Le Cornu & Kurda v Place on Brougham Pty Ltd - [2013] SADC 32

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
LE CORNU & KURDA v PLACE ON BROUGHAM PTY LTD
[2013] SADC 32
Judgment of His Honour Judge Cuthbertson
15 March 2013
CONVEYANCING - RELATIONSHIP OF VENDOR AND PURCHASER - STATUTORY PROTECTION OF PURCHASERS
Sale of land under the Land and Business (Sale and Conveyancing) Act 1994 (SA) – Action by purchasers for return of deposit paid on rescission – Whether the community lot, the subject of sale, must be in existence at time of service of Vendor's Statement - Whether Vendor's Statement accurate – Whether statutory right to rescind has been lost by conduct of purchaser – Defence of election and estoppel.
HELD: Not necessary for community lot to have been created at time of service of Vendor's Statement – Conduct of purchasers in continuing to try to on-sell the property after becoming aware of asserted defects in Vendor's Statement constituted election by conduct to affirm the contract. Purchasers estopped from denying the validity of the contract.
Community Titles Act 1994; Land and Business (Sale and Conveyancing) Act 1994; Real Property Act 1886 S 223LB; Land and Business (Sale and Conveyancing) Regulations 1995, referred to.
Myles Pearce & Co Pty Ltd v Alfredo Leuci, Robert Martin & Roslyn Jean Martin (1997) 193 LSJS 491; Astill & Anor v South Esplanade Developments Pty Ltd (2007) 249 LSJS 334; Sargent v ASL Developments Ltd (1974) 131 CLR 634; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Tudor Developments Pty Ltd v Makeig (2008) 72 NSWLR 624; Everest Project Developments Pty Ltd v Mendoza [2009] V ConvR 54-775; South Esplanade Developments Pty Ltd v Astill [2007] ANZ ConvR 534; Marchesi v Viridian Noosa Pty Ltd [2010] QSC 324; Allmed Pty Ltd v Opak Investments Pty Ltd (in liq) [1995] ANZ ConvR 153; Cockburn v Key Urban Pty Ltd [2009] NSW ConvR 56-243; Immer (no 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26; Tiplady v Gold Coast Carlton Pty Ltd (1984) 3 FCR 426, considered.

LE CORNU & KURDA v PLACE ON BROUGHAM PTY LTD
[2013] SADC 32
The Issue

The plaintiffs claim damages and the return of a deposit paid upon the signing of a contract for the purchase from the defendant of a unit (apartment 608) in the Adelaide Hotel development at “Place on Brougham”, North Adelaide (T266) for $2,999,000 (T269) on 23 May 2005. (T271 - Ex P11). A deposit of $299,990 was paid. (Ex P11 - Contract, Schedule)
The plaintiffs claim to have rescinded the contract by serving a Notice of Cooling Off (Ex P24) on 5 October 2007. The plaintiffs claim to have been able to serve the Notice of Cooling Off outside of the period of time prescribed for the service of a Notice due to the fact that the Form 1 Notice (Vendor’s Statement) was inaccurate, relying on the principle in Myles Pearce & Co Pty Ltd v Alfredo Leuci, Robert Martin & Roslyn Jean Martin (1997) 193 LSJS 491 and Astill & Anor v South Esplanade Developments Pty Ltd (2007) 249 LSJS 334.
The defendant counterclaims for failure of the plaintiffs to complete the contract.
The Facts
The defendant had an option to purchase the site of the Adelaide Hotel at North Adelaide. (T141) It proposed to convert the existing hotel into an apartment complex and planning approval to do so was sought and obtained.
Planning regulations enabled a three-storey development on the site but if the existing structure was utilised then the existing height of six storeys could be maintained under the existing use provisions. (T141)
A marketing campaign was commenced giving the public an opportunity to pre-purchase the units which were to be developed prior to launching on the open market. (T142)
The defendant needed funds in order to complete the project. At the time the units were advertised for sale preliminary plans were in existence identifying the apartments that were to be developed on the six levels of the building. (T159, T160) The development had not, however, been commenced.
On 19 May 2005 the plaintiffs contacted the defendant requesting that apartment 608 be put “on hold”. (T171-T272) As a consequence that apartment was not available to any other purchaser and the defendant agreed not to sell it to anyone else. (T172)
The plaintiff, Le Cornu, inspected the premises and invited his friend, the plaintiff Kurda, to jointly purchase the premises. (T272) He told Kurda “it was easy money to be made, you could make $100,000” and that you could make 20% on the investment and it was an easy sale. (T272)
The plaintiffs expectations were that they would be able to sell their rights for at least $100,000 more in a few weeks of the contract being signed. (T255, T268, T273)
They both signed the contract (Ex P11) on 23 May 2005 without reading it (T255, T275, T289) thus committing themselves to settlement on a corner unit comprised in a community lot on the sixth floor of the development,
From previous transactions he had been involved in, Le Cornu knew they had three days to “cool off”. (T262, T276)
The plaintiffs were interested in on-selling the unit at a profit prior to settlement. (T255, T267, T268, T285) Le Cornu did not have any expectation of actually having to pay for the apartment. (T285)
An extensive campaign to market the property was then conducted by the plaintiffs. (Ex D60)
At the time of service of the Vendor’s Statement a plan of community division under s 14 of the Community Titles Act 1996 had not been lodged at the Land Titles Office. That was not done until about 2007, some two years later, as it was necessary to wait for the building to be completed so that an accurate survey could be undertaken to ensure that all the party walls and common areas and all the particulars were accurate and concise so as to enable the plan to be lodged. (T190)
The plaintiffs were served with the relevant Vendor’s Statement at the time they signed and received a copy of the contract. Section 7 of the Land and Business (Sale and Conveyancing) Act 1994 requires service “at least 10 clear days before the date of settlement”. (s 7(1))
It must have been clear to everyone concerned, including the plaintiffs, that settlement would take very much longer than 10 days as none of the building work to convert the hotel to apartments had commenced. (T289)
A right to cool off
Section 5 of the Act provides for a cooling off period which is granted to the purchaser under a contract for the sale of land,
5—Cooling-off

(1)Subject to this section, a purchaser under a contract for the sale of land or a small business may, by giving the vendor written notice before the prescribed time of the purchaser's intention not to be bound by the contract, rescind the contract.

The case for the plaintiffs is as follows:
1.   That at the date of service of the Vendor’s Statement the community lot to be acquired pursuant to the contract must exist; and in this case it had not yet been created under the Community Titles Act 1996.
Land is defined in the Act as follows:-
land includes—
(a) an interest in land; and
(b)an exclusive right (whether deriving from the ownership of a           share or interest in a body corporate or partnership or           arising in some other way) to the separate occupation of           land or a building or part of a building;)
(my underlining)
2.   Because the “community lot” had not been brought into existence at the time of the contract, and the service of the Vendor’s Statement, the statement did not provide the requisite prescribed particulars affecting the land, the subject of the contract, namely the “community lot”.
3.   The vendor must have obtained title to the land which is to be the subject of the contract and it had not obtained title in this case, though it had a contractual right to do so.
4.   The Vendor’s Statement must correctly list the encumbrances on the property which is the subject of the contract. The list of encumbrances wrongly omitted to mention that National Australia Bank held a registered fixed & floating charge executed by The Adelaide Hotel International Pty Ltd, then the registered proprietor of the site.
As to whether it is a precondition for the service of a valid Vendor’s Statement that the subject of the contract, the community lot, be in existence and that the vendor have acquired title to the land
The contract was to purchase a community lot in a development which had not yet taken place. The shell of the building was to be used so that the developer could rely on the existing use provisions so as to be excluded from height restrictions to which it would be subject if a completely new development was undertaken. The existing floors would remain in place but the old division of hotel rooms on each floor would be replaced by a number of units with different divisions. (T289, T290)
Clearly, at the time of the serving of the Vendor’s Statement the thing to be acquired pursuant to the contract (“the community lot”) did not exist.
Section 7 requires the service of a Vendor’s Statement and provides for certain particulars to be included, including details of the community lot.
The contract in this case gives an exclusive right to the separate occupation of part of the building and so it is a contract by a “vendor of land” and hence the requirement to serve a Vendor’s Statement together with the particulars required under the Act and Regulations arises.
There is nothing, however, in the Act or Regulations that directly answers the question whether the land (in this case the unit to be exclusively occupied in part of the building) “the community lot” which is being developed must actually exist at the time of the contract and / or the service of the Vendor’s Statement.
The plaintiffs say that the vendor cannot fulfil its obligation to provide an accurate and complete Vendor’s Statement in respect of the land until the community lot comes into existence.
The vendor does not have to serve the Vendor’s Statement at the time of the contract. The obligation is only to do it at least 10 days before settlement. (Section 7(1) Land and Business (Sale and Conveyancing) Act 1994)
If the vendor waits until the development is complete “the community lot” will be in existence and the vendor can then serve an accurate Vendor’s Statement. If the vendor wishes to serve the notice at such an early stage, as happened here, then that is a problem for the vendor in meeting its requirement to provide an accurate statement and that problem should not be visited upon the purchaser.
The difficulty for the vendor in those circumstances would be, however, that it could never be guaranteed that it had a firm contract at an early stage because the purchaser may “cool off” at any stage within 2 business days of the notice being served and the developer would have risked much if it has gone ahead with the development and expended a large amount of money without the guarantee of a sale at the end of it.
The defendant’s response is that there is nothing in the Act or Regulations that specifies that the “community lot”, which is the subject of this contract of sale, must be in existence at the time of the contract. Indeed, s 223LB(5) of the Real Property Act 1886 contemplates and provides for the validity of a contract in circumstances where a division of land by community plan under the Community Titles Act 1996 is intended but not yet complete.
223LB—Unlawful division of land
(5)This section does not affect the validity of a contract to grant, sell, transfer, convey, mortgage or encumber an estate or interest in land if—
(a) a division of land—
(i)under this Part; or
(ii)by strata plan under the Strata Titles Act 1988 or by community plan under the Community Titles Act 1996, is contemplated by the parties to the contract; (my underlining)
Section 223LB confirms the validity of such a contract and s 7 of the Land and Business (Sale and Conveyancing) Act requires the service of the Vendor’s Statement, the only proviso being it must be served at least 10 days prior to settlement. Many developments occur with sales taking place “off the plan”. It is common practice that sales take place and Vendor’s Statements are served in circumstances where the community lot, the subject of the sale, is not in existence. It is common commercial practice because in many cases the developer needs the money from a deposit or from the sale in order to have sufficient funds available to undertake the development or to obtain further funding for the development.
If the service of a valid notice required that the community lot, the subject of the sale, be in existence then many developments would not take place at all because the developer would not be able to raise the finance.
In my view neither the legislation nor the regulations require the existence of the community lot at the time of the execution of the contract of sale or service of the Vendor’s Statement.
There is no law prohibiting the service of a Vendor’s Statement when the community lot is not in existence. The procedure adopted by the defendant here is common practice within the industry and the plaintiffs have not been able to demonstrate where there has been a legal challenge to such a common practice.
Section 10(1) of the Land and Business (Sale and Conveyancing) Act 1994 provides that,
10—Variation of particulars
(1)A vendor's statement must be accurate as at the date of service on the purchaser.
(2)If after the service of a vendor's statement but before the purchaser signs the contract circumstances change so that if a fresh statement were to be prepared there would have to be some change in the particulars contained in the statement, then the vendor's statement will be regarded as defective until a notice of amendment is served and when such a notice is served it
will be presumed that the vendor's statement was served, as amended by the notice, on the date of service of the notice.
(my underlining)
Provision is also made in s 10(2), in the event that circumstances change between the time of service of the Vendor’s Statement and before the purchaser signs the contract.
Section 10(2) does not speak of variations made after the purchaser signs the contract and there is no need to serve an amended Vendor’s Statement given the purchaser signs the contract. Presumably there is no need to serve a further amended Vendor’s Statement after the purchaser has signed because he has made his decision to purchase on the information then provided to him and it is only that information which must be correct at the time it is given and up to when he signs the contract.
There is no requirement for the defendant to serve any notice of amendments should there be a change in circumstances occurring during the period between the signing of the contract and settlement.
It may be that, given the lengthy period of time between service of the Vendor’s Statement and signing the contract and settlement, there will be changes in circumstances which would affect the accuracy of the statement. It is not only the vendor, however, who may benefit from an early enforceable contract. The purchaser may wish to get involved in the development at an early stage to take the benefit of what is perceived as a bargain price and perhaps, as here, to sell at a profit to another purchaser before the development even comes to fruition.
There is no legal impediment to the defendant serving the Vendor’s Statement at the time that it did. Section 7(1) specifically requires the service of the statement at least 10 clear days before the date of settlement and there must always remain scope for there to be a change in circumstances in that 10 day period although admittedly, being a much shorter period, there is less scope for a change in the circumstances than when the notice is served as here at the time of contracting when settlement is known to be a considerable time away.
The plaintiffs drew attention to the fact that provision is made for the purchaser to obtain a certificate of a legal practitioner to the effect that the purchaser has received legal advice about his cooling off rights and that he waives those rights pursuant to s 5(7)(b). The plaintiffs assert that this is the solution to the problem that the developer may need committed funds prior to proceeding with the development.
I agree that this may be a solution but there is no requirement for the defendant to proceed in this manner. (T296, T396, T397) The defendant is entitled to do that which is not prohibited at law and that includes serving the Vendor’s Statement at the stage the contract is entered into with the proviso that it must be accurate at that time.
Information that the community lot was not in existence and that the defendant had not, at the time of the Vendor’s Statement, provided details of it was something the plaintiffs were aware of from the moment of signing the contract as they had inspected the site.
Failure to provide requisite prescribed particulars of “community lot”
In my view there was no “community lot” created at the time the Vendor’s Statement was issued and there was no obligation to provide particulars in relation to a nonexistent “community lot”.
The absence of these particulars does not invalidate the Vendor’s Statement provided it is accurate at the time.
In the alternative, the plaintiffs must have known at the time of receipt of the Vendor’s Statement and at the time of signing the contract that the “community lot” was not in existence and there were accordingly no particulars. This will have consequences on the question of the issues of election and estoppel to which I will return.
In my view the Vendor’s Statement is not invalid or inaccurate on this account.
If the plaintiffs are correct in their submission that the omission makes the statement invalid and preserves the time for the plaintiffs to “cool off” then their failure to exercise their right to cool off and their continuing to advertise the property for sale means that they have lost the right to cool off for the reasons I will discuss.
The National Australia Bank charge
It is common ground that The National Australia Bank held a registered fixed and floating charge number 755676, dated 8 June 2000, executed by the Adelaide Hotel International Pty Ltd, the registered proprietors of the Development Site at the time the Vendor’s Statement was served. (Ex P1)
The parties disagree as to whether the charge should have been described in the Vendor’s Statement.
Section 7(1)(b) provides as follows,
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 s 5; and
b)   Particulars required by Regulation of –
i.     All mortgages, charges and prescribed encumbrances affecting the land subject to the sale; and
ii.     …
iii.    …  (my underlining)
Section 3, the definitions section, defines mortgage to mean,
A legal or equitable mortgage;
Encumbrance is defined as follows,
Encumbrance, in relation to the land, includes –
a)   An easement (other than a statutory easement not registered on the certificate of title to the land that relates only to the provision of electricity, gas, water, sewerage or telephone to the land); or
b)   A right of way, restrictive covenant, writ, summons, warrant, caveat, lean, notice, order, requirement, declaration, claim or demand; or
c)   Any other factor (whether similar or dissimilar to those mentioned in paragraphs (a) or (b)) affecting, presently or prospectively the title to, or the possession or enjoyment of, the land;

The Land and Business (Sale and Conveyancing) Regulations 1995 deals with the form of the Vendor’s Statement.
7—Sale of Land – Form of Vendor’s Statement.

For the purposes of s 7(1) of the Act a statement is in the required form if it comprises –
a)   Part A, B and C of Form 1; and
b)   Such parts of the Table of Particulars set out in Division one of the Schedule of Form 1 as contained mortgages (item 1) and prescribed encumbrances items 2 to 7 (inclusive); and
c)   Such other parts of that table as contained the prescribed encumbrances and charges item 8 to 57 (inclusive) that effect, presently or prospectively, title to, or the possession or enjoyment of, the land subject to the sale; and
d)   …
e)   …
Regulation 8 provides that for the purposes of s 7(1)(b) of the Act,
(a) …
(b) the encumbrances specified in Division one of the Schedule of Form 1 are prescribed encumbrances;
It follows that if the charge affects “the land subject to the sale”, it must be disclosed.
As observed, at the time of service of the Vendor’s Statement the registered proprietor of the land upon which the development was to take place was the Adelaide Hotel International Pty Ltd.
On 8 June 2000 an instrument created a fixed and floating charge in respect of “all the monies which are now or may, from time-to-time, be owed or remain unpaid in any manner or on any account whatsoever to the chargee by the company”. (Ex P1)
The company is the Adelaide Hotel International Pty Ltd and the chargee is the National Australia Bank.
The question for me is whether this charge should have been disclosed in the Vendor’s Statement on the basis that it is a mortgage, charge or prescribed encumbrance “affecting the land subject to the sale” at the time of service of the Statement pursuant to s 7(1)(b)(i) of the Act. The defendant argues that it is not something that affects the land the subject of the proposed sale.
The instrument states on its face,
In return for the Bank agreeing to give or to continue giving credit and banking facilities to or at the request of the Mortgagor, the Mortgagor as beneficial owner charges all or every part of the Mortgage Property (other than any Mortgage Property comprised in any specific security to the Bank, which the Mortgagor charges subject to that specific security) with the payment and satisfaction of all and every part of the Secured Amounts and undertakes to the Bank as follows: (Ex P1)
(my underlining)
The defendant argues that the phrase “(other than any Mortgage Property comprised in any specific security to the Bank, which the Mortgagor charges subject to that specific security)” means that the particular property in respect of which the plaintiffs are buying a community lot is exempted from the charge as it is “comprised in [a] specific security to the Bank”, namely a mortgage, Ex P2.
There is only a need to disclose a mortgage or charge where it affects the title or possession or enjoyment of the land which is subject to the development. The defendant argues that the charge which the plaintiff says should have been disclosed in the Vendor’s Statement specifically excludes from its operation any mortgage property which is comprised in any specific security to the bank and that the subject property is comprised in a specific security to the Bank.
In my view, however, the phrase, “which the Mortgagor charges subject to that specific security” has the effect that “payment and satisfaction of all and every part of the Secure Amounts” is charged to “that specific security” namely the mortgage (Ex P2) which was disclosed.
I do not agree, however, with the defendant’s submission that there was no need to disclose the Debenture (Ex P1) because it was securing the same debt as the disclosed security. (Ex P2)
Near the end of the debenture, Ex P1, there is a stamped provision obviously not part of the original document which reads as follows,
Notwithstanding any other provision of this DEBENTURE it shall be security only for the payment to the BANK of the moneys which are PURPORTED to be secured by MEMORANDUM OF MORTGAGE dated 30/11/94 from the MORTGAGEE to the BANK and for the payment to the BANK of all moneys, costs, charges and expenses which the BANK shall pay incur or sustain in connection with the preparation, stamping, registration, enforcement or release of this DEBENTURE or in connection with the exercise or attempted exercise of any right, power or authority which becomes exercisable upon breach or non-observance of any covenant contained in this DEBENTURE in connection with the protection, upkeep or management of the mortgage property and interest thereon.
(my underlining)
It seems to me that this provision makes the subject property security not only for the “moneys” secured by Memorandum of Mortgage dated 30/11/94 (Ex P2) but also for,
... the payment to the BANK of all moneys, costs, charges and expenses which the BANK shall incur or sustain in connection with the preparation, stamping, registration, enforcement or release of this DEBENTURE or in connection with the exercise of any right, power of authority which becomes exercisable upon breach of non observance of any covenant contained in this DEBENTURE ...
This means the subject property is charged with the payment of “all monies, costs, charges and expenses” in connection with the “preparation, stamping, registration, enforcement or release” of the Debenture, Ex P1, in addition to what is secured by Ex P2.
It seems to me that this should have been disclosed in the Vendor’s Statement as it is a potential liability on the property over and above the liability secured by the disclosed mortgage, Ex P2.
The property in question was, at the time of issue of the Vendor’s Statement, subject to such a “specific security to the Bank” namely the mortgage, (Ex P2), which concerns “the whole of the land comprised in certificates of title register book, volume 5118 folios 156, 185, 569, 588, 804”. (Ex P2)
The contract signed between the plaintiffs and the defendant (Ex P11) indicates that the property being purchased by the plaintiffs is part of that same land as is the subject of the memorandum of mortgage between the Adelaide Hotel International Pty Ltd and the National Australia Bank Ltd. (Ex P11)
There was therefore a need for the defendant to include the charge in the Vendor’s Statement as it potentially operated on the land subject to purchase by the plaintiffs to secure,
... the payment to the BANK of all moneys, costs, charges and expenses which the BANK shall incur or sustain in connection with the preparation, stamping, registration, enforcement or release of this DEBENTURE or in connection with the exercise of any right, power of authority which becomes exercisable upon breach of non observance of any covenant contained in this DEBENTURE ...
Conclusion
Accordingly I am of the view that the Vendor’s Statement is inaccurate and therefore an invalid notice insofar as it omits reference to the debenture P1. It follows that the plaintiffs had a right to “cool off” upon ascertainment of information concerning the existence of this charge.
It is necessary, therefore, to consider the issues raised by the defence of election, waiver and estoppel.
Cooling Off
By letter dated 5 October 2007 the plaintiffs purported to serve a Notice of Cooling Off and to rescind the contract. (Ex P24)
The defendant relies on the principles of election by conduct, estoppel and waiver to assert that the plaintiffs are unable to rescind the contract notwithstanding any defects in the Vendor’s Statement.
The jurisprudence within Australia would indicate that it is by no means settled that equitable principles can apply, and in particular the principles of election by conduct, estoppel and waiver, to a statutory scheme similar to this one.
In Tudor Developments Pty Ltd v Makeig (2008) 72 NSWLR 624, Beazley and Basten JJA preferred the reasoning of Doyle CJ in dissent in Astill & Anor v South Esplanade Developments Pty Ltd (para 101) to that of the majority on the question of the availability of waiver in a not entirely dissimilar statutory scheme in New South Wales.
In Everest Project Developments Pty Ltd v Mendoza [2009] V ConvR 54-755, Hargrave J of the Supreme Court of Victoria also supports the approach adopted by Doyle CJ in dissent.
In Marchesi v Viridian Noosa Pty Ltd [2010] QSC 324, Douglas J, now with the benefit of the decision of the Full Court in Astill v South Esplanade Developments Pty Ltd and the discussion of it in Tudor Developments Pty Ltd v Makeig, expressed the view against the proposition that waiver was an available defence to the failure to comply with the statutory scheme then under consideration.
The Full Court in Astill does however appear to receive support from Mullighan J in Allmed Pty Ltd v Opak Investments Pty Ltd (in liq)[1995] ANZ ConvR 153.
To that may be added the dissent of Handley AJA in Tudor Developments Pty Ltd v Makeig.
For my part I would respectfully adopt the remarks of Judge Millsteed in South Esplanade Developments Pty Ltd v Astill [2007] SADC 24 at para 75,
I find it difficult to accept that Parliament intended to extend its protective policy to purchasers who choose to affirm a contract in circumstances where they are aware of the matters required to be set out in a valid Form 1, or to purchasers prepared to exploit their cooling-off rights in an unconscionable manner. The plaintiffs’ argument, taken to its logical conclusion, would mean that a purchaser who received a Form 1 knowing that it was defective and knowing that he or she was entitled to cool-off under s5, could defer exercising that right until just before the nominated date of settlement. The purchaser could sit on the contract, say to see how the property fared in the market, and rescind the contract at the last possible moment because the property had dropped in value or rescind it for some other reason that was unfair, unreasonable or unconscionable. It is not difficult to imagine circumstances in which an unscrupulous purchaser could, if the plaintiffs’ argument is accepted, convert the right to cool-off into an instrument of commercial oppression.
To prevent such unconscionable conduct the Court must have available to it the equitable principles of waiver and estoppel.
In any event, I am bound by the Full Court of South Australia in the decision in Astill & Anor v South Esplanade Developments Pty Ltd which is authority of the Full Court that the defendant is entitled where appropriate to rely on equitable principles to enforce the contract where there has been a purported cooling off on the grounds of an inadequate Vendor’s Statement in circumstances which bring those equitable principles into play.
Conduct of plaintiffs post ascertainment of information that the Vendor’s Statement may be defective.
It becomes necessary therefore to consider when the plaintiffs ascertained the asserted defects in the Vendor’s Statement and their conduct upon ascertainment of that information.
The plaintiffs argue that the subject of the contract was not in existence and the vendor had not acquired title to the land at the time of the service of the Vendor’s Statement and accordingly the vendor had failed to give details of the yet to be made community lot. I have already held that these facts do not invalidate the Statement that was served.
If I am wrong about that, it is clear that these matters were within the knowledge of the plaintiffs at the time of receipt of the Statement.
Insofar as these are facts not disclosed in the Vendor’s Statement then the ascertainment of them occurred well prior to the service of the Statement or at least at the time of service of the Statement.
In those circumstances there is no reason why the plaintiffs should not have been able to elect within days of signing the contract and by their failure to do so they have affirmed the contract and in any event are estopped from denying its contractual application for the reasons I shall explain.
It is the ascertainment of facts in the Vendor’s Statement that are inaccurate that is the crucial factor and not the ascertainment of the legal right to cool off. (See Astill at para 91)
The only other relevant non disclosed fact that was ascertained is the existence of the National Australia Bank charge.
It became apparent that the plaintiffs would have difficulty making the settlement (T321) as they had also purchased units in a development at Glenelg. (T249, T264) Settlement in relation to those units was coming up at about the same time. Indebtedness in relation to these Glenelg units, upon settlement, was in the region of $4 million. (T278, T284)
Indeed settlement would have been impossible without the involvement of some sort of financial backer, possibly Mr Le Cornu Senior. (T285)
The plaintiffs had been unable to on-sell at a profit as they intended.
They heard that there may be a problem with the Vendor’s Statement used by the defendant and they sought legal advice. (T257) This was in about June / July 2007. (T258, T306) A colleague had told Le Cornu that there may be a possible defect in the Vendor’s Statement used by the defendant. (T286) Indeed on 4 July 2007 the plaintiff, Le Cornu, had been told that their right to cool off had not expired and that they could still serve a Cooling Off Notice. (T209, T308 - Ex D64)
They had enlisted a solicitor seeking advice in June / July 2007. (T258)
Le Cornu understood that if the plaintiffs were going to make the choice of rescinding the contract they should do so as soon as possible and were instructed by their solicitor to do so immediately. (T310)
This legal advice was confirmed in late August namely that they should serve a notice to rescind the contract. (T260-T261)
Yet on 5 September 2007 the plaintiffs were sent an email from their agents (T293) setting out a new proposal to on-sell the premises. (Ex D60, p1763) The asking price was then $2,475,000.
Le Cornu admits that right from the start when he received advice about the possibility of cooling off, the plaintiffs were warned to be cautious about any further advertising to on-sell the property as to do so might be regarded as an inconsistent course of conduct with cooling off. (T311-T313)
The advice included that the plaintiffs had the right to cool off or continue with the contract. These were mutually exclusive rights. They were also advised that if they were going to “cool off” they should do so as soon as possible.
They were advised to do so the next day as settlement was likely to occur in September. (T310) The first plaintiff asked his legal advisors whether he should continue to advertise once he had decided to rescind the contract. The response from his legal advisors was to be careful. (T311)
The advice to be cautious was about the implications of the fact that there was both a Cooling Off Notice and advertising still proceeding. (T313) They advised that the plaintiffs should be cautious because they were mutually inconsistent courses of conduct. (T313) The advice was not to do anything which might indicate that they had waived one right and were continuing to exercise the other. (T313) This advice was given on about August 2007. (T313)
Le Cornu agrees that he obtained his partner’s parents to do the advertising but denied that the motive was in the exercise of caution pursuant to the legal advice and to disguise the fact that they were still trying to sell the property. (T313)
At the 18 September 2007 meeting the choice was made to threaten legal proceedings and that from hereafter the advertising would be “low key”. (T322) At that meeting they had discussed with their legal representatives conduct that could be taken to amount to a waiver.
Extensive letterboxing of the property was also done in the North Adelaide area. (T322, T323 - Ex D60)
On 5 October 2007, some three months after receiving advice that they should file a Cooling Off Notice the plaintiffs’ solicitors delivered to the defendant a Notice of Cooling Off. (Ex P24, T270) The defendant refused to accept it. After the Cooling Off Notice was served by the plaintiffs the advertising continued but no longer mentioned that it was apartment 608 for sale. (T314) The plaintiff has no recollection as to why that might have happened. (T314)
The defendant had sent a Notice to Settle dated 23 October via their legal representatives (T179) The plaintiffs knew that the defendant was not content to accept the Cooling Off Notice as releasing the plaintiffs from the obligation of the contract. (Ex D26) The 7th of November was fixed as the settlement date. (T180)
The plaintiffs continued to advertise the sale of the property well into 2008. (T159, T270, T294 & Ex D60)
In addition there was a change in the size of the advertisement which no longer had greater prominence than many other advertisements in the Saturday real estate section. (T314) I do not accept the plaintiffs’ explanation that the change of approach was because “not all purchasers ... look for the big glossy ads” and “some people like to look at the classifieds section.” (T314, T315)
Le Cornu, agrees that the billing may have changed to go to the Nobles, his partner’s parents, but he denies that the motive was to somehow conceal who was seeking to make the sale. (T316)
In my view it is of note that the plaintiffs got the advertising to be done through Mr Le Cornu’s partner’s parents. The advertising was modified so as no longer to refer to the fact that what was being advertised was apartment 608 and the advertisement was changed so that it was placed in the Saturday paper with no greater prominence than other ads in the general classified section. (T314)
The fact that the plaintiff is unable to satisfactorily explain the reason for those changes leads me to infer that they were so as not to draw the attention of the defendant to the fact that they were continuing to advertise the apartment for sale and that can only have been by virtue of the fact that the plaintiffs were contemplating cooling off and had received advice to that effect.
I am of the view that by early July 2007 the plaintiffs had received advice sufficient for them to know of the asserted insufficiencies in the Vendor’s Statement and that they intended using the insufficiencies to give them the opportunity to file a Cooling Off Notice and extricate themselves from the contract as a fallback position if they could not sell it.
The fact that they failed to do so until the filing of a Cooling Off Notice dated 5 October 2007 indicates that they still entertained hopes of making a profit from the contract to purchase the premises and that they wished to delay matters in the hope that a buyer would come forward.
Subsequent to 5 October 2007 when the plaintiffs purported to cool off they continued to offer the property for sale in a manner so as not to attract the attention of the defendant that they were offering it for sale in the hope that they might yet be able to make a profit.
By November / December 2007 the plaintiffs had reduced the price wanted for the property to around $2,000,000. This was not a fall back position in case a Court ruled against the purported rescission, it was merely to attract more potential buyers. (T317)
They originally advertised at a significant profit but as the time for settlement approached, and they were receiving no enquiries, they reduced the price. (T293-299 - Ex D59 & D60)
As late as January 2008 the plaintiffs were dealing through an agent with a potential purchaser. (T298)
Practical completion of the development was achieved on or around November, 2007. (T172)
The plaintiffs failed to settle and the defendant was required to effect a sale to a third party at $1.5 million, an amount significantly less than the contract price.
Election by conduct
It can be seen from the scheme of the Act that once the provisions of s 7 are complied with and the purchaser is taken to have all the relevant information available, the right to rescind is brought to an end within a reasonably short time. If the purchaser does not rescind within that time he is bound by the contract. The failure to exercise the right to rescind before expiry of the prescribed time means that the purchaser is bound by the contract unless the Vendor’s Statement is found to be inaccurate whereupon the purchaser again has a right to cool off or affirm the contract.

In Sargent v ASL Developments Ltd, (1974) 131 CLR 634, Mason J (as he then was) described the right of election in the following terms,
A person is said to have a right of election when events occur which enable him to exercise alternative and inconsistent rights, i.e. when he has the right to determine an estate or terminate a contract for breach of covenant or contract and the alternative right to insist on the continuation of the estate or the performance of the contract. It matters not whether the right to terminate the contract is conferred by the contract or arises at common law for fundamental breach - in each instance the alternative right to insist on performance creates a right of election.
(p 656)
In the present case the relevant events are the ascertainment that a charge over the land was held by National Australia Bank, that the community lot did not exist and that details of the community lot had not been provided. While the contract remains binding on the vendor, the Act confers on the purchaser the right to rescind in certain circumstances.
It is the exercise of the right to rescind or the inconsistent right to affirm the contract which constitutes the election.
As to the required state of knowledge of the person making the election Mason J said,
If a party to a contract, aware of a breach going to the root of the contract, or of other circumstances entitling him to terminate the contract, though unaware of the existence of the right to terminate the contract, exercises rights under the contract, he must be held to have made a binding election to affirm. Such conduct is justifiable only on the footing that an election has been made to affirm the contract; the conduct is adverse to the other party and may therefore be considered unequivocal in its effect. The justification for imputing to the affirming party a binding election in these circumstances, though he be unaware of his alternative right, is that, having a knowledge of the facts sufficient to alert him to the possibility of the existence of his alternative right, he has acted adversely to the other party and that, by so doing, he has induced the other party to believe that performance of the contract is insisted upon. It is with these considerations in mind that the law attributes to the party the making of a choice, though he be ignorant of his alternative right. For reasons stated earlier the affirming party cannot be permitted to change his position once he has elected.
(p 658)
I find that the plaintiffs continued to advertise for sale after they became aware of what they say are defects in the Vendor’s Statement. In particular, advice to the effect that there was a right to cool off was given probably by July and at least by August 2007 (T313) and it was not until 5 October 2007 that a Notice of Cooling Off was delivered to the defendant. (Ex P24, T270)
Documentary evidence exists that the plaintiffs were advised of the right to cool off. (File note D64, dated 4 July 2007)
By a facsimile transmission dated 24 July 2007, the plaintiff, Le Cornu, indicated to his solicitor that “I wish to initiate correspondence regarding the contract for Place on Brougham”. (Ex D65)
It would appear that the plaintiffs were so impecunious at that stage that they were having difficulty finding the $5,000 for legal fees, a factor which casts significant doubt on their ability to settle. (Ex D65)
There can be no doubt that at this stage the plaintiffs knew of their rights to cool off as Le Cornu wrote,
I just needed to let you know that I am hoping that we win this battle and that I can afford to pay you from the deposit funds that I get back from Place on Brougham. (Ex D65)
By knowing of their right to cool off the plaintiffs must also have known of the facts said to give that right.
By failing to rescind the contract by the giving of a Notice of Cooling Off after 4 July and by the continuing to offer the property for sale, which requires that the plaintiffs be in a position to obtain title, the plaintiffs have elected to affirm the contract. They must also be taken to have elected when they failed to take any action at or near the time of signing the contract when they must have ascertained that there was no community lot and that the vendors were not the registered proprietors.
In delaying the issue of any Notice of Cooling Off they have induced the defendant to believe for a period of time at least from July if not from when the contract was signed until the filing of the Notice that the contract was still on foot. This has prevented the defendant from trying to sell the property to some third party, a thing that the plaintiffs no doubt wished to avoid so the property would continue to be available for them to on-sell at a profit.
The conduct of the plaintiffs in continuing to offer the property for sale surreptitiously, even after the service of the Cooling Off Notice, confirms my view that the plaintiffs were interested in on-selling at a profit and wanted to retain the ability to do that. They were not in a financial position to settle, at least without difficulty, and so they wanted to be able to extricate themselves from the contract if necessary, but, in the meantime they wished to avail themselves of any opportunities to make a profit.
The plaintiffs place reliance on a decision of Nicholas J in the Supreme Court of New South Wales in Cockburn v Key Urban Pty Ltd [2009] NSW ConvR 56-243.
The factual situation appears at first glance to be very similar to the case at bar.
In that case the certificate required to be served by the vendor in relation to a contract for the sale of property was held to be invalid. The certificate was required to be served under a condition of the contract. The purchasers purported to rescind the contract.
The vendor countered that,
… since the commencement of these proceedings, the first to sixth plaintiffs had marketed, and had issued contracts for the sale of units through a real estate agent which amounted to conduct inconsistent with their claim for a declaration that their contracts with the vendor had been rescinded. (para 32)
The vendor relied on conduct of the plaintiffs in advertising the units, the subject of the contract for sale, through a real estate agent in a newspaper and on the agent’s website.
In response to the website advertisement a person visited the agent’s office and had a conversation with the first plaintiff about various units for sale and was advised of the listing prices and possible rental yields and given a copy of floor plans and forms of contract for each unit.
The first plaintiff’s evidence which was accepted was that he had arranged the marketing of the units after the proceedings had been issued “out of concern that the Court would rule against the purchasers on the rescission question”.
41The vendor submitted that, in the circumstances, the plaintiffs’ stance was that they retained a title to the units sufficient to convey good title when called upon to do so and, thereby, they had effectively renounced the rights claimed in these proceedings, and should be precluded from claiming that rescission was effective.
44 … [I]t was put that it was sufficient to constitute an election or waiver that, by the terms of the contracts, they had deliberately represented or held out they had, or would obtain, title to the units and thereby adopted a position inconsistent with their claim for rescission, and should not be permitted to pursue it.
His Honour said,
46It was never the intention of the plaintiffs to abandon their claims in this Court. … The conduct complained of went no further than representing to third parties that upon completion of any contract good title would be conveyed. As no contracts were exchanged, such conduct was without legal effect.
47In my opinion, no question of the plaintiffs’ right to insist upon rescission of a particular contract with the vendor arose until they had entered into a binding contract for the on-sale of the relevant unit or units with a third party. This did not occur. An occasion for choosing between inconsistent rights never arose.
In my view the case can be distinguished from the case at bar.
I am positively of the view that the plaintiffs determined to try to protect themselves from having to go ahead with a settlement which would have been financially embarrassing by seeking legal advice as to how to extricate themselves from the requirement to settle and at the same time they wished to prolong the opportunity to make a profit from the transaction by continuing to extend the opportunity to effect a sale.
For these reasons they deliberately failed to advise the defendant of the claimed defect in the Vendor’s Statement. They deliberately refrained from any action that would lead to the defendant being aware they wanted to keep up their sleeve a right to rescind if they could not sell at a profit.
I have considered whether the advertising might be regarded as simply a means of procuring a sale so that both the purchaser and the vendor would be satisfied and there would be no need for legal proceedings to take place over the issue. The plaintiffs however positively disavowed that this was their intent. (T317)
I have considered whether by eventually advertising at a lower price than the price that they paid for the property the plaintiffs were trying to merely minimise their damage but the plaintiffs explained to me that their intention in advertising at a lower price, at least initially, was to attract potential buyers who might end up paying a higher price. (T317)
For the above reasons I would distinguish the case of Cockburn.
I find that the advertisements placed on behalf of the plaintiffs carried with them an implied representation that the authors had the legal right to dispose of the subject property to any purchaser and that they could only have that legal right if the notice of cooling off was to no effect and they had a right themselves to get title. The representation was to the defendant too as the defendant was aware of the plaintiffs’ advertising.
In Sargent v ASL developments Ltd, Mason J explained the concept of election thus,
A person confronted with a choice between the exercise of alternative and inconsistent rights is not bound to elect at once. He may keep the question open, so long as he does not affirm the contract or continuance of the estate and so long as the delay does not cause prejudice to the other side. An election takes place when the conduct of the party is such that it would be justifiable only if an election had been made one way or the other (Tropical Traders Ltd. v. Goonan). So, words or conduct which do not constitute the exercise of a right conferred by or under a contract and merely involve a recognition of the contract may not amount to an election to affirm the contract.
(p 656)
In Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26, in a joint judgment their Honours Deane, Toohey, Gaudron and McHugh JJ said,
The true nature of election is brought out in this sentence from the seminal work of Spencer Bower and Turner, The Law Relating to Estoppel by Representation: "It is of the essence of election that the party electing shall be "confronted" with two mutually exclusive courses of action between which he must, in fairness to the other party, make his choice." (para 41)
I find that, by their conduct, the plaintiffs have elected to confirm the contract. They have been confronted with two mutually exclusive courses, to affirm or to rescind. They have elected to keep advertising, a thing they can only do if they have the right to pass title. If they had an offer of a suitable price they would have taken it and not proceeded with any rescission.
It is their conduct in failing to rescind having had advice about the asserted inaccuracies of the Vendor’s Statement and the continuing to offer the property for sale themselves in the hope of achieving a profit, and the denying of the opportunity to the defendant to mitigate its losses by selling at an earlier time on a deteriorating market that makes it entirely unfair to the defendant to allow them to delay the right to rescind.
It is recognised that there is no suggestion that the plaintiffs have positively told the defendant that they would be proceeding with the contract. Rather it is the absence of any advice to them that they would not be proceeding with the contract and the encouragement in the defendants of a belief that the status quo existed by requesting to use publicity material of the defendant without mentioning the fact that they wanted to get out of the contract.
As to the conduct in continuing to advertise after the issuing of the Notice of Rescission, that evidence is available to be used by me only to the extent that it casts light on and shows the true nature of the evidence that the plaintiffs were trying to sell the property before the issue of the Notice of Rescission. It confirms my view that there was a concerted effort by the plaintiffs to make the profit which they had hoped to make initially and that the purported rescission was a fallback position to be relied on as a last resort should the sale at a profit prove impossible to achieve. In other words the conduct after the purported rescission casts light on the plaintiffs conduct before the purported rescission.
As to the need for communication of the election to the other party, I do not think that must be a requirement in circumstances where the party making the election is trying to hide the fact that an election is being made, in order to review the election if necessary to suit its own purposes.
Moreover the defendant was certainly aware that the plaintiffs were offering the property for on sale. (Ex D60) It is also apparent from the exchange of emails (D16). Again at no stage was the defendant advised during the exchange that the plaintiffs no longer regarded themselves as bound by the contract.
As to whether an election can be made by doing nothing it seems to me that logically this must be the case in certain circumstances. By continuing to advertise, and doing nothing else to advise the defendants that an election has been made, especially over such a long period of time the plaintiffs have indicated that an election has been made, albeit one that they have tried to conceal in order to be able to go back on it if a profitable opportunity to on-sell arose.
The proposition that doing nothing can amount to an election derives some support from the majority judgment of Bleby and Sulan JJ in Astill,
[94]As we have said, the Act and the Regulations specify the state of knowledge in a particular case that a purchaser must have before he or she is able to make a valid election, either expressly or by conduct or by doing nothing.
(my underlining)
In this case the fact of an election having been made is to be implied from the conduct of the plaintiffs in continuing to try to on-sell, and in requesting use of the defendants photographs for publicity to on-sell and in not disabusing the defendant of its understandable belief that the contract is on foot over such a lengthy period of time.
Estoppel
The doctrine of equitable estoppel was discussed by the High Court in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
In that case Brennan, J said at page 428-429,
In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.
Mason, CJ and Wilson, J said at page 406,
[The] doctrine extends to the enforcement of voluntary promises on the footing that departure from basic assumptions underlined in the transaction between the parties must be unconscionable. As failure to fulfil a promise does not of itself amount to unconscionable conduct, the reliance on an executory promise to do something, resulting in the promisee changing his position or suffering detriment, does not bring promissory estoppel into play. Something more would be required. Humphries Estate suggests that this may be found, if at all, in the creation or encouragement by the party estopped in the other party of an assumption that the contract will come into existence or a promise will be performed and that the other party relied on that assumption to his detriment in the knowledge of the first party.
In Astill, Bleby J related these pronouncements more closely the case at bar. He said at page 249,
In this case, the doctrine of estoppel focuses on the vendor’s state of belief and reliance on an assumption or expectation induced by the purchaser.
In most cases, the vendor, either as a result of their own endeavours or those of their agent, would serve the statement on the purchaser genuinely believing it to state accurately the prescribed information so as to effect the commencement of the prescribed time. In circumstances where the vendor genuinely believes the statement to be true and complete but where the purchaser knows the statement to be defective, and consequently that their right to rescind is preserved, the purchaser may engage in conduct, such as making requests of the vendor to effect changes to the property or engaging in further negotiations in respect of the property, that would induce the vendor to believe that the parties were bound by the agreement from which neither could resile. In such circumstances it is conceivable that a vendor may rely on that assumption, which has been induced by the conduct or by statements of the purchaser. If then the vendor acts to his or her detriment, then the purchaser may be estopped from exercising the right to rescind the contract.
Once again, knowledge by the purchaser of the full facts is important, and the availability of estoppel in those circumstances is entirely consistent with the objects and purposes of Part 2 of the Act.
In circumstances where the vendor has relied on the conduct of the purchaser in assuming the contract between them to be binding, and has suffered detriment as a result, it is a matter for trial whether it is unconscionable for the purchaser subsequently to rescind the contract on the basis that their right to do so has not expired due to the vendor’s failure to serve a valid statement. In our view, whether the elements of estoppel are satisfied is a matter of evidence.
In this case, the defendant argues that there was at least a 3 months period between the time when the plaintiffs first became aware of defects in the Vendor’s Statement such as to give them the right of rescission during which the plaintiffs did nothing to serve the necessary Notice of Rescission. At the same time they advertised the property for on-sale so as to profit from the situation if they could, thereby inducing the defendant to continue to believe that the plaintiffs regarded themselves as bound by the contract and remained willing and able to settle at the appropriate time. That was unconscionable conduct. The plaintiffs did nothing to disabuse the defendant of their belief, known to the plaintiffs, that the contract was on foot.
It is clear from the letter by corporate counsel for the defendant by its letter of 23 July 2007 that the defendant was aware that the plaintiffs were advertising the property for sale. (Ex D60)

It must have been apparent to the plaintiffs from the tenor of that letter that the defendant assumed at that time that the plaintiffs were bound by the contract. I find that at this time the defendant genuinely believed the Vendor’s Statement was true.
At no time did the plaintiffs disabuse the defendant of that apparent belief. Indeed by doing nothing they encouraged its continuation.
They relied on what they knew to be the defendant’s belief that the cooling off period had expired and that the contract was ongoing to obtain marketing material to assist them in their endeavour to assign the contract for profit. They well knew that the defendant would not have agreed to provide this if it has been told that the plaintiffs no longer regarded the contract as being on foot.
If the plaintiff had served the Notice of Rescission in a reasonably short period of time the defendant would have known that the attitude of the plaintiffs was that they did not regard themselves as being bound by the contract and would not be settling on the contract and this would have given them an opportunity to consider whether to try to resell the apartment at a time when circumstances were more propitious for a sale as economic circumstances were in decline at that time.
As it was succinctly put by Fitzgerald J in Tiplady v Gold Coast Carlton Pty Ltd (1984) 3 FCR 426 at 455,
The applicants acted in a way which was clearly and unequivocally consistent only with the ongoing operation of the contract and their possession of rights under it by attempting to resell the unit to which they had no claim, except under the contract. The applicants' conduct did not merely assume the continued existence of the contract but exercised rights based on it adverse to the respondent which alone was entitled to sell or resell the unit, and, if profit was available, obtain that profit, unless the applicants were to complete: cf Aquis Estates Ltd v. Minton [1975] 3 All E.R. 1043.
I find the plaintiffs have elected to affirm the contract and in any event are estopped from denying its validity.
Failure to Mitigate
The property was eventually sold for $1.5 million. (T184)
As to a claim that the defendant failed to tenant the property during the course of any delay so as to obtain rent, I accept the evidence that it would be unwise to tenant a brand new property and risk damage and wear and tear.
Purchasers would prefer to buy a brand new premise and would be more likely to pay a higher price for brand new premises. (T194)
Further, I do not think there is validity in the criticism that the defendant failed to list the property for sale at a price reasonably comparable to the asking price of other three bedroom apartments in the development as the market had diminished in value. (T195)
Orders
There will be judgment for the defendant on the counterclaim and the plaintiffs claim is dismissed.
I will hear the parties as to specific orders, interest and costs.