that it is non-essential. Keane JA (McMurdo P and Douglas J agreeing) said:

    To enquire whether cl 5.3(1)(d)(ii) of the contract is to be characterised as an "essential term" of the contract is to be distracted from the real issue. As was emphasised by the majority of the court in Beard v Wratislaw, the provisions of the contract in relation to what is required to be provided at settlement "in exchange for payment of the Balance Purchase Price" are of critical importance because "the obligations of a purchaser and vendor under a clause in that form are dependent, concurrent and reciprocal". Absent compliance by the vendor with those provisions or proof of the vendor's readiness, willingness and ability to comply, the purchaser cannot be charged with breach of contract by reason of its failure to perform its dependent, concurrent and reciprocal obligation to tender the purchase price…

    So long as the respondents were not in a position to deliver the things referred to in cl 5.3(1), the appellant's failure to tender performance could not amount to a breach, even if "substantial" compliance with cl 5.3(1) was tendered by the respondents. Otherwise, by a parity of reasoning, the respondents would not have been in breach in failing to complete had the appellant tendered the balance of the purchase price less $1.00. Concurrent obligations in contracts for the sale of land are not to be construed as being subject to such "margins of appreciation".[164]    

    (Emphasis added, citations omitted)

    [163] [2005] QCA 391.

    [164] [2005] QCA 391 at [21], [22].

    7.  Dispensation with further performance of vendor’s statement term

16. The plaintiff contends that the defendants dispensed with further performance of the vendor’s statement obligation.

17. The “dispensation” principle applies to interdependent promises when party B communicates to party A a decision not to perform obligation Y in circumstances in which it would be apparent to an objective observer in A’s position that it would be futile or nugatory for A to perform its own obligation X because B will not be performing its counterpart obligation Y.[165] 

    [165] Foran v Wight (1989) 168 CLR 385 at 390-398 per Mason CJ, 417 per Brennan J, 433-434 per Deane J and 442 per Dawson J; Park v Brothers [2005] HCA 7337; (2005) 80 ALJR 317 at [41]-[42] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ.

18. The defendant contends that the dispensation principle is merely a specific application of estoppel and that A must prove that its failure to perform X was in reliance upon B’s intimation.  The plaintiff contends that the dispensation principle is a specific application of waiver and it is not necessary to prove reliance and in any event reliance should be inferred.

    The dispensation principle

19. The dispensation principle is a corollary of the “ready, willing and able” doctrine.  It cannot sensibly be said that party A is not ready, willing and able to perform obligation X merely because A does not perform obligation X on the due date after having been informed that party B will not be performing counterpart obligation Y. The position is analogous to the situation in which party A terminates for repudiation before the time arrives for performance of interdependent promises. In that event, the issue of readiness, willingness and ability to perform is determined at the time of termination on the basis that “nothing but a substantial incapacity or definitive resolve or decision against doing in the future what the contract requires is counted as an absence of readiness and willingness.”[166] In each case, the repudiatory conduct of party B renders hypothetical actual performance by A of obligation X, changing the approach to and focus as to A’s readiness, willingness and ability to perform.

    [166] Rawson v Hobbs [1961] HCA 72; (1961) 107 CLR 466 at 481 per Dixon CJ.

20. The dispensation principle does not involve a direct application of either waiver or estoppel. Rather, those doctrines are analogies to the application of the ready, willing and able doctrine to circumstances in which the other party has repudiated the contract and manifested an intention not to perform its own interdependent obligation.  The extent to which the analogy with waiver or estoppel will be apt will depend on the particular circumstances of the contract. This is the effect of the decision of the High Court in Parks v Brothers [167] which in turn explains earlier authorities.

    [167] (2005) 80 ALJR 317.

21. In Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd,[168] Dixon CJ said:

    But a plaintiff may be dispensed from performing a condition by the defendant expressly or impliedly intimating that it is useless for him to perform it and requesting him not to do it.  If the plaintiff acts upon the intimation it is just as effectual as actual prevention…

    Lord Campbell C.J., in Cort v. The Ambergate &c. Railway Co. …brought the point out clearly: "… a refusal by the defendant before the arrival of the cargo to perform the contract was not of itself necessarily a breach of it, but that such refusal, unretracted down to and inclusive of the time when the defendant was bound to receive the cargo, was evidence of a continuing refusal and a waiver of the condition precedent of delivery, so as to render the defendant liable for the breach of contract".

    I think that the defendant unmistakably intimated to the plaintiff that it was useless to take the steps requisite if the defendant was to deliver FOB Sydney because the defendant could not do so and so impliedly intimated to the plaintiff, when time still allowed the plaintiff to find another February ship and to give 14 days’ notice of the ship and of the shipping date or dates, that the plaintiff need not do so. … What excused the plaintiff was the defendant’s persistently maintaining that it could not ship the goods from Sydney as distinguished from Melbourne.

    and Kitto J said:

    The principle, which applies whenever the promise of one party, A, is subject to a condition to be fulfilled by the other party, B, may, I think, be stated as follows.  If, although B is ready and willing to perform the contract in all respects on his part, A absolutely refuses to carry out the contract, and persists in the refusal until a time arrives at which performance of his promise would have been due if the condition had been fulfilled by B, A is liable to B in damages for breach of his promise although the condition remains unfulfilled …

    I am supposing, of course, a case like the present where in all the circumstances the refusal necessarily conveys to B that he need not trouble to fulfil a condition to which A’s obligations under the contract are subject, because even if he does A will still not perform his obligations.[169]

    [168] (1954) 90 CLR 235.

    [169] (1954) 90 CLR 235 at 250-251.

22. In Foran v Wight,[170] Mason CJ:

    [170] (1988) 168 CLR 385.

    The qualification is that, if the repudiating party by his refusal to perform or other conduct intimates to the innocent party that he need not perform an obligation which is a condition precedent to the performance by the repudiating party of his obligation, and does not retract that intimation in time to give the innocent party an opportunity to perform his obligation, that party may be excused from actual performance of the condition precedent.  The repudiating party then waives complete performance of the condition precedent and his conditional promise becomes unconditional.[171]

    [171] 168 CLR 385 at 396, 398.

    Brennan J said:

    But if one party intimates to the other that it is useless for the other to fulfil these obligations and the other acts on the intimation, the party to whom the intimation is given is dispensed from a nugatory tender of performance. [172]

    Deane J said:

    The position is, however, different if one party has unambiguously informed the other party that he will not perform his obligations within the time made of the essence of the contract.  In such as case, the refusal to perform constitutes an intimation to the other party that the tender of performance of his concurrent obligations will be nugatory and futile.  … both Dixon CJ and Kitto J referred, with approval, to Lloyd Campbell CJ’s statement in Cort v Ambergate Railway Co which identified the applicable doctrine as “waiver”.  The line between the somewhat arbitrary doctrine of waiver and the doctrine of estoppel by conduct has always been a vague one and the former doctrine has been increasingly enveloped and rationalised by the latter.  At least in cases such as Peter Turnbull and Co, where the focus is upon action by one party “upon” what was conveyed to that party by the other party, the applicable primary doctrine should be seen in a modern context as that of estoppel.[173]

    and Dawson J said:

    Whilst the contract remains on foot for both parties, if the repudiation by one party makes it futile or pointless for the other party to attempt to perform an obligation, the law does not require him to do so.  The obligation remains – it does not disappear from the contract – but the other party is treated as if he had performed it in the limited sense that he is absolved from the consequences which would otherwise flow from his non-performance.  This principle … was originally justified as being common sense, although it has latterly been seen as the early recognition of the now developed notions of estoppel.[174]

    (Citations omitted)

    [172] 168 CLR 385 at 417.

    [173] 168 CLR 385 at 433-434.

    [174] 168 CLR 385 at 442.

23. In Park v Brothers,[175] Gleeson CJ, Gummow, Hayne, Callinan and Hayden JJ identified the principle as follows:

    [175] (2005) 80 ALJR 317.

    [In] Foran v Wight, …the principle was stated by Mason CJ in the following terms.

    “…The qualification is that, if the repudiating party by his refusal to perform or other conduct intimates to the innocent party that he need not perform an obligation which is a condition precedent to the performance by the repudiating party of his obligation, and does not retract that intimation in time to give the innocent party an opportunity to perform his obligation, that party may be excused from actual performance of the condition precedent.  The repudiating party then waives complete performance of the condition precedent and his conditional promise becomes unconditional.”

    In the earlier case, Dixon CJ referred to repudiatory conduct which expressly or implicitly intimates to the innocent party that it is useless to perform a condition, in consequence of which that party is dispensed from performing the condition. This, he said, was "just as effectual as actual prevention." Kitto J said:

    "The principle, which applies whenever the promise of one party, A, is subject to a condition to be fulfilled by the other party, B, may, I think, be stated as follows. If, although B is ready and willing to perform the contract in all respects on his part, A absolutely refuses to carry out the contract, and persists in the refusal until a time arrives at which performance of his promise would have been due if the condition had been fulfilled by B, A is liable to B in damages for breach of his promise although the condition remains unfulfilled."

    The application of that principle to a given case may be affected by the nature of the promise, and the nature of the condition.  If the conduct of the party in breach of contract prevents the performance by the other party of the condition, then it has been said to be “evident from common sense” that it is “equal to performance of the condition”.  The result has been explained sometimes in terms of waiver and sometimes in terms of estoppel.  Lord Mansfield said that “reason” dictated if one party stops the other offering performance by showing an intention not to perform “it is not necessary for the first to go farther, and do a nugatory act”. … The principle justifies a conclusion that the failure of the appellants to seek approval of the location of the 860 HA did not itself deprive them of their rights under special condition 24.  In the light of the respondent’s stance that the contract had been rescinded, to seek approval would have been futile. [176]

    (Citations omitted, emphasis added)

    [176] 80 ALJR 317 at [41]-[43].

24. By their summary of Dixon CJ’s reasoning and selecting the passages from the judgments of Kitto J in Peter Turnbull and Mason CJ in Foran v Wight emphasizing the analogy to waiver as opposed to estoppel and by the statement that the application of the dispensation principle may be affected by the nature of the promise and condition, the High Court was adopting an approach that the result in a given case will depend on the particular circumstances of the contract rather than an automatic and invariable application of either waiver or estoppel principles.

    Application to the facts

25. The letter from Commercial’s solicitors dated 28 April 2009 made it plain that Commercial was (purportedly) rescinding the Contract ab initio and demanding return of the deposit. It was apparent that Commercial would not attend settlement on 30 April. It was also apparent, not only that it would be futile for Highfield to serve an amended Form 1 Statement because Commercial had already (purportedly) rescinded the Contract, but it would also be otiose because Commercial was now fully aware of the answers to the four asbestos questions posed in the Pro Forma Vendor’s Statement. Commercial was in no sense intimating that Highfield should serve an amended Form 1 Statement if it wished Commercial to settle.

26. In the circumstances, the letter of 28 April 2009 conveyed to an objective observer in the position of Highfield that it was futile and otiose for Highfield to serve an amended vendor’s statement.  By its conduct, in an objective sense, Commercial dispensed with the necessity for Highfield to serve an amended Form 1 Statement answering the asbestos questions. In accordance with the decision of the High Court in Park v Brothers,[177] this is sufficient to conclude that Commercial dispensed with compliance with the vendor’s statement term.

    [177] (2005) 80 ALJR 317.

1. The defendants contend that the fact that Highfield sent its conveyancer to attend at settlement on 30 April and 27 May 2009, armed with an executed transfer and the duplicate certificate of title, demonstrates that there was no reliance by Highfield upon any intimation from Commercial: if Highfield regarded itself as not being obliged to serve an amended Form 1 Statement by reason of the letter, it would not have attended settlement at all (with or without an amended Form 1 Statement). The defendants also refer to the evidence of Mr Gill that he sought instructions on 30 April whether to serve an amended Form 1 Statement as showing that it was brought to the attention of Highfield and Highfield must have made a conscious decision not to serve an amended statement.

2. I reject the defendants’ contention in this respect.  It overlooks the fact that there was no assertion in the letter of 28 April 2009 that Highfield was in breach of contract due to the non-disclosure of asbestos in the Form 1 Statement.  Commercial did not make that assertion until the week before trial being long after Highfield terminated the Contract on 1 September 2010. The only assertion Commercial was making was of misrepresentation. It is these facts which explain why Highfield did not serve an amended Form 1 Statement, but did attend settlement as a preliminary to issuing a notice to complete.

3. If the letter of 28 April 2009 had asserted that it was a term of the Contract that Highfield serve on Commercial by the settlement date a fully complete and accurate vendor’s statement and in the absence thereof Commercial had no obligation to complete settlement, it would manifestly have been in Highfield’s interests to serve, and I find that it would have served, an amended Form 1 Statement answering the four asbestos questions[178] on or before 30 April 2009. In reaching this last conclusion, I have treated the plaintiff as bearing the onus of proof. Accordingly, if Highfield had needed to establish the elements of estoppel, it has done so.

   [178] Perhaps with a reservation of the right to contend that it was not obliged to do so.

   8.  Implied term of cooperation

4. The plaintiff contends that         Commercial is precluded from relying upon the vendor’s statement term because it breached an implied term of cooperation.

5. I reject the plaintiff’s contention for the reasons set out at [314] to [320] above.

   9.  Unconscionable conduct

6. The plaintiff contends that Commercial is precluded from relying upon the vendor’s statement term because its conduct was unconscionable.

7. This issue could only arise if, contrary to my conclusions above, clause 11 was incorporated as a term of the Contract, Highfield breached that term, the term was interdependent with Commercial’s obligation to settle, there was no dispensation by Commercial’s conduct with ongoing compliance by Highfield with that term and under contractual principles Commercial was not obliged to complete settlement of the transaction over the period between 30 April 2009 and 1 September 2010.  On that hypothesis, it cannot be said that Commercial was guilty of unconscionable conduct precluding it from reliance upon contractual principles to give that result.  For this reason, and the reasons set out in part G section 8, I reject Highfield’s contention.

   I. CONCLUSION

8. Clause 11 of the Option Agreement imposed an independent contractual obligation on Highfield. It required service of a vendor’s statement by settlement. It was not rendered void by section 33 of the Act.

9. Clause 11 was not incorporated as a term of the Contract and in any event Highfield was not proved to be in breach. In consequence both Defence 1 and Defence 2 fail.

10. The vendor’s statement term would not any event have been an essential term of the Contract and Defence 1 would have failed on this account.

11. Commercial was not entitled to terminate the Contract on 28 April or 27 May 2009. If Commercial had been entitled to terminate the Contract, Commercial’s acts of repudiation on 28 April or 27 May 2009 were sufficient to have that legal effect.

12. If the vendor’s statement term had been an essential term of the Contract, it would have been interdependent with the purchaser’s obligation to settle. As Commercial was not ready, willing and able to settle, Commercial was not entitled to terminate the Contract and Defence 1 would have failed on this account.

13. If the vendor’s statement term was a term (but not an essential term) of the Contract, it would have been independent of the purchaser’s obligation to settle. Section 7 of the Act did not postpone a purchaser’s obligation to settle in the absence of receipt of a complying vendor’s statement, nor did it imply a term into the Contract to that effect. In these circumstances, any breach of the vendor’s statement term by Highfield would not have disentitled it from terminating and Defence 2 would have failed on this account.

14. If the vendor’s statement term was interdependent, Highfield was not in any event unready, unwilling or unable to perform its own obligations under the vendor’s statement term of the contract so as to disentitle it from terminating because Commercial by its conduct dispensed with further performance of the vendor’s statement obligation. Defence 2 would have failed on this account. It would not have failed merely because the vendor’s statement term was not an essential term (assuming it was interdependent) and Highfield was not repudiating its obligations under the Contract.

15. Commercial was not in breach of an implied term requiring cooperation nor was it guilty of unconscionable conduct so as to preclude it from terminating the Contract or resisting Highfield’s termination.

16. Highfield validly terminated the Contract for breach and repudiation. Highfield is entitled to judgment against either Commercial or College at its election for $2,420,247.93 calculated to 13 August 2012. I will hear the parties as to the precise orders to be made.