Hong v Tsambikos
[2015] VCC 1401
•14 October 2015
ick
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised |
Case No. CI-14-03439
| JI HONG | First Plaintiff |
| WEI-GUO FAN | Second Plaintiff |
| v | |
| SAM TSAMBIKOS v MOORE REAL ESTATE PTY LTD (trading as Ray White Glen Waverley) (ACN 10 362 365) | Defendant First Third Party |
| PETER TO | Second Third Party |
Case No. CI-14-05725
| SAM TSAMBIKOS | Plaintiff |
| v | |
| JI HONG WEI-GUO FAN | First Defendant Second Defendant |
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| JUDGE: | HER HONOUR JUDGE KENNEDY | |
| WHERE HELD: | Melbourne | |
| DATE OF HEARING: | 9, 10, 11, 14, 15, and 16 September 2015 | |
| DATE OF JUDGMENT: | 14 October 2015 | |
| CASE MAY BE CITED AS: | Hong v Tsambikos | |
| MEDIUM NEUTRAL CITATION: | [2015] VCC 1401 | |
REASONS FOR JUDGMENT
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Catchwords: Contract for sale of land containing special condition that contract conditional on approval by FIRB-construction of contract- whether condition was a condition subsequent or condition precedent- whether purchaser entitled to rely on failure of condition to terminate-onus of proof- whether reasonable steps taken- whether substantial chance that approval would not be granted in any event- whether purchaser would be entitled to relief against third parties for alleged misrepresentations of estate agent about FIRB process
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr J Love | Australian Legal Advisory centre |
| For the Defendant | Mr J Doherty | McNab, McNab & Starke |
| For the Third Parties | Mr P Fary with Ms D Costaras | McKay Law |
HER HONOUR:
1 On 27 February 2014 Ms Hong and Mr Fan (the vendors) entered into an agreement to sell a property at 12 The Boulevard, North Balwyn to Mr Tsambikos (the purchaser). The contract was conditional on the purchaser being approved by the Foreign Investments Review Board (FIRB) by 5 March 2014.
2 No approval was obtained from FIRB by 5 March 2014 or at all.
3 By letter dated 11 March 2014 the purchaser sought to rescind the contract for non-fulfilment of the contingent condition. He now seeks a return of his deposit paid ($25,000).
4 The vendors claim that the purchaser is not entitled to rely on non-compliance with the condition given the purchaser failed to take reasonable steps to obtain approval. They claim this breached an implied term to take such steps.
5 The vendors further claim the outstanding deposit ($127,000), interest and costs on the basis of non-compliance with a notice of rescission served on 12 June 2014. They further say that the deposit paid ($25,000) has been forfeited.
6 The purchaser claims that the FIRB condition was a condition precedent to the formation of the contract such that no obligation arose to take reasonable efforts as alleged.[1] The purchaser also alleges that he took reasonable steps to obtain approval.[2] He further says that FIRB approval could not have been obtained by 5 March in any event.[3]
[1] Further Amended Defence filed 11 September 2015, at para 1A (CI-14-03439).
[2] Further Amended Defence filed 11 September 2015, at para 10A (CI-14-03439).
[3] Further Amended Defence filed 11 September 2015, at para 10A.3 (CI-14-03439).
7 In alleging that reasonable steps were taken, the purchaser further claims that Mr Peter To (the second third party), an estate agent engaged by Moore Real Estate Pty Ltd, which traded as Ray White Glen Waverly (“Ray White”) (the first third party), made various actionable representations to the effect that he would apply for FIRB approval which would be obtained by 5 March 2014.[4] He also claims the consequential loss (constituted by any liability to the vendors) as a set off against the vendors (alleging that Mr To acted on behalf of the vendors).
[4] Further Amended Defence filed 11 September 2015, at para 8B (CI-14-03439).
8 The purchaser has further brought a third party proceeding against the third parties (in their own right) claiming loss (represented by any claim by the vendors) by reason of his reliance on the alleged representations under the Australian Consumer Law and/or by reason of negligent misrepresentation.
9 The third parties challenge the representations alleged and say there were reasonable grounds for making them. They also, in particular, claim that the purchaser did not rely on any misrepresentation and that any loss was caused by the purchaser’s own failure to use reasonable endeavours to obtain approval.
10 The first issue was therefore to construe the contract, including:
· Whether the special condition was a condition precedent or subsequent;
· whether the contract was subject to any implied term as alleged by the vendors.
11 The next issue was whether the purchaser was entitled to terminate the contract. This turned on whether he took reasonable steps to obtain approval and/or whether approval could have been obtained by 5 March in any event.
12 In considering the issue of reasonable steps and/or the “set off” defence it was also necessary to consider what, if anything, Mr To said, and in what capacity.
13 The final issue was whether, if the vendors were successful against the purchaser, any orders should be made against the third parties.
14 If the purchaser was not entitled to terminate he accepted that the vendors would be entitled to the balance of the deposit (albeit as an acceptance of a repudiation).[5] The issue would then be, what, if any orders should be made in the third party proceeding.
[5] Defendant’s Closing Submissions dated 15 September 2015 at para 30; Transcript (11 September 2015) at page 156
15 However, if the purchaser was entitled to terminate, the vendors also accepted that he would be entitled to his deposit back.[6]
[6] Transcript (16 September 2015) at page 358
16 The above issues arose in two proceedings. Proceeding CI-14-05725 was originally instituted in the Magistrates’ Court by the purchaser wherein he claimed the $25,000 deposit. Proceeding CI-14-03439 was brought in this Court by the vendors. It further contains the third party proceeding.
Witnesses
17 The vendors called Ms Hong who gave her evidence through an interpreter. She presented as intelligent and astute though her answers were sometimes unresponsive. I also did not find her to be forthcoming regarding her conversations with Mr To about the (proposed) overseas buyer and the FIRB condition. For example, although she denied that Mr To’s “exact words” were that the contract might come to an end without approval, she later agreed that she understood that if approval was not obtained then the contract would become “invalid”.
18 The purchaser called Mr John Hill as well as Mr Tsambikos.
19 Mr Hill was the manager of the Compliance and Real Estate Screening Unit at Treasury in Canberra and gave evidence about the FIRB process which will be referred to below.
20 Mr Tsambikos was an unregistered builder and café owner. He presented as a generally honest witness though somewhat “out of his depth” in relation to this matter. Thus, although he described himself as a “specialist”,[7] this was the first property he had acquired for a client.
21 His recollections were also incomplete, consistent with the passage of time. In particular, as will be seen below, he had difficulty recalling exactly when the FIRB clause was discussed.
22 The third parties called Mr To, who had worked for Ray White for 3 years and was engaged by the vendors to market the property for sale.
23 Mr To had considerable difficulties in recollection (for example he used expressions such as it had “been too long”; and I “can’t remember” frequently). His evidence that he recommended that Mr Tsambikos get a lawyer was also not credible.
24 Overall, given the unsatisfactory nature of the oral evidence, I have given paramount weight to any objective evidence.
Background
Pre-signing of contract
25 At the end of 2013, Ms Hong decided to sell the property and engaged Ray White pursuant to an exclusive sale authority dated 24 December 2013. This provided for a commission of 2.8% plus GST with bonus provisions.
26 The evidence of Ms Hong was that she dealt with Mr To and gave him instructions to list the property, put it on the market, advertise it and look for potential buyers.
27 Meanwhile, the evidence of Mr Tsambikos was that he was introduced to a Mr Yu Yong (“Mr Yu”) through an intermediary, a Mr Ivan Huang, whom he had met at an Expo in Guangzhou. In December 2013 Mr Huang advised Mr Tsambikos that he had a client who wanted to purchase a “separated house” in Balwyn or Doncaster for around $1.5 - $2 million.
28 The client was Mr Yu who is a national of the People’s Republic of China.
29 Mr Tsambikos looked at the property with Mr Yu on about 18 February 2014.
30 By email of 19 February 2014 Mr Huang advised Mr Tsambikos that Mr Yu wanted “to proceed.”
31 Mr Tsambikos subsequently met Mr To at the property on about 21 February 2014. There is some dispute in the evidence as to what Mr To said which will be resolved below. However, it was not in dispute that the purchaser made known to Mr To that he intended to purchaser the property for an overseas Chinese national.
32 Mr Tsambikos and Mr To then met again at Ray White offices on 24 February 2014 at which time a first offer was submitted of $1.49 million (which was rejected).
33 Mr Tsambikos and Mr To then met again on 27 February at which time the second offer of $1.52 was made and subsequently accepted when the vendors signed late on 27 February (a Thursday).
Contract
34 The contract provided for a contract price of $1,520,000 with the deposit of $152,000 due by 14 March 2014 and settlement due on 28 May 2014.
35 The contract recorded that $25,000 of the deposit had been paid (though this was not in fact true because a deposit cheque later bounced). In fact, the $25,000 deposit was paid in two tranches: $5,000 on 3 March 2014 and $20,000 on 5 March 2014.
36 The contract contained a handwritten special condition relating to FIRB approval as follows:
This Contract is subject to Purchaser being approved by Foreign Investment Review Board
Approval Date: 5th March 2014.
37 It also contained a nominee general condition 18 which read as follows:
Nominee
The Purchaser may nominate a substitute or additional purchaser, but the named purchaser remains personally liable for the due performance of all the purchaser’s obligations under this Contract.
38 Mr Yu was never formally nominated pursuant to this clause.
39 The Section 32 Statement attached to the contract contained a title search which revealed that the property was subject to a covenant. The covenant included a restriction on the title owner to the effect that he:
“…will not erect more than one dwelling house on each such lot and that any dwelling house so erected shall not cost less than five hundred pounds.”
Events subsequent to contract
40 The evidence of Mr Hill was that, although the FIRB system recorded a “registration attempt” by a Yong Yu, there was no evidence of an actual application being made.
41 In the result, no FIRB approval was obtained by 5 March 2014.
42 By correspondence of 11 March 2014 the solicitor for the purchaser advised the vendors that as FIRB approval had not been given within the time required, his client rescinded the contract. He also sought a refund of the deposit.
43 By correspondence of 20 March 2014 the vendor’s solicitors then noted that Mr Tsambikos had not paid the outstanding deposit by the due date of 14 March 2014 and had further withdrawn from the contract. It alleged that he had by these actions repudiated the contract which was accepted.
44 By correspondence of 12 June 2014 the vendors then also served a (purported) notice of default and rescission citing the failure to pay the balance then owing under the contract on 28 May 2014.
45 On 13 June 2014, the purchaser subsequently issued proceedings in the Magistrates’ Court seeking a return of his $25,000 paid.
46 On 17 July 2014 the vendors brought County Court proceeding CI-14-03439 seeking the balance of the deposit.
47 The vendors have subsequently placed the property on the market and obtained a (higher) price of $1.68 million on settlement on 3 September 2015.
Construction of the contract
Implied term
48 The vendors alleged:
Insofar as there are terms of the Contract that are implied the implication arises from the principles of General Contact [sic] Law that require the parties to a contract to reasonably cooperate to carry out its terms and the fact that the Defendant made know to the Plaintiff’s agent Mr. To that he was intending to nominate a foreign national as the purchaser of the property. The implied terms of the Contract include the following:
i.That the Defendant and/or his Nominee shall make honest and all reasonable efforts to obtain Foreign Investment Review Board approval by the stated date being 5 March 2014 so as to allow the Defendant’s Nominee to purchase the property.[8]
[8] Amended Statement of Claim filed 11 September 2015 at para 2A (CI-14-03439).
49 The purchaser admitted that “he had to exercise reasonable endeavours to obtain FIRB approval on or before 5 March 2014” if the condition was a condition subsequent.[9]
[9] Further Amended Defence filed 11 September 2015, at para 2A(b) (CI-14-03439); Defendant’s Closing Submissions dated 15 September 2015, at para 19.
50 The third parties however contended that there was no implied term to the effect pleaded highlighting that it was only Mr Yu who had standing to apply for FIRB approval.[10]
Preliminary issue
[10] Third Parties’ Closing Submissions dated 15 September 2015, at para 8.
51 The special condition was expressed to be applicable to “the purchaser” but I accept that this meant the intended nominee and not Mr Tsambikos.
52 This was consistent with the way all parties (including the vendors) ran the case.[11]
[11] See Amended Statement of Claim filed 11 September 2015 at para 2A (CI-14-03439); Further Amended Defence filed 11 September 2015, at para 2(d) (CI-14-03439); Further Amended Third Party Notice filed 10 September 2015, at para 5 (CI-14-03439); Further Amended Defence to Third Party Statement of Claim filed 10 September 2015, at para 5 (CI-14-03439), Amended Statement of Claim filed 10 September 2015, at para 2(d) (CI-14-05735); Amended Defence to Plaintiff’s Amended Statement of Claim filed 14 September 2015, at para 3B (CI-14-05735); Reply to Defence filed 7 August 2015, at para 4 (CI-14-05725)
53 I also note that the Particulars of Sale expressly defined the purchaser as “Sam Tsambikos and/or nominee.” Although it is true that Mr Yu was never actually nominated, the evidence showed that he was the intended “overseas buyer” Mr Tsambikos told the vendors’ agent about.
54 It was also consistent with the fact that Mr Tsambikos was not a person who required FIRB approval. If the concept of a “purchaser” was confined to Mr Tsambikos the clause would be rendered meaningless.
Implied term
55 It is generally accepted that a party to a contract has a duty to co-operate. In Butt v McDonald[12], Griffith CJ stated:[13]
“It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.”
[12] (1896) 7 QLJ 68.
[13] Butt v McDonald (1896) 7 QLJ 68 at pages 70-71.
56 This statement was approved by the High Court in Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Ltd[14].
[14] (1979) 144 CLR 596 at page 607.
57 A number of decisions dealing with conditions subsequent to formation have also indicated that there will be implied into the agreement a term requiring a party to use reasonable endeavours to ensure that the condition is fulfilled.[15]
[15] For e.g. Butts v O’Dwyer (1952) 87 CLR 267 at page 280; Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at pages 545-546 (Gibbs CJ), at page 553 (Mason J), at page 559 (Wilson J), at page 566 (Brennan J); Zieme v Gregory [1963] VR 214 at page 223; Piva v Sportiva Macchina International Pty Ltd [2006] VSC 321 at para [85]; Joseph Street v Tan (2012) 38 VR 241 at paras [5], [41]; Plumor Pty Ltd v Handley (1996) 41 NSWLR 30 at page 34E.
58 It is unnecessary in this case to consider whether there was some additional obligation to use honest endeavours as alleged by the vendors. The case cited in support, Zieme v Gregory[16] (“Zieme”), does not support such an obligation.
[16] [1963] VR 214.
59 In any event, consistent with the purchaser’s concessions, and the preponderance of authority, I accept that the contract included an implied term to the effect that the purchaser “shall make all reasonable efforts to enable the intended nominee to obtain FIRB approval by 5 March.”
Whether condition precedent
60 The purchaser submitted that the special condition was a condition precedent to formation of the contract. He relied on the fact that words “the contract” were used in the clause as the subject of the condition and submitted that there was a presumption that the special condition was a condition precent to formation citing Masters v Cameron[17] in support of these propositions. [18]
[17] (1954) 91 CLR 353.
[18] Defendant’s Closing Submissions dated 15 September 2015 at para 12(a).
61 The purchaser submitted that a construction of the special condition as a condition precedent to formation was consistent with:[19]
[19] Defendant’s Closing Submissions dated 15 September 2015 at para 13.
· the fact that there are no express provisions requiring steps to be taken to fulfil the condition, including no provision requiring the provision of a rescission notice (as in cases such as Ardee Pty Ltd v Collex Pty Ltd[20] (“Ardee”);
[20] [2001] NSWSC 836.
· the deposit was for a “modest” $25,000;
· the balance of the deposit was to be paid after the condition had been fulfilled; and
· the parties would know whether the condition would be fulfilled within a short period.
62 Additionally, the purchaser referred[21] to the provisions of the Foreign Acquisition and Takeovers Act 1976 (Cth) which makes it an offence for a non-Australian resident to enter into an agreement by virtue of which he or she obtains an interest in Australian urban land without first notifying the Treasurer.[22] It was submitted that this should be a surrounding fact taken into account in construing the special condition.[23]
[21] Defendant’s Closing Submissions dated 15 September 2015 at para 6.
[22]Foreign Acquisition and Takeovers Act 1976 (Cth), s 26A(2)(a).
[23] Defendant’s Closing Submissions dated 15 September 2015, at para 7.
63 I reject the submission that Masters v Cameron gives rise to any presumption that the words used in the special condition were a condition precedent to formation. Although the High Court stated that expressions like “subject to contract” might prima facie suggest that there was not a contract, it did not necessarily produce such a result.[24] In any event, the condition in this case is not of similar import, rather it provides that “the contract” is subject to the requisite approval. Such a clause is also distinguishable from the clause the subject of Masters v Cameron, which was worded as follows: “This agreement is made subject to the preparation of a formal contract of sale which shall be acceptable to my solicitors on the above terms and conditions…”.[25] The High Court noted that the formal contract anticipated was “to be acceptable to the vendor’s solicitors, and the meaning is sufficiently evident that the contract shall contain, not only the stated terms and conditions expressed in a form satisfactory to the solicitors, but also whatever else the solicitors may fairly consider appropriate to the case.”[26] Thus there was a clear implication that the parties did not intend to be immediately bound.
[24]Masters v Cameron (1954) 91 CLR 353 at pages 362-363.
[25]Masters v Cameron (1954) 91 CLR 353 at page 359.
[26]Masters v Cameron (1954) 91 CLR 353 at page 364.
64 This is to be compared with the current case wherein the parties have agreed on, and finalised, detailed terms and conditions including both general and special conditions of sale.
65 I accept that the clause considered in the decision in Ardee (construed as a condition subsequent) was different to the special condition in this matter given the clause expressly provided for the agreement to be binding pending fulfilment of the condition and for a rescission procedure if the clause was not complied with. However, the mere absence of similar words in the special condition in this matter does not mean that the parties did not intend to be bound immediately. As such, little assistance is provided by Ardee on this issue.
66 Similarly, none of the facts of the payment of deposit, the amount of the deposit or the due date for the payment of the balance of the deposit points conclusively to the conclusion that the special condition is either a condition precedent to formation or a condition subsequent to formation. If the special condition was found to be a condition precedent to formation, then the analysis of the status of the deposit in Masters v Cameron might well be applicable (i.e. that of an anticipatory payment[27]). However, this begs the question as to the appropriate characterisation of the condition.
[27]Masters v Cameron (1954) 91 CLR 353 at page 365.
67 The time for obtaining approval from FIRB (relatively short) was also inconclusive.
68 As far as the provisions of the Foreign Acquisition and Takeovers Act 1976 (Cth) are concerned, I note that the provision which imposes criminal liability on a non-resident who enters into an agreement by virtue of which the non-resident obtains an interest in Australian urban land without first notifying the Treasurer, section 26A(2), is subject to the following qualification:[28]
[28]Foreign Acquisition and Takeovers Act 1976 (Cth), s 26A(3).
(3) Where:
(a) a person enters into an agreement by virtue of which he or she acquires an interest in Australian urban land; and
(b) the provisions of the agreement that relate to the acquisition of the interest do not become binding until the fulfilment of a condition or conditions set out in the agreement;
the person shall not be taken, for the purposes of subsection (2), to have entered into the agreement until the time when those provisions become binding.
69 Thus, whether the special condition was a condition precedent to formation or a condition subsequent, the risk of any exposure to criminal liability is the same. I therefore do not consider that these provisions assist in the determination of this issue.
70 There is therefore little assistance to be gained from the terms of the agreement itself in this case. However, in a case such as this, the following statement of Mason J in Perri v Coolangatta Investments Pty Ltd becomes highly significant:[29]
“Generally speaking the court will tend to favour that construction which leads to the conclusion that a particular stipulation is a condition precedent to performance as against that which leads to the conclusion that the stipulation is a condition precedent to the formation or existence of a contract. In most cases it is artificial to say, in the face of the details settled upon by the parties, that there is no binding contract unless the event in question happens. Instead, it is appropriate in conformity with the mutual intention of the parties to say that there is a binding contract which makes the stipulated event a condition precedent to the duty of one party, or perhaps of both parties, to perform. Furthermore, it gives the courts greater scope in determining and adjusting the rights of the parties. For these reasons the condition will not be construed as a condition precedent to the formation of a contract unless the contract read as a whole plainly compels this conclusion.”
[29] (1982) 149 CLR 537 at 552.
71 This statement has since been endorsed on many occasions.[30]
[30] National Mutual Trustees Ltd v Targridge Pty Ltd (Unreported, Supreme Court of Victoria, 2 October 1995); Davies v Deputy Commissioner of Taxation [2015] FCA 773 at para [81]; NAB v Hunter (No 3) [2013] NSWSC 102
72 There is nothing in the written contract or in the submissions of the parties that “compels the conclusion” that the special condition is a condition precedent to formation of the contract. In such cases, consistent with Perri, it is not appropriate to construe the condition as a condition precedent to formation of the contract.
73 I am further fortified in this view by the subsequent conduct of the purchaser’s solicitors in generally acknowledging the contract, in particular by seeking rescission of “the Contract” by the correspondence of 11 March; further alleging that a representation was made which induced the purchaser to “enter the contract” in correspondence of 14 March. Such conduct may be utilised in determining whether a contract did exist.[31]
[31] See cases referred to in Cheshire & Fifoot Law of Contract, Seddon Bigwood and Ellinghaus (10th ed, 2012), LexisNexis Butterworths, para [10.16].
74 I therefore find that the condition was not a condition precedent to formation. It followed that the purchaser was bound by the implied term to make “all reasonable efforts” to enable the intended nominee to obtain FIRB approval by 5 March.
What if any representations were made, and in what capacity
75 The purchaser’s pleadings alleged a wide range of representations.
76 However, in the result, only the following 3 were pursued:
(a) that Ray White, further or alternatively Peter To would apply for FIRB approval for the Chinese Purchaser;
(b) the approval would be obtained within 1 or 2 days;
(c) the approval would be obtained by 5 March 2014[32]
[32] Further Amended Defence filed 11 September 2015, at para 8B(a)-(c) (CI-14-03439).
Evidence of Tsambikos
77 As indicated already, the evidence of Mr Tsambikos was that there were 3 meetings: one on site on 20 or 21 February 2014; one at the estate agent’s offices where he made a first offer (which was rejected) on 24 February 2014; and a further one where he made the successful offer at the offices of Ray White on the day of signing on 27 February 2014.
78 In terms of the first meeting his evidence under examination was as follows:
Mr Tsambikos: … Well, I explained to him how there was a - the overseas buyer needed to get FIRB approval, and that I need to go and see somebody who can do that.
Mr Doherty: What, if anything, did Mr To say in response to that?
Mr Tsambikos: He said that, "Look, you don't need to go and see anybody.I do that all the time. I've done it for quite a few properties, and I can help you with that."
Mr Doherty: What, if any, indication did he give as to the time frame in which approval could be granted?
Mr Tsambikos: He said it only takes a day or two, doesn't take long at all, and then - he could do it.
79 Mr To also told him he needed the visa number as well as the passport of Mr Yu.
80 He also asked Mr To about how the contract worked and whether he would send the contract overseas for Mr Yu to sign. Mr To said the way they could do it was to sign as purchaser and/or nominee. Once they got FIRB approval was then when they would nominate Mr Yu.
81 At the second meeting they filled out a contract for the first offer of $1.48m or $1.49m.
82 At the third meeting, they started putting in the clause relating to FIRB. Mr Tsambikos requested 13 or 14 days but Mr To said he should be able to get FIRB approval a lot quicker in one or two days.
83 Mr Tsambikos also claimed at one point that Mr To said he does this all the time and he would be able to do it for us.
84 Under cross examination he became very unclear about whether a FIRB clause was discussed at the time of the making of the first offer. He suggested they discussed a four or five day period but was then unable to explain why he would then ask again for 13 or 14 days at the third meeting. Ultimately he conceded that the conversation about waiting the 13 or 14 days may not have been on 27 February 2014.
85 Under cross examination he also agreed that Mr To told him that he had previously made a few FIRB applications but maintained that Mr To said such applications would take one to two days.
86 He disagreed with the suggestion that Mr To said he could “get a lawyer to assist him or that he could help if required.” He agreed that Mr To wanted the information as soon as possible and that he wanted the passport and visa.
Evidence of Mr To
87 Under examination, Mr To had very limited recollection as to the first or second meetings.
88 At the meeting on signing on 27 February 2014 his evidence was they discussed price, deposit money and the settlement date and that Mr Tsambikos asked him to put in a FIRB clause. He originally asked for 2 weeks and then later they “agreed” on 5 March 2014.
89 He claimed they discussed his role which was to “help Sam to make the application.” He also sought a passport, visa and addresses and phone number.
90 Mr Tsambikos asked him to help him to make an application and also asked how long it would take. Mr To said: “from my past experience, a couple of days.”
91 He claimed he followed up after 27 February 2014 by phone or text but did not receive anything until 4 March 2014.
92 Under cross-examination he did not recall any conversation about FIRB at the time of the first offer.
93 He claimed that when Mr Tsambikos asked him whether he would assist him with the application his response was: “You should get someone who- maybe a lawyer or a conveyancer to do it, but if you want me to help you, I can.”
94 This appeared to be different to what had been put to Mr Tsambikos (by To’s Counsel) namely that Mr To would say he told Tsambikos he could “either” get a lawyer or he could help him.
95 Mr To described himself as having an “assisting role.” He claimed he said “most people would use a lawyer. I think you should.” He claimed he did “recommend” a lawyer.
96 He agreed Mr Tsambikos had said he wanted 14 days and he suggested that 7 would be enough.
Resolution
Role – representation (a)
97 Although at one point, Tsambikos spoke of Mr To being able to “do it for them” the general tenor of his evidence was that Mr To was to “help” him make the application. This was consistent with his initial evidence under examination and was also reflected by the conduct of Mr To later (as detailed below) in requesting Mr Tsambikos to meet at his office so they could prepare the application together.
98 However, I do not accept Mr To’s evidence (first raised under cross examination) about mentioning a lawyer. His ultimate position under cross examination (that he actually recommended one) had not been put to Mr Tsambikos and appeared to be exaggerated. I prefer the evidence of Mr Tsambikos on this matter that no mention was made of a lawyer.
99 I therefore accept that Mr To said he could “help Mr Tsambikos with” the application. However, as Mr Tsambikos conceded, this was qualified given Mr To wanted the information as soon as possible which included the passport and visa. Such a statement was further qualified by a later acknowledgment of Mr Tsambikos which will be referred to below.
Timing – representation (b)
100 There appears to be very little difference in both accounts since Mr Tsambikos’s account was that he was told “one or two days” as compared to Mr To’s version which was “a couple of days.”
101 To the extent it is necessary I accept Mr To’s suggestion that he told Mr Tsambikos it would take “a couple of days” given this was consistent with correspondence from the purchaser’s solicitors shortly after the making of the alleged statements. Thus, in correspondence of 14 March, Gary Blenkiron alleged that Mr To represented to the purchaser that the processing would only “take a couple of days” which induced his client to enter the contract.[33]
[33] Exhibit TP3.
102 Again however an issue arises as to whether this statement was qualified.
103 The evidence of Mr To was that he expressly made his statement “from my past experience.” Mr Tsambikos also accepted that Mr To had told him that he had previously made a few FIRB applications in the context of giving his time estimate. The purchaser also does not appear to challenge the evidence of Mr To in this respect in final submissions.[34]
[34] Defendant’s Closing Submissions dated 15 September 2015, at para 37(d).
104 I therefore accept that the statement as to the time estimate was qualified as generally stated by Mr To, that is, that he said he believed the application would take “a couple of days” based on his experience. According to Mr To, this experience was constituted by an application for a Ms Wu plus another “couple” of unidentified purchasers.
Timing – representation (c)
105 The third parties generally accepted this representation was made given they put it to Tsambikos on instructions.
106 Thus what was put to Mr Tsambikos was that he asked whether 5 March 2014 was long enough and Mr To said it was [long enough] provided Mr Tsambikos provided information as soon as possible. Mr Tsambikos agreed with this.
107 I therefore accept that Mr To represented that 5 March 2014 was “long enough.” However, this representation was qualified subject to the provision of timely information. It was also made in the context of Mr To’s experience.
In what capacity
108 The purchaser and third parties submitted that any representations were made on behalf of the vendors within the scope of Mr To’s ostensible authority.[35]
[35] Defendant’s Closing Submissions dated 15 September 2015, at para 35; Third Parties’ Closing Submissions dated 15 September 2015, at paras 9-13.
109 In particular the purchaser submitted that the representations were made as part of the work performed in selling the property particularly when considered within context of this property which was attractive to an overseas (Chinese) market.[36] Thus it was said that part of the process of selling a house in this market was the making of statements about FIRB.
[36] Defendant’s Closing Submissions dated 15 September 2015, at para 35
110 The only case cited was the decision of Goulet v Clarkson (“Goulet”).[37]
[37] [1949] 1 DLR 847.
111 There was no suggestion that statements about FIRB were expressly authorised by the vendors, not could there be. Thus the evidence did not establish that the vendors expressly authorised Mr To to make statements about the FIRB process.
112 In terms of ostensible authority, the essence of the doctrine is as follows:
“An ‘apparent’ or ‘ostensible’ authority…is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be an in fact acted on by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the ‘apparent’ authority, so as to render the principal liable to perform any obligations imposed on him by such contract.”[38]
[38]Freeman and Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503.
113 The representation is usually implied from conduct.[39]
[39] G E Dal Pont, Law of Agency (LexisNexis, 3rd ed. 2014) at 466.
114 In the present case, although Mr To was expressly engaged to sell the property pursuant to the authority I do not consider that the vendors held him out as their agent for the purposes of making representations as to the separate FIRB process.
115 A principal can however “hold out” a person as having ostensible authority simply by investing the agent with a particular office or title.[40] The court must then look at the usual authority that is vested in persons with that title, in that particular trade or business.
[40] G E Dal Pont, Law of Agency (LexisNexis, 3rd ed. 2014) at 467.
116 Turning to this case again, the purchaser adduced no evidence to establish that the usual authority of an estate agent in this area extended to making representations about the timing of the FIRB process; nor that such agents would ordinarily assist purchasers with that process.
117 In such circumstances I do not consider that the representations as to the timing, and role of Mr To, in relation to the FIRB application were made within the scope of any ostensible authority.
118 In Goulet, a real estate agent had made misrepresentations as to the revenue of a farm property he was engaged to sell by the vendor. The misrepresentations were made in an advertisement and twice verbally by the agent. Coady J of the British Columbia Supreme Court found that the vendors had in any event made the same representations to the purchasers. But in the event that was incorrect, Coady J stated that the vendors would be bound by the statements of the agent.
119 The finding as to agency was hence obiter. In any event, a statement as to the revenue of a farm property the subject of the sale is more naturally connected with the subject matter of the sale. This is distinguishable from the present case where the FIRB process constituted a completely separate matter unconnected with the characteristics of the property the subject of the sale.
120 Accordingly I am satisfied that any representations made by Mr To were made on behalf of the third parties in their own right and not on behalf of the vendors.
Whether the purchaser was entitled to terminate
121 It was not disputed that the purchaser was, prima facie, entitled to terminate for the non-fulfilment of the contingent condition.[41]
[41] Gange v Sullivan (1966) 116 CLR 418 at pages 442 (Taylor, Menzies and Owen JJ) and 443 (Windeyer J); Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at page 546 (Gibbs CJ).
122 The vendors however say that this does not operate because the purchaser breached the implied condition.
123 The purchaser says he did not. In any event he says that the vendors have not established that any breach caused the non-satisfaction of the special condition given FIRB approval could not have been obtained in any event.
Principles
124 In the Court of Appeal decision of Joseph Street v Tan[42] the Court of Appeal states:
“It is well established that a party wishing to rescind cannot take advantage of its own ineffective or inefficient measures to comply with its contractual obligations, and that where a [party’s] default has deprived the [other party] of a “substantial chance” that the condition would have been fulfilled, the [party in default] cannot exercise the right of rescission.”
[42] (2012) 38 VR 241 at page 257.
125 The disentitlement thus has two aspects:
· That the party wishing to rescind has failed to comply with contractual obligations;
· That this default effectively caused the non-satisfaction of the condition by depriving the other party of a “substantial chance” that the condition would have been fulfilled
126 The issue of onus as to this disentitlement is the subject of conflicting authority.
127 The third party and purchaser submitted that the onus lay on the vendors citing a decision of Plumor v Handley[43] (“Plumor”) a decision of McLelland CJ in the NSW Supreme Court which has been followed and cited by a number of other decisions in New South Wales.[44]
[43] (1996) 41 NSWLR 30.
[44] For e.g.Sharjade Pty Ltd v Commonwealth of Australia [2009] NSWCA 373 at para [56]; Redglove Projects Pty Ltd v Ngunnawal Local Aboriginal Land Council [2005] NSWSC 892 at para [93]; Schenk v ACN 081 123 140 Pty Ltd [2002] NSWSC 123 at para [20]; Munro v Bodrex Pty Ltd [2002] NSWSC 122.
128 In that case His Honour noted that there were conflicting cases on the issue of onus before ultimately preferring a line of authority which supported a finding that the onus of proof lay on the party resisting rescission.
129 However, in Victoria, a decision of the Full Court of the Supreme Court has taken a different position. Thus in Zieme v Gregory[45] a Full Court (constituted by Lowe, Smith and Gowans JJ) determined that the onus was on the party seeking to rely on the condition[46] highlighting that the condition involved a right “accruing to the purchaser” and citing decisions of Brauer & Co (Great Britain) Ltd v James Clark (Brush Materials)[47] and Barber v Crickett.[48]
[45] [1963] VR 214.
[46]Zieme v Gregory [1963] VR 214 at page 223.
[47] [1952] 2 All ER 497 at page 501.
[48] [1958] NZLR 1057
130 The decision in Zieme was further relied upon by Hargreaves J in the Supreme Court of Victoria decision of Piva v Sportiva Machhina International Pty Ltd.[49] In that case His Honour cited it for the proposition that the onus lay on the party seeking to rescind.[50]
[49] [2006] VSC 321.
[50] Piva v Sportiva Machhina International Pty Ltd [2006] VSC 321 at para [115], where Brauer & Co (Great Britain) Ltd v James Clark (Brush Materials) [1952] 2 All ER 497 was also cited.
131 In Joseph Street v Tan[51] Forrest J appears to accept a different position on onus but notes that the issue was not specifically addressed. The Court of Appeal in that case does not directly deal with onus, nor was it mentioned in a further Court of Appeal decision of Penola Trading Co Pty Ltd v Sunny Springs Pty Ltd[52] (although Plumor is cited).[53]
[51] [2010] VSC 586 at para [60].
[52] [2009] VSCA 161.
[53]Penola Trading Co Pty Ltd v Sunny Springs Pty Ltd [2009] VSCA 161 at para [100].
132 The decision in Zieme has also been cited with approval in Western Australia.[54]
[54] Fay v Sheridan [1999] WASCA 61 at para [23]; Mario Casella & Sons Builders Pty Ltd v Duckworth [2005] WASC 245 at para [72].
133 Although the cases cited by McLelland CJ in Plumor might generally favour a different approach to Zieme, as he observed, they were not generally binding authority. The decision he appeared to give most weight to, a decision of Joseph Constantine Steamship Line Ltd v Imperial Smelting Corporation Ltd,[55] was also a frustration case rather than a case about a contingent condition.
[55] [1942] AC 154.
134 There is also considerable merit in an approach that imposes an onus on the party who takes the benefit of the condition.
135 In any event, unless and until the Full Court decision of Zieme is reviewed, this Court is bound by the approach in that case that the onus lies on the party seeking to rely on the condition (i.e. the purchaser).
136 Even though the purchaser carries the onus, it is important to bear in mind the comments of McLelland CJ in Hunyor v Tilelli[56] as follows:
“it is necessary however to bear in mind that all evidence is to be weighed according to the proof which it was reasonably within the means of one party to produce or of the other to contradict”.[57]
[56]Hunyor v Tilelli (1997) 8 BPR 15,629.
[57] Hunyor v Tilelli (McLelland CJ, 24 April 1997, available through LexisNexis online: BC9701457 at 4).
Whether implied condition breached
137 In order to consider whether the purchaser did make all reasonable efforts to obtain FIRB approval, it was necessary to consider the events which occurred from shortly before the signing of the contract until 5 March (the last day for compliance with the condition).
Chronology of events
138 By text of 25 February 2014 from Mr Tsambikos to Mr Huang he stated that he needed all of Mr Yu’s details to apply for FIRB and asked whether he had a visa number.
139 By email of 26 February Mr Tsambikos further advised Mr Huang as follows:
I have 7 days to get FIRB for Mr Yu, so if he confirm everything ok, I will need all his information, including if he has visa number,
Please confirm back to me via text as I will be out of the office today,
Sam
140 Mr Tsambikos received the passport scanned back to him on 26 February 2014 at 12.30pm. However he did not provide this to Mr To at that time.
141 The contract was then executed on 27 February 2014.
142 Meanwhile, the phone records, consistent with the evidence of Mr To, suggest he was chasing Mr Tsambikos for necessary information between 27 February and 4 March.[58]
[58] See for example, entries highlighted in green in Chronology filed by Third Party on 16 September 2015 (CI-14-03439).
143 However, it was not until 4 March that Mr Tsambikos pursued the visa number and forwarded the passport to Mr To.
144 Thus by email at 2.09am on 4 March 2014 Mr Tsambikos writes to Mr Huang:
I am ready to apply for Mr Yu FIRB, Can you please email me Mr Yu Australian Visa Number, also please text to me as I will be out of the office,
Sam
145 At 5:06am, Mr Tsambikos then sent an email to Mr To attaching Mr Yu’s passport scan (which had been in his possession since 26 February).
146 Mr Tsambikos subsequently received a phone call from Mr To saying the information he needed was not on the passport and he needed a 14 digit visa number.
147 Mr Tsambikos therefore texted Mr Huang on 4 March 2014 at 12.32 pm requesting the visa number.
148 After some further exchanges between Mr Huang and Mr Tsambikos, at 2:51pm, Mr Tsambikos sent an email to Mr To attaching a scan of Mr Yu’s Visitor (Class FA) Visa.
149 In the result, this was the first time Mr To received the visa.
150 There followed some further exchanges between Mr To and Mr Tsambikos as Mr To was a little unclear as to whether this was the right visa number to use given it appeared to be in different form to what he had in the past.
151 In the result, the evidence of both Mr To and Mr Tsambikos was that a meeting was proposed for 1.00pm on 5 March 2014 wherein they were to prepare the FIRB application together. This is consistent with Mr To’s diary entry for 1300 hours dated 5 March which records: “Sam come in after 12.00 to do FIRB.”
152 However, on 5 March 2014 at about 13:27pm Mr Tsambikos sent a text to Mr To which stated:
Hi Peter
I will be at your office in half hour
153 The explanation of Mr Tsambikos was that he was running late because he had needed to get a replacement cheque and did not get there until the “afternoon sometime” at around 3.30 pm at which point Mr To was not there. He said they then had a phone call wherein Mr To said he had another appointment but would do the FIRB application that night.
154 Mr To says Mr Tsambikos did not get to his office at all. However he says there was a conversation (at around 4.30) wherein Mr Tsambikos said he could not come in. Mr To then said they had to make the application together because they were using Mr Tsambikos’ email and other details. However, Mr Tsambikos then asked Mr To do it himself. Mr To was not comfortable with this and said he did not want to take responsibility. He requested Mr Tsambikos to send a text because he was not happy with him not showing up.
155 To the extent necessary, I accept Mr To’s account which is corroborated by his telephone records which record a phone call at 4.37pm to Mr To’s telephone number.
156 It is also corroborated by a text of 16:46pm which Mr Tsambikos sent to Mr To which provided:
Hi Peter, Could you as a favour please apply for FIRB on our behalf, Thank you,
157 On 5 March 2014 at about 18:01 pm, Mr To sent a text to Mr Tsambikos saying:
Hi Sam, please note I do not take any responsibility whatsoever or accept any claim whatever in relation to the outcome of the FIRB application, please reconfirm.
158 On 5 March 2014 at about 18:06pm, Mr Tsambikos sent a text to Mr To saying:
Yes Peter, that’s ok I understand you do not take any responsibility.
159 By 5.00 pm on 5 March no FIRB application had been made. According to the evidence of Mr Hill no decision could thereby be made that day given decision-making took place during office hours between 9.00am and 5.00pm.
160 However, Mr To attempted to apply for FIRB on the website using Mr Tsambikos’ details.
161 Mr To then texted Mr Tsambikos at 9.56 pm asking him to give him a call as there was nothing more he could do without the password which would be (and was) sent to Sam’s email address.
162 In fact there are two FIRB emails sent to Mr Tsambikos as follows:
· The first of 5 March 2014 at 8.24pm read:
Dear Yong,
Welcome to the Foreign Investment Review Board online applications.
A temporary password has been set for you below. You must change it next time you log in.
· The second of 5 March 2014 at 8.44pm read:
A temporary password has been set for you below. You must change it next time you log in.
163 Mr To did not hear from Mr Tsambikos. He therefore tried to make another application using his own email address so the password would come to him but received nothing from FIRB. He did not even receive a password to continue the process of an application.
164 In the result, no FIRB application was made.
165 Moreover, by email of 9 March Mr Huang advised Mr Tsambikos that there was “bad news” since Mr Yu did not want this block anymore, asking “Do you think you can get your deposit back?”
Resolution
166 Mr Tsambikos alleged that reasonable and honest steps were taken citing that he relied on Mr To, there were delays in obtaining material from China, he placed Mr To in a position to lodge the application from 3pm on 4 March and relied on him to lodge the application.[59]
[59] Defendant’s Closing Submissions dated 15 September 2015 at para 28.
167 He also rejected a proposition that he put in a “merely perfunctory effort” to obtain approval given he left it to 4 March 2014 because he was aware that the client was having second thoughts by this time.
168 The third parties further submitted that the content of any implied term would have to accommodate the 3 day cooling off period under s 31 of the Sale of Land Act 1962 (Vic).[60]
[60] Third Parties’ Closing Submissions dated 15 September 2015, at para 17.
169 Although the purchaser needed to source material from China, there was no reason for his delay in providing the passport until 4 March given it was in his possession from 26 February.
170 It is also true that he made a general request for the visa number on 26 February 2014. However he did not really prosecute this request until 4 March 2014 being the day before the pivotal date
171 It was also inadequate to leave it until 3 pm on 4 March to put Mr To in a position to make the application. On the basis of Mr To’s representations (as found) the process was to take a couple of days. In any event, I accept that both men were to make the application together which did not occur given Mr Tsambikos failed to attend the meeting on 5 March.
172 Insofar as the purchaser relied on anything said by Mr To, the test is an objective one and should be considered regardless of any subjective reliance on Mr To.[61] In any event, the representations found did not justify the inaction of Mr Tsambikos. As indicated already, he left it until the day before to provide crucial material and then did not prosecute it with due effort. The representations found were only that he would be “helped” and that the application could take a couple of days. This was further qualified by the need to provide timely information.
[61]Joseph Street v Tan (2012) 38 VR 241 at para [40].
173 I also do not consider that the 3 day cooling off period permitted the purchaser to effectively stand by and do nothing until its completion. Instead, in the absence of a withdrawal he remained bound by the contract and was duty bound to take reasonable steps towards obtaining approval by 5 March 2014.
174 Overall, I consider that the purchaser failed to take reasonable steps to ensure that FIRB approval could be granted by 5 March 2014. Leaving aside whether he should have made independent inquiries about the criteria (as the vendors suggested), the failure to forward the passport and pursue the visa number prior to 4 March was inexcusable. The failure to turn up to the meeting was also inadequate.
175 Although there may be suspicions as to whether the failure to prosecute was deliberate given the possible “cold feet” of Mr Yu, I am also unable to be satisfied that Mr Tsambikos deliberately left it too late to ensure the application would fail (as suggested by the vendors). He rejected such a suggestion under cross examination and was a generally honest witness.
176 I am therefore satisfied that the purchaser failed to make all reasonable efforts to obtain FIRB approval in breach of the implied term. However, it remains to be seen whether this prevents him from terminating the contract.
177 The purchaser further alleged that it would be “unconscionable” for the vendors to assert that he could not rely on the special condition giving the following particulars:
The defendant did not know how to apply for or obtain FIRB approval. He relied upon the plaintiffs’ real estate agent to apply for and obtain the FIRB approval. The plaintiffs’ real estate agent did not obtain this approval. The approval could not have been obtained by 5 March 2015 [sic]. The plaintiffs now seek, notwithstanding the Representations, the balance of the deposit from the defendant.[62]
[62] Further Amended Defence filed 11 September 2015, at para 10B (CI-14-03439).
178 However, none of these matters make it unconscionable for the vendors to assert that the purchaser cannot rely on the condition. It was incumbent on the purchaser to find out how to apply for FIRB approval given the condition was inserted for his benefit. The estate agent was not the vendors’ agent for this purpose and, even if he was, there was nothing in his conduct that excused the purchaser from taking reasonable steps.
179 However, insofar as it is alleged that the approval could not have been obtained by 5 March, this matter is dealt with, below.
Whether approval could have been obtained by 5 March in any event
180 As indicated already, the issue is whether the purchaser has established that there was no “substantial chance” that FIRB approval could be granted by 5 March 2014 if pursued with reasonable effort.
181 The purchaser alleged that FIRB approval could not have been obtained by 5 March 2014.[63] Both the purchaser and third parties submitted that, given Mr Yu only held a visitor visa, he could only succeed, consistent with the evidence of Mr Hill, if he met Guidance Note 4. However, he would be unable to meet this Guidance Note given the property was not “uninhabitable or derelict” nor could he build more than one dwelling given the covenant. In such circumstances, the application would have been rejected. It was further most unlikely that any answer at all would have been received within the short time frame.[64]
[63] Further Amended Defence filed 11 September 2015, at para 10A.3 (CI-14-03439).
[64] Defendant’s Closing Submissions dated 15 September 2015 at para 27; Third Parties’ Closing Submissions dated 15 September 2015 at paras 23-24.
182 The vendors submitted that it was “not at all clear” whether a person in the apparent circumstances of Mr Yu would have obtained approval.[65] In particular, they say that there were 3 scenarios through which he might have obtained FIRB approval: by obtaining a different visa; the building of multiple dwellings; or demolishing the existing house as “derelict.”
[65] Plaintiff’s Submissions dated 16 September 2015 at paras 47 and 53.
183 In order to resolve these contentions, some understanding of the FIRB regime was called for.
The FIRB regime
Guidance Notes
184 The main witness was Mr Hill who was the manager of the Compliance and Real estate Screening Unit in Treasury, ACT. His role was to review and, if appropriate, approve all residential real estate applications by foreign investors in Australia.
185 His evidence was that decision-making as to FIRB approvals was concerned with whether an application is “contrary to the national interests” as set out in section 21A(2) of the Foreign Acquisitions and Takeovers Act 1975 (Cth).
186 However, his evidence was that, as a matter of practice, the criteria applied by Mr Hill’s department in assessing applications was reflected by the Guidance Notes. He agreed that he followed the Guidance Notes in making decisions and that his officers did as well. Indeed, the effect of his evidence was that this was almost invariably the case. Thus, although he conceded that it “might be the case” that the Guidance Notes would not give a definitive answer, he also said that “no reason springs to mind.”
187 He agreed that there was a degree of judgment in some cases as to the degree of some criteria having been satisfied. Again, however, this was all in a context of applying the Guidance Notes in the first place. In fact, he said it would be a “very small proportion” which would require any measure of deliberation in the context of 30,000 applications a year.
188 It was not in dispute that Guidance Notes 2 to 4 were of relevance in this case.
189 Guidance Note 2 provided that temporary residents who held a visa which permitted them to stay in Australia for a continuous period of more than 12 months could buy one established dwelling only to live in.
190 Guidance Note 3 provided that short term visa holders could invest in Australian real estate only if that investment added to the housing stock. This generally occurred by acquiring new dwellings, off the plan properties under construction or vacant land for development. Such persons could not buy established dwellings as investment properties or as homes.
191 Guidance Note 4 provided that foreign persons could buy established properties for redevelopment provided the redevelopment increased the stock of houses in Australia. Such redevelopment (which would not include refurbishment of an existing dwelling) would be subject to conditions and could be done in two ways as follows:
[1]Replace a habitable dwelling with multiple dwellings
A redevelopment proposal is normally approved where an existing habitable dwelling is demolished and replaced with multiple dwellings (that is, more dwellings will be built than will be demolished).
[2]Replace a derelict or uninhabitable dwelling with a new one
A redevelopment proposal is normally approved where it can be shown that the existing dwelling is at the end of its economic life (that is, derelict or uninhabitable) and will be replaced by a new dwelling.
· To demonstrate that the dwelling is derelict or uninhabitable, a valuation of the existing structure(s) by a licensed valuer and/or a builder’s report is required. Photographs and other forms of evidence, including council development approval, may also be required.
Website
192 Mr Hill also gave evidence of the application process when one went to the FIRB website in March 2014 wherein applications passed through a number of “screens.”
193 Mr Hill gave evidence of a sample application. He explained that there were 3 categories of application: to apply for vacant land to build a residential property; a new dwelling; and the third (applicable here) which was a second hand dwelling.
194 Critically, his evidence was that if he selected the purchase of a (single) second hand dwelling for redevelopment involving the building of one property that you could not proceed unless the application confirmed that the current dwelling was at the end of its economic life or uninhabitable (at screen 8). This was to put into effect the policy contained in the Guidance Notes.
195 Screen 12 further asked the applicant to include relevant builders/government certificates to the effect that the property was no longer suitable for occupancy “at a minimum.” The evidence of Mr Hill was that a failure to include attachments would not stop the application process but they would contact the applicant to receive these documents.
Application of Guidance Notes
196 Given the evidence of Mr Hill was that the Guidance Notes (2-4) were followed by himself and his officers (which was also exemplified by the “self- executing” application of the screens) it was important to assess their applicability so as to determine whether there was any substantial chance of a successful approval.
Guidance Note 2
Applicable visa
197 As indicated above, Guidance Note 2 applied to “temporary residents.”
198 The vendors criticised the evidence as to Mr Yu’s visa status highlighting that the photocopy was incomplete, bore no date and that the subclass was not captured.
199 However, the photocopy is sufficiently clear to determine that the visa was a “Visitor (Class FA) Visa” in the name of Mr Yu. It also seemed reasonable to infer that it was current given it was provided by Huang in response to a request by Mr Tsambikos. Finally, item 1236 of Schedule 1 to the Migration Regulations 1994 (Cth) is entitled “Visitor (Class FA)”. Sub item (7) to item 1236 lists “Subclass 600 (Visitor)” as the only subclass of the Class FA visa.
200 The extract does not record the precise length of time the visa permitted Mr Yu to stay in Australia. However, Item 600.215 of Schedule 2 to the Migration Regulations 1994 (Cth) provides that the criteria for a subclass 600 Visitor visa included the following:
“If the grant of the visa would result in the applicant being authorised to stay in Australia for more than 12 consecutive months as the holder of:
(a) one or more visitor visas; or
(b) a Subclass 417 (Working Holiday) visa; or
(c) a Subclass 462 (Work and Holiday) visa;
exceptional circumstances exist for the grant of the visa.”
201 It is probable given this criteria, that a visitor visa would only authorise a stay of 12 months or less.
202 The purchaser also adduced information from the website of the Department of Immigration and Border Protection which contained the following public statement about a Visitor visa (subclass 600):
“This visa lets you visit Australia:
· to visit or for business visitor purposes
· for up to three, six or 12 months.”
203 Although this was the present state of the Website, this practice appeared likely to be applicable as at February 2014 given the Migration Regulations were unchanged.
204 This position is also fortified by the evidence of Mr Hill whose role was to review and approve all residential real estate applications by foreign investors in Australia (30,000 a year). His evidence was that he was familiar with this type of visa and that “typically” his experience was that this visa was granted for 3 months. Further, that a person with a class FA would not, as a matter of practice, satisfy Guidance Note 2.
205 I am therefore satisfied that Mr Yu was entitled to visit Australia for a period of 12 months or less although I am unable to determine the precise period in this case. Such a finding was not seriously challenged by the vendors (their challenge was more to whether the visa was operative).
206 Given this finding, however, Mr Yu could not access FIRB approval pursuant to Guidance Note 2 which only applied to temporary residents who held a visa which permitted them to stay for a continuous period of “more than 12 months.”
207 The vendors, however, submitted that Mr Yu and/or others in his family either possessed or were in the process of acquiring visas that were not visitors visas but would be such as to enable stays longer than 12 months.[66]
[66] Plaintiff’s Submissions dated 16 September 2015, at para 43.
208 However, any such suggestion was speculative only. There was no evidence that Mr Yu was in a position to come to Australia with a different visa. Although there were references to him wanting to settle in Australia (by, for example, putting his daughter in school), there was no evidence that he was in position to rely on some visa of greater length, nor that anyone associated with him was in such a position. In particular there was no evidence that he could obtain such a visa within such a short time frame.
Whether Guidance Note applicable in any event
209 There was also an additional issue with Guidance Note 2 which was that it provided that temporary residents could either buy one of 2 alternatives: an established dwelling “to live in” or alternatively new dwellings or vacant land to build new dwellings.
210 The proposed property was not a new dwelling or vacant land. However, equally, as the vendors conceded, the emails were “invariably about building a new home for Mr Yu” by first demolishing the existing property.[67] This no doubt explained the involvement of Mr Tsambikos as a builder.
[67]Plaintiff’s Submissions dated 16 September 2015 at para 41; see also Exhibit F; Exhibit G; Exhibit 6, Exhibit 11; Exhibit 12; Exhibit TP6;
211 Thus, as apparently accepted by the vendors, Guidance Note 2 appears to “not relate to a person in the situation of Mr Yu”[68] given he did not intend to buy the property to live in it. This was consistent with the Vendors’ position in Closing that only Guidance Note 4 would be applicable.[69]
Guidance Note 3
[68] Plaintiff’s Submissions dated 16 September 2015, at para 40.
[69] Transcript (16 September 2015) at 369
212 Guidance Note 3 would also be inapplicable since the property did not constitute a “new dwelling, off the plan property or vacant land.” Again, the vendors also did not rely on Guidance Note 3.
Guidance Note 4
213 This left Guidance Note 4 which made provision for a redevelopment proposal in 2 cases: where the existing dwelling was to be demolished and replaced with multiple dwellings; or where the existing dwelling was to be replaced as “derelict or uninhabitable.”
214 The purchaser (and third parties) submitted that this Guidance Note could not have been satisfied. Firstly, the proposal involved the building of only a single dwelling. Secondly, the property was not “derelict or uninhabitable.” In any event, given that on average applications took between 10-15 days, the application would not have been processed successfully in time.
215 The vendors, however, submitted that this Guidance Note might be attracted given there was a prospect that Mr Yu might build more than one dwelling and/or demolish the home as derelict. Further that the court should draw adverse inferences in regard to whether the purchaser “properly represented Mr Yu’s intentions,” relying on Jones v Dunkel.[70]
Building of multiple dwellings
[70] Plaintiff’s Submissions dated 16 September 2015, at para 45.
216 In terms of Jones v Dunkel, I do not regard Mr Yu as someone who would be expected to be called by the purchaser. Rather, as the emails made clear, he effectively left Mr Tsambikos to carry responsibility on his own, pulling out of the transaction on 9 March 2014.[71] Further, although no explanation for his absence was explicitly provided, it appears highly unlikely that he would be contactable given there was no evidence as to his location in China (given he had communicated through an intermediary).
[71] Exhibit K.
217 Mr Yu’s intentions are also best represented by the available objective evidence at the time. Although, there was some evidence that Mr Yu was “toying” with multiple dwellings,[72] the better view, as the vendors themselves accepted, was that his intention was, predominantly, to build a single new replacement dwelling.[73] Thus the vendors submitted that Mr Yu intended to demolish an existing dwelling and build a new one in its place;[74] further that Mr Yu was “mainly interested in a single new home”.[75]
[72] E.g. see Exhibits 7 and 8
[73]E.g. Exhibit F; Exhibit G; Exhibit 6, Exhibit 11; Exhibit 12; Exhibit TP6
[74] Plaintiff’s Submissions dated 16 September 2015, at para 41.
[75] Plaintiff’s Submissions dated 16 September 2015, at para 49.
218 In any event, any proposal to build multiple dwellings was doomed to fail given the existence of the covenant.
219 The vendors submitted that an application might be made to remove the covenant which was “likely to be successful.” Further that the covenant would not affect the FIRB application given the FIRB would not necessarily have known about it since it would only arise at the town planning phase.[76]
[76] Plaintiff’s Submissions dated 16 September 2015, at paras 51-52.
220 However, there was no evidence that an application to remove the covenant would be successful; more particularly that it could be successful within the short time frame.
221 Further, although there is no express provision requiring full and frank disclosure or anything similar, s 27 of the Act requires that the notification to the Treasurer of the intention to acquire land must be in accordance with, and comply with the directions in, the prescribed form. The prescribed form in the case of an individual acquiring residential land is attached to the Foreign Acquisitions and Takeovers (Notices) Regulations 1975 and is located in Schedule 1 (Form 4). The form includes fields for “Lot and Plan” “Volume and folio” and “Other”. At the end of the form, the applicant has to sign a declaration that includes a statement that confirms that “the information provided in this Notice, and in any attachments, is complete and correct”. In light of Guidance Note 4 which requires that a habitable dwelling be replaced by multiple dwellings, omitting any reference to the covenant would not be “complete” information and might amount to a fraud on the Commonwealth. There is also a power under s 36 of the Act whereby the Treasurer may request further information in relation to an application, so if reference had been made to the covenant, a copy of the covenant document might be requested. It is a criminal offence to not comply with this kind of request.
222 There was therefore no “substantial chance” of meeting Guidance Note 4 on the basis of building multiple dwellings.
“Derelict or uninhabitable”
223 The Guidance Note speaks of an existing dwelling which is at the end of its economic life (that is “derelict or uninhabitable”).
224 The Australian Concise Oxford Dictionary (5th ed) further defines “derelict” as being “abandoned”, “ownerless”, “ruined” or “dilapidated.”
225 The vendors sought to rely on evidence from Ms Hong that she had considered knocking down the property.[77] However, this could not establish that the property was uninhabitable or derelict, particularly given she was also considering “renovating” the home.
[77] Plaintiff’s Submissions dated 16 September 2015, at para 48
226 More significantly, the evidence of Ms Hong was that she was still living in the property at the time of the second sale with her husband and daughter. There was a reference to some “leaking” and that the house was “old” but no suggestion (from her or anyone else) that it was uninhabitable, “abandoned,” or “ruined.”
227 This evidence was also consistent with the advertisement (approved by Ms Hong) which portrays an attractive “substantial home” and provides no basis for a suggestion that the property was uninhabitable or “ruined”. Although it proposed an option for demolishing the property, the advertisement also spoke of the option to “craft a magnificent family home.”[78]
[78] Exhibit TP2.
228 There was therefore nothing to suggest that the home could be characterised as “derelict or uninhabitable.”
229 Even if I was wrong on this, the matter was, at the least, something that would need further evidence and argument. (see e.g. Screen 12 which required at a “minimum” a certified builders report or Government certificate that the dwelling was not suitable for occupancy). Notwithstanding the (very limited) experience of Mr To, the evidence of Mr Hill was that, although “in certain cases” the application could be granted within a day, applications “on average” took between 10-15 days to process. Given his much more extensive experience and given (at least) this case warranted further material and consideration, there is no substantial chance that any approval could have been obtained in the short time available.
230 I am therefore satisfied that there was no substantial chance of meeting Guidance Note 4 on the basis that the dwelling was derelict or uninhabitable.
Summary
231 As apparently conceded by the vendors, any application for approval in this case would have been determined pursuant to Guidance Note 4.
232 However, there was no substantial chance of success under this Guidance Note. Even leaving aside Mr Yu’s intentions, the covenant prevented the building of multiple dwellings. There was also nothing to suggest the home was “derelict or uninhabitable” in circumstances where the vendors’ family were living there.
233 A further obstacle was the short time applicable. Given, at the least, the application was not straightforward, there was no real chance that the application would have been approved in the short time available.
234 The purchaser has thereby satisfied the court that FIRB approval could not have been obtained by 5 March. Put another way, there was no substantial chance of success of obtaining FIRB approval by 5 March.
Conclusion
235 I am satisfied that the purchaser breached the implied condition.
236 However, I am also satisfied that there was no substantial chance that FIRB approval could have been obtained by 5 March 2014.
237 In such circumstances, the purchaser remains entitled to terminate for non-fulfilment of the condition and, as conceded by the vendors, is also entitled to a return of the deposit.
Whether purchaser entitled to orders against third parties
238 Given the failure of the vendors on the primary claim, it follows that the third party claim must be dismissed.[79]
[79] Defendant’s Closing Submissions dated 15 September 2015, at para 42.
239 However, out of deference to the submissions of the parties I will briefly record my views in relation to the main aspects of this proceeding.
ACL claims
Representation (a)
240 Even if the representation constituted an actionable representation, it was a statement as to the future and only actionable if there was an absence of reasonable grounds for making it.
241 However, the evidence suggests that Mr To had every intention to “help” with the making of the application. Thus his subsequent conduct demonstrates this where he made follow up phone calls and processed the information once it was received.
242 The representation was also not false since Mr To did “help” Mr Tsambikos.
243 I am further not satisfied that Mr Tsambikos relied on such a representation. Thus in his later response to Mr To’s disclaimer he acknowledged that Mr To did “not take any responsibility.”
244 Moreover even if there were no reasonable grounds for making the statement, and the statement was false, there is no evidence that the statement caused the loss. Thus, there is no evidence that the failure to lodge the application was attributable to any failure of Mr To. Instead, for reasons already given I am satisfied that it was attributable to the purchaser.
Representation (b)
245 In terms of the timing representation, this again related to a future matter (again presuming it to be actionable).
246 As found above, this representation was qualified by reason of Mr To’s prior experience. Although there appeared to be only 3 such applications, Mr To was not challenged in relation to the timing for these applications.
247 In any event, the purchaser has also not demonstrated reliance on the misrepresentation given he does not appear to have relied on the alleged time frame but waited until after “a couple of days” to provide pivotal information.
248 Finally, I am also again not satisfied that any such misrepresentation caused the loss given that, if, contrary, to my primary finding, the purchaser was to be liable to the vendors, this would be because he had failed to take reasonable steps to process the application (which had a substantial chance of success by 5 March).
Representation (c)
249 For similar reasons this representation would not ground an actionable claim.
250 Thus, there appeared to be reasonable grounds for the making of the representation when viewed as qualified by Mr To’s experience.
251 I am also not satisfied that Mr Tsambikos relied on this representation given his conduct.
252 Finally, if there was a substantial chance of a successful application in the time frame, any failure to obtain approval would be attributable to the purchaser not the third parties.
Negligent misrepresentation
253 In the alternative it was alleged that the third parties owed the purchaser the following duties:[80]
[80] Further Amended Third Party Notice filed 10 September 2015, at para 17 (CI-14-03439).
17. In the premises Ray White and/or Peter To owed the defendant duties:
a) not to misrepresent the timeframe within which FIRB approval could be obtained;
b) not to misrepresent the time it would take Ray White and/or Peter To to obtain FIRB approval;
c) to pursue the FIRB application with due care and responsibility.
254 It was then alleged that these duties were breached given the third parties:[81]
[81] Further Amended Third Party Notice filed 10 September 2015, at para 18 (CI-14-03439).
18. In breach of the duties above Ray White and/or Peter To;
a)misrepresented the timeframe within which FIRB approval could be obtained;
b)misrepresented the time it would take Ray White and/or Peter To to obtain the FIRB approval;
c)did not pursue the FIRB application with due care and responsibility.
255 I am not satisfied that any duty of care arose in the present circumstances.
256 The requirements for the imposition of a duty of care are well known. First, loss must be reasonably foreseeable; and second, after an analysis of the salient features of the case it is appropriate to impose a duty of care.[82] In relation to negligent misstatement generally, Courts in prior cases have also considered the following factors to be particularly important: assumption of responsibility,[83] vulnerability,[84] the expertise of the person making the representation,[85] whether the representation was requested or given voluntarily[86] and the existence of any disclaimer.[87]
[82] See Perre v Apand (1999) 198 CLR 180; Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (2014) 313 ALR 408.
[83]Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 at page 264.
[84] Perre v Apand (1999) 198 CLR 180 at paras [11], [118]-[129]
[85]Norris v Sibberas [1990] VR 161 at page 172.
[86] San Sebastian Pty Ltd v Minister administering the Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340 at pages 356-357.
[87]Mutual Life & Citizens’ Assurance Co Ltd v Evatt (1968) 122 CLR 556 at pages 584-585 and 614-615.
257 In this case, Mr To did not assume responsibility for the accuracy of any information he gave Mr Tsambikos in relation to the time it would take to get FIRB approval and he was not an expert on the matter. Mr Tsambikos was not vulnerable and could have sought advice from anyone else at any time. It is accepted that Mr To did make the representation in response to a request, rather than voluntarily and that Mr To did not give a disclaimer in relation to these statements. However, it is noteworthy that he qualified the statements with “in my experience.” Given these factors, it would not be appropriate to impose a duty of care for the statements made by Mr To to Mr Tsambikos in relation to the length of time it would take to get approval from FIRB.
258 In relation to the alleged duty owed by Mr To to Mr Tsambikos to carry out the application with due care and responsibility, many of the same factors as above apply. In addition, there was in relation to this action an express disclaimer from Mr To that he was not accepting responsibility for the application. This factor, in combination with those above, leads to the conclusion that no duty of care should be imposed in relation to Mr To’s attempt to apply for approval to FIRB.
259 In any event I am unable to be satisfied, for reasons given above that any duty as alleged was breached given I am not satisfied that any timeframe was “misrepresented” given the qualified nature of the representation.
260 I am also not satisfied that Mr To did not pursue the FIRB application “with due care and responsibility.” As the above chronology makes clear, he appears to have acted with due expedition and care. The fact that he was ultimately unable to apply does not demonstrate a breach of duty in circumstances where he only received the necessary material on the afternoon before the expiry date.
261 For reasons given already, any breach was also not causative of loss.
Other causes of action
262 The purchaser pleaded some further “application representations.”[88] However these were abandoned given the statement of the third parties that no estoppel was being pursued in its own right.
[88] Amended Reply to Defence to Third Party Statement of Claim filed 11 September 2015, at para 2 (CI-14-03439).
263 It follows that the third party proceeding would also be dismissed on the merits if the issue arose.
Conclusion
264 In the light of these reasons, I consider that the following orders are appropriate.
265 Firstly in proceeding CI-14-03439:
· The plaintiffs’ claim is dismissed.
· The plaintiffs are to pay the defendant’s costs of the proceeding (excluding the third party action) up to 5 October 2014 on a party/party basis and from 6 October 2014 on a standard basis to be taxed in default of agreement.
· The defendant’s third party claim is dismissed.
· The defendant is to pay the third parties’ costs of the third party claim up to 5 October 2014 on a party/party basis and from 6 October 2014 on a standard basis to be taxed in default of agreement
266 In relation to proceeding CI-14-05735
· The defendants are to pay the plaintiff the deposit of $25,000 together with statutory interest;
· The defendants are to pay the plaintiffs’ costs of the proceeding up to 5 October 2014 on a party/party basis and from 6 October 2014 on a standard basis to be taxed in default of agreement.
267 I will however hear from the parties as to the precise form of final orders.
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