Lockwood v PSP Investments Pty Ltd
[2013] VSC 10
•2 May 2013
| Do Not Send for Reporting | ||
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
List B
No. 6987 of 2012
BETWEEN
| RICHARD LOCKWOOD | Plaintiff |
| and | |
| PSP INVESTMENTS PTY LTD | Defendant |
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JUDGE: | Judd J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 11 April 2013 | |
DATE OF JUDGMENT: | 2 May 2013 | |
CASE MAY BE CITED AS: | Lockwood v PSP Investments Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 10 | |
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SALE OF LAND – Amendment of plan of subdivision – Whether amendment of subdivision materially affected the lot – Whether purchaser entitled to rescind the contract – Whether purchaser entitled to repayment of deposit from vendor – Sale of Land Act 1962 (Vic) ss 9AC, 9AF.
STATUTES – Interpretation – Sale of Land Act 1962 (Vic) s 9AC.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | M McKenzie | Parke Lawyers |
| For the Defendant | S R Horgan SC B J Murphy | Kyriakou Lawyers |
HIS HONOUR:
The substantive relief sought by the plaintiff in this proceeding is a declaration under s 9AC(2) of the Sale of Land Act 1962, or s 49(1) of the Property Law Act 1958, that four contracts for the purchase of apartments in a new development known as ‘Ecosquare’, in Raleigh Street, Windsor, were validly rescinded and for the return of deposits.
On 24 January 2010 the plaintiff, Richard Lockwood, entered into eight contracts of sale of real estate with the defendant, PSP Investments Pty Ltd. Four contracts related to apartments to be constructed on the Ecosquare site, and four contracts related to car parks to be located on the ground level. Each contract was for the sale of land prior to the approval of a Plan of Subdivision and thus a ‘prescribed contract of sale’ under s 9AA of the Sale of Land Act. Each contract adopted a common form, save for the reference to lot numbers and price. The price of each apartment was $215,000. A deposit of $21,500 was paid on each. The apartments were lots numbered 609, 611, 709 and 711 respectively. The price of each car park was $45,000. A deposit of $4,500 was paid on each. The car parks were lots 6, 7, 8 and 10 respectively. There were to be only 10 car parks, but 86 apartments.
The proposed development, according to a brochure and Plan of Subdivision attached to each contract, was for seven levels of apartments constructed over a ground floor providing car and bicycle parking. The brochure and plan defined the boundary and location of 11 apartments on the first floor, 13 on the second, 13 on the third, 13 on the fourth, 12 on the fifth, 12 on the sixth, and 12 on the seventh floor. On the rooftop, there was depicted an area, as lot 800, which appeared to make provision for the delayed construction of a penthouse.
The evidence disclosed that in early 2012 the City of Port Phillip required the deletion of the car park lots from the Plan of Subdivision. As a consequence, they would merge into ‘common property’. From as early as mid‑February 2012, there were discussions and negotiations between the defendant and the Council over the proposed change. The defendant eventually accepted the change. Information about the requirement of Council, the subsequent negotiations and the defendant’s acceptance of the change, was not disclosed to the plaintiff. The fact of an amendment was first disclosed to the plaintiff after the plan had been registered.
Andrew Michael Gibbins, a director of the defendant, said that he instructed his solicitor, Mr Kyriacou, to inform the plaintiff’s solicitors of the amendment on 24 August 2012. Mr Gibbins referred to a letter of that date written by Mr Kyriacou. By that time, however, the plaintiff had already discovered the change as a result of a telephone conversation between his solicitor and Mr Kyriacou. The letter of 24 August was apparently written in reply to a letter from the plaintiff’s solicitors dated 22 August 2012. In his letter, Mr Kyriacou referred to the earlier conversation and acknowledged that the defendant had requested a change to the Plan of Subdivision on 13 August 2012, which triggered an obligation under s 9AC(1) of the Sale of Land Act to ‘advise the purchaser in writing of the proposed amendment’ within 14 days.
The conversation between solicitors followed a letter from Mr Kyriacou, written on 14 August 2012 to the plaintiff’s solicitors, requiring settlement of the contract for each apartment lot. Nothing in those letters indicated that the Plan of Subdivision had been amended. As a result of an enquiry made by the plaintiff’s solicitors on the following day, they were informed by Mr Kyriacou that the car park lots no longer existed, and that the area once occupied by those lots now formed part of the common property. On 22 August 2012, the plaintiff’s solicitors wrote to Mr Kyriacou confirming the earlier telephone advice and that the deposits paid under the car park contract would be returned. The letter continued:
We are instructed that when our client entered into the contracts for the purchase of the abovementioned lots it was his intention that each lot would be purchased in pairs and with each apartment and car parking space to be in his ownership and control. This would enhance the long‑term value of the apartment lots but is also vital in his application for finance from a lender.
We are further instructed that at the time of the purchase of these lots, our client had avoided purchasing other apartments in other developments and had instead chosen the apartments in Ecosquare because he was able to purchase the car parking spaces.
We note that s 9AC of the Sale of Land Act 1962 (Vic) requires the vendor to notify the purchaser of any amendment to the Plan of Subdivision within 14 days after the requirement for the amendment.
We note in this regard that no notification has ever been provided to our client of any amendments to the Plan of Subdivision. This is in breach of the said Act. Should you claim such notice was given, kindly provide a copy and details of same.
Please advise of the details of all the amendments which have been made to the Plan of Subdivision since the contracts of sale were entered. We have searched the plan as registered. However, we are not obliged to search through the document to try to identify all the changes made.
In relation to each of the apartment lots purchased by our client, we are able to discern three obvious and apparent amendments, each of which individually and in combination materially affects each of the lots purchased by our client.
Specifically, we note the following changes:–
1.The car parks purchased by our client, specifically for use with the apartment lots, no longer exist and are no longer available for sale. Even if 99‑year leases were granted by the Owners Corporation to our client in respect of the common property for use as car parking spaces, our client will not have ownership of the car parking spaces which our client contemplated at the time he entered into the contracts of sale for all the lots.
2.The configuration of lots 609 and 709 on the north‑eastern and south‑western corners have been amended, ie the footprint of each of those apartments has been changed. Further, lot 800 has apparently been removed from the plan, as has its unit entitlement and liability.
3.The lot entitlement and lot liability for each of the lots have been changed as a result of a change in the total lot entitlement and lot liability for the development. The lot liability for each of the apartment lots purchased has increased and this will result in a higher contribution for each lot which our client will be obliged to pay.
As a result of these changes, and reserving any rights arising pursuant to any other amendments to the Plan of Subdivision which the vendor is requested to provide, we hereby give you notice that our client rescinds each of the contracts for sale for lots 609, 611, 709 and 711 pursuant to s 9AC(2) of the Sale of Land Act 1962.
Please arrange for the deposit monies paid for each of the eight lots to be refunded to our office immediately.
Mr Kyriacou responded on 24 August 2012 as follows:
We refer to your correspondence of 22 August 2012.
We refer to our telephone conversation on 15 August 2012 wherein we stated that the four (4) car parks being lots 6, 7, 8 and 10 have been removed as separate titles from the PS 623565A and added to the common property of the subdivision.
We confirm that the change was requested on 13 August 2012 and as such our client’s notification is fully compliant with its obligations under s 9AC(1) of the Sale of Land Act 1962 (Vic) (the ‘Act’).
Even in the event that you dispute our telephone notification, please take this letter as formal notification. Again, it falls within the 14‑day period until 27 August 2012, and consequently fulfils our client’s obligations.
We reiterate our verbal advice provided on 15 August 2012, that our client has proposed the following in respect of the car parks being lots 6, 7, 8 and 10 purchased by your client:
(a)a 99‑year lease in respect of each of the lots 6, 7, 8 and 10 (we note that under s 14 of the Owners Corporation Act 2006 (Vic), the Owners Corporation may lease said property); or
(b)alternatively, a full refund of the deposits in respect of car parks being lots 6, 7, 8 and 10.
Please confirm which option you prefer.
We remind you that your client signed eight separate contracts in relation to the purchase of the lots outlined above. Each contract stands alone. The rationale underpinning your client signing each contract is immaterial.
Thus, an issue between the parties was whether the deletion of the car park lots and the consequential failure of those contracts, permitted the plaintiff to rescind the apartment contracts under s 9AC(2) of the Sale of Land Act. The plaintiff went further, however, contending that there were other amendments to the Plan of Subdivision that permitted rescission of the apartment contracts, even if not permitted to do so by reason alone of the deletion of the car park lots and the consequential failure of those contracts. The plaintiff alleged that there were changes to the configuration of the apartments; that lot 800 had been deleted; and that common property had increased. He also alleged a change to each lot entitlement.
Section 9AC of the Sale of Land Act provides:
(1)If after a prescribed contract has been entered into and before the registration of the relevant plan of subdivision an amendment to the plan is required by the Registrar or requested by the vendor, the vendor shall within 14 days after the receipt of the requirement of the Registrar or the making of the request by the vendor (as the case requires) advise the purchaser in writing of the proposed amendment.
(2)The purchaser may rescind a prescribed contract of sale within 14 days after being advised by the vendor under subsection (1) of an amendment to the plan of subdivision which will materially affect the lot to which the contract relates.[1]
[1]Emphasis added.
It was common ground that each contract was a ‘prescribed contract’ and that the defendant had requested a change to the Plan of Subdivision and was required to advise the plaintiff in writing of the proposed amendment. The plaintiff contended that he was never advised in writing of the full extent of the amendments and thus was unable to fully address the question of materiality in his evidence. That contention was made in response to the defendant’s contention that the plaintiff’s evidence failed to establish that the amendment would materially affect each apartment lot. What is clear, however, is that the plaintiff was advised in writing on 22 August 2012 of the deletion of the car park lots and the conversion of that space into common property. It was not contended by the plaintiff that the defendant had failed to comply with its obligation under sub‑s (1) merely because the plaintiff had not been advised of the proposed amendments prior to registration of the plan. Nevertheless, I am of the view that under s 9AC(1), the defendant was required to notify the plaintiff of the ‘proposed amendment’ following its request for amendment and before registration.
The purchaser’s right to rescind, within 14 days of the written advice required under sub‑s (1), is only available if the amendment to the Plan of Subdivision, once made, will materially affect the lot to which the contract relates. The defendant contended that the material effect must be adverse or ‘affect rights deleteriously’;[2] that it must involve a change of substance of that contracted for;[3] and that the effect of the change on a lot must be determined by an assessment of entitlements and liabilities only in relation to that lot. The defendant contended that the deletion of the car park lots, and the consequential failure of those contracts, did not have any material effect upon the substance of that which was contracted for in any of the apartment contracts and resulted in an insignificant adjustment to lot entitlements. It contended that the contracts were not conditional one upon the other; and that there was no basis to contend that the bundle of eight contracts should be considered as a whole, or that an apartment lot and car park lot should be considered as connected or interdependent.
[2]Gold Coast Carlton Pty Ltd v Wilson [1985] 1 Qd R 182, 189.
[3]Deming No 456 Pty Ltd v Brisbane Unit Development Corporation Pty Ltd (1983) 155 CLR 129, 168–9.
The defendant relied on Deming No 456 Pty Ltd v Brisbane Unit Development Corporation Pty Ltd[4] to support its contention that the amendment must have had the effect of changing the substance of the contract. In that case, the High Court considered the operation of s 49 of the Building Units and Group Titles Act 1980 (Qld). A purchaser had sought to avoid a contract on the basis that ‘rights of the purchaser have been materially affected’. Section 49 required a proprietor to give a written statement to a purchaser containing a wide range of prescribed information. The purchaser initially sought to avoid the contract on the basis that the vendor’s address had been omitted. After the commencement of the proceeding, the purchaser sought to also rely upon the vendor’s failure to notify alterations in the lot and on a change in the aggregate lot entitlements.
[4](1983) 155 CLR 129.
The vendor had obtained summary judgment against the purchaser in the Supreme Court of Queensland. The purchaser’s appeal to the Full Court was dismissed. On appeal to the High Court, it was held that the purchaser could rely upon any deficiencies that were identified at the time of the hearing. The orders for summary judgment were set aside and the purchaser was given unconditional leave to defend the action. Wilson J dissented on the basis that the evidence did not disclose a serious issue to be tried. In the course of his dissenting judgment, Wilson J considered the requirement in sub‑s 49(4) that ‘the rights of the purchaser have been materially affected’. His Honour said:
Section 49(4) contemplates that there will be circumstances which are capable of materially affecting the rights of purchasers. These circumstances encompass the entry into or variation of a management agreement or service agreement, the making or variation of a by‑law or a change in the lot entitlement of any lot or the aggregate lot entitlement. Of course, it would be quite unjust if minor changes or adjustments in these areas were to entitle a purchaser to avoid a contract. On the other hand, if the changes are not insignificant and have the effect of changing the substance of that contracted for, the intention of the legislature would seem to be plain. In the present case, Deming was clearly entitled to be informed promptly of the change in lot entitlement and the question of material affectation could reasonably have been raised by Deming had it wished them to avoid the contract on that ground.[5]
[5]Emphasis added.
The reasoning of Wilson J concerned a different statutory regime. Section 49(4) of the Queensland Act was concerned with the ‘rights of the purchaser’. That of itself may invite a more wide‑ranging inquiry than one limited to the effect of an amendment on ‘the lot’. There may, however, be a significant overlap between factors that will materially affect a lot and those which affect the rights of the purchaser under the contract. After all, s 9AC(2) refers to ‘the lot to which the contract relates’, in the context of a purchaser’s right to rescind that contract.
There is much to be said for the proposition that an amendment to a plan that has a material effect on the lot to which the contract relates, has a corresponding effect on the rights of the purchaser. On the other hand, the rights of the purchaser may be affected by factors other than those that affect the lot. Had the defendant contended that the distinction was important, because it is only the effect of the amendment on the lot that may be taken into account and not some wider notion of ‘the substance of that contracted for’, the utility of the dissenting judgment, as support for its case, seems misplaced.
The defendant also relied on the decision of the Full Court of the Supreme Court of Queensland in Gold Coast Carlton Pty Ltd v Wilson.[6] Once again, the court considered s 49(4) of the Building Units and Group Titles Act. Andrews SPJ said:
The respondents argued that their rights were “materially affected”. What this amounts to is that their share of the costs of the services of Body Corporate Services Pty Ltd was to be $63.00 for the first year, rising to $70.00 for the next year. Whether this amounts to material affectation of their rights is a question of fact. They argue to the effect that they had a right to expect that the body corporate, or a member or members of it would carry out the tasks involved. They did not make much of a fist of showing what this would involve for the individual or individuals concerned. There is no reasonable ground to assume that other individuals will perform the work for nothing. There is nothing to show that they could or would do the work themselves. I cannot accept that “materially affect” means other than to affect rights deleteriously in some way. I am by no means persuaded that to show that a purchaser is to pay what appears to be rather a modest sum for work of this kind is to show that his rights have been affected at all. In any event His Honour found this point against them and I think that he was correct.[7]
[6][1985] 1 Qd R 182.
[7]Emphasis added.
The defendant contended that s 9AC(2) of the Transfer of Land Act should also be construed so as to limit the material effect to one prejudicial or deleterious to the purchaser’s rights. The plaintiff contended that even if an amendment had the effect of improving rights, it would nonetheless materially affect the lot to which the contract related. He argued that whether or not a purchaser elected to rescind was beside the point.
In Besser v Alma Homes Pty Ltd,[8] Pagone J considered that question. It is not clear whether Gold Coast Carlton v Wilson was drawn to his Honour’s attention. His Honour held:
I am unable to accept the submission for Alma Homes which would exclude from the meaning of the words “plan of subdivision” in s 9AC the provisions for lot entitlements and liabilities. The word “plan” is not used in the section to mean only the design or layout of the physical boundaries of real estate but is used in its ordinary meaning to include the totality of the scheme and arrangement by which property is to be subdivided. The “plan” for the subdivision of the land in question included the respective rights and obligations which were to attach to each of the lots. The proposed plan of subdivision comprised all four of the pages which had been provided in the contract, and “the s 32 statement”, including the fourth page setting out the respective entitlements and liabilities. Part of the plan of the specific subdivision which was proposed was the proportionate allocation of the entitlements and liabilities attaching to each of the lots. It is not to the point that an amendment may benefit the party seeking rescission. That fact may be relevant to whether it materially affects the lot but not to whether it is an amendment to the plan itself. The form in which the plan of subdivision was subsequently registered requires no different conclusion. The plan of subdivision is expressed to be three pages but expressly refers to and incorporates the Owners Corporation Search Report identifying the respective entitlements and liabilities. That may be seen from the first page of the registered plan of subdivision which contains a section in bold with the words “LOTS ON THIS PLAN MAY BE AFFECTED BY ONE OR MORE OWNERS CORPORATIONS”. In this case those words were followed by a reference to the Owners Corporation Search Report for details. It was that Search Report which accompanied the documents forwarded to Ms Besser’s solicitors by the solicitors for Alma Homes and which showed the entitlement and liability attaching to Lot 4 to be one of 202 and not 100 of 400.
…
Whether an amendment will materially affect the lot to which the contract relates is something to be determined objectively. A change in entitlement and liability is something which may materially affect the lot to which a contract relates.[9]
[8][2012] VSC 460; emphasis added.
[9]Emphasis added.
His Honour made reference to the judgment of Wilson J in Deming No 456 and continued:
Whether an amendment will materially affect the lot is not to be judged by reference to the reason the amendment is made but by objective facts and circumstances. Nor is it to be judged by reference to whether a person in the position of the party affected by the amendment might not, or that some might think the party affected should not, elect to rescind. The amendment of the entitlements and liabilities of the lot owners affects them in various ways. The rights of the owners in this subdivision are governed by the Owners Corporation Act 2006 (Vic). Section 74 provides that a lot owner with more than 25% lot entitlements has the right to call a special general meeting and, by s 83, the right to call a ballot. One of the ways to obtain a quorum under that Act for the purposes of decision-making by owner corporations can be by “at least 50% of the total lot entitlement”. A special resolution can be placed by ballot or poll passed by “75% of the total lot entitlements of all of the lots affected by the owners corporation”. Lot entitlement also affects votes at a standard meeting. It is not possible to forsee the issues that may arise in relation to the property in the subdivision and, in particular, to the common property. However the change does have an effect upon Lot 4 by reducing the entitlements and liabilities attaching to the lot.[10]
[10]Emphasis added.
I would respectfully agree with the conclusion of Pagone J that the amendment need not be detrimental. In my view, the purpose of the legislation requires no such qualification to be made to the requirement that the amendment ‘will materially affect the lot’. Section 9AC was inserted into the Sale of Land Act in 1985[11] and amended in 1988[12] to its present form. The second‑reading speeches offer little assistance in the construction of the provision, other than to disclose the obvious purpose to protect the interests of those purchasing ‘off the plan’ in the event of a change to the plan. The legislative scheme is designed to regulate the sale of land pending registration of a Plan of Subdivision. The disclosure requirements are not limited to those found in s 9AC(1). There must also be a disclosure of certain works.[13] Penalties apply for the supply of false information or a failure to supply that information.
[11]Act No 10216.
[12]Act No 53/1988.
[13]Section 9AB Sale of Land Act 1962.
A failure by a vendor to comply with the disclosure obligations under s 9AB entitles a purchaser to rescind at any time before registration of the Plan of Subdivision. Section 9AC does not limit the right of rescission to a time before registration of the plan.
Section 9AF provides for the repayment of deposit monies. In the event of rescission for default by the vendor under s 9AB, or rescission under s 9AC(2), any deposit, less any occupation fees paid by the purchaser, is to be immediately returned to the purchaser. The Act expressly provides that it does not limit or affect the power of the Court to order the repayment of the deposit monies under s 49(2) of the Property Law Act. The plaintiff has also applied under that provision for a return of his deposits.
There is no express requirement in s 9AB that the default, or in s 9AC(2) that the material effect, be deleterious or adversely affect the lot or the rights of the purchaser under the contract. It is true that there is no such express requirement is to be found in s 49 of the Building Units and Group Titles Act 1980 (Qld). But while the purposes of s 49 of the Queensland Act and s 9AC of the Sale of Land Act overlap, the scope of the protection afforded, and the mechanisms for protection, are materially different. Section 49 requires the giving of a wide range of information, although it includes full particulars of ‘any change in the proposed lot entitlement’. A purchaser is at liberty to rescind a contract if ‘rights’ have been materially affected.
Because of the wide‑ranging scope of the information required under the Queensland statutory regime, it may be accepted that some additional boundary ought to be implied so as to restrict the opportunity for rescission to situations in which the rights of a purchaser were adversely affected. The variety of information, with differing degree of significance to a purchaser, may well justify the introduction of such an implied requirement. However, there is no need for any such implication in s 9AC(2). Furthermore, there seem to be sound reasons for the omission of any such qualification.
In the present case, one question that confronted the purchaser, given notice of the deletion of the car park lots, and lot 800, was the effect of the enlarged common property on his apartment lots. Putting to one side the obvious detriment of losing the benefit of four car park lot contracts, the effect of an enlarged area of common property, on the owner of each apartment lot, may vary from lot to lot.
The nature of the information required under s 9AC(1) is confined to any change to the plan under which the purchaser entered into a contract. That is, a change to the definition of the subject matter of the contract — the lot. The provision assumes that a vendor may amend the plan. A relevant change may, of course, be required by the Registrar. Thus, in the absence of agreement, a purchaser is vulnerable to change in the subject matter of the contract. It is accepted that a change found to be adverse to the interests of a purchaser may more readily translate into one that will be found to ‘materially affect the lot’, but there may be instances, illustrated by this case, when reasonable parties may debate whether the change is adverse or beneficial to a particular lot.
The section does not expressly require proof of detriment. In my view there is no occasion to impose upon a vulnerable purchaser the additional burden of proving detriment if the purchaser, seeking to rescind, is able to establish that the amendment will ‘materially affect the lot’ to which his contract relates. I am of the opinion that it is unnecessary for the plaintiff to establish that the amendment of the plan was detrimental, deleterious or otherwise prejudicial in addition to establishing that it will materially affect the lot to which the contract relates. Of course, an objectively defined deleterious effect on the rights of a purchaser under a contract may more readily establish materiality.
The plaintiff contended that he had purchased eight lots that were part of a development scheme, the essential elements of which changed with the amendment. That submission drew support from the scope or elements of a ‘plan’ as found by Pagone J in Besser. The plaintiff submitted that the scheme was defined in the brochure and Plan of Subdivision annexed to each contract. There were three relevant elements. The existence of 10 car park lots and lot 800; and the common property. The change had the effect of enlarging the common property, thus changing the corresponding rights and obligations of the owner of each apartment lot. The plaintiff contended that whether or not the eight contracts, or each pair of contracts (apartment and car park lot), could be considered together when assessing the material effect on an apartment lot, the project or scheme had undergone such a change with the elimination of the car park lots and lot 800 as to materially affect each apartment lot. He argued that the subject matter of the apartment contracts had changed, not only because the defendant could not perform the car park contracts, but because the scheme, plan, or project under which the apartment contracts had been made had changed in material respects.
The plaintiff further contended that it was unrealistic to isolate any one of the eight contracts entered into by him on 24 January 2010 for the purpose of an assessment of the material effect on an apartment lot. He contended that it was entirely coincidental that there were eight contracts, instead of a single contract, or four contracts for an apartment and car park.
At one point, the plaintiff sought to advance a contention that the Court should find a collateral contract, the terms of which made each contract conditional on the other. The defendant contended that it was inappropriate to advance such a case in a summary procedure brought under s 49 of the Property Law Act.[14]
[14]Kadissi v Jankovic [1987] VR 255.
This contention was unclear and not developed. In any event, it had no evidentiary foundation. The apartment contracts each contained a handwritten change to the price, from $210,000 to $215,000. But there was no evidence that the adjustment had been made to reflect the obvious advantage of acquiring a car park from the limited stock. Had there been an agreement to that effect, it would surely have been introduced into evidence. The evidence of the plaintiff’s intention in relation to the contracts was plainly inadmissible.
The plaintiff did not advance a contention that a term should be implied into the contracts that would have made the completion of each apartment contract conditional on the ability of the vendor to complete a car park contract. The defendant argued that it was not appropriate to advance such contentions in the absence of pleadings. I agree, although the absence of an implied term did not diminish the force of the plaintiff’s contention that these contracts should not be considered in isolation of each other.
The plaintiff sought to connect the apartment and car park contracts by reference to the Special Conditions. Each contract contained special conditions in identical form, which made reference to three elements of the attached Plan of Subdivision. Those elements were: ‘any lot’, a ‘Car park’, and ‘common property’. Special Condition 7 expressly authorised the defendant to make amendments or alterations to the Plan of Subdivision. The vendor was required to notify the purchaser if, before registration of the plan, a ‘material and substantial amendment’ was required by the responsible authority or Registrar of Titles or requested by the vendor which ‘materially and substantially affects the lot sold’. The vendor was required, within 14 days of receipt of such a requirement or making such a request, to advise the purchaser in writing of the proposed amendment.
It was common ground that the Special Conditions could not displace the statutory provisions. They did not purport to do so, but imposed an earlier obligation to notify the purchaser in the prescribed circumstances. Special condition 7.6 provided:
Notwithstanding the foregoing and without limiting the generality thereof;
7.6.1The Vendor shall be entitled to alter or vary the position of any lot or Car park or additional land on the Plan of Subdivision where in the Vendor’s sole opinion it is required to do so for Planning, construction or access purposes provided that the Vendor shall not be entitled to reduce the actual size area of any car park sold to the Purchaser without the consent of the Purchaser;[15]
[15]Emphasis added.
The plaintiff relied upon Special Condition 7.6.1 to contend that each contract for the purchase of an apartment lot precluded the defendant from reducing ‘the actual size area of any car park sold to the Purchaser without the consent of the Purchaser’. He contended that if and insofar as the contracts were to be considered independently, then each contract for the purchase of an apartment lot expressly contemplated that a car park lot may have been purchased and, if so, precluded a reduction in the actual size of that lot. He argued that the elimination of the car park lot would contravene that preclusion. The point of this argument was not so much to establish a contravention by the defendant, as to establish the interdependency of each contract for the sale of an apartment lot and a contract for the sale of a car park.
Insofar as it may be necessary to ‘connect’ the contracts so as to make the apartment contracts depend upon the preservation of the right to a car park, there is substance in the plaintiff’s contention. I do not, however, think that it is necessary to establish the connection or interdependency by such elaborate means as collateral contract, implied term or cl 7.6.1. The approach taken by the defendant to confine the inquiry to an analysis of the change, if any, to the entitlements and liabilities of each apartment lot, is unduly narrow. While each lot was the subject of a contract, it formed the part of a development project in which the plaintiff invested prior to its completion. The outcome had yet to be realised. The context in which the parties entered into each contract was the definition of the whole development proposal as described in each contract.
The attempt by the defendant to drive a wedge between each contract, and in particular the apartment and car park contracts, overlooked that which must have been apparent to any reasonable bystander. There was a symmetry to the transaction. Ordinary common experience compels the conclusion that both parties would have understood that the acquisition of a car park, in short supply, would enhance the value to the plaintiff of each apartment. The transaction, viewed as a whole, was in substance the acquisition of four packages, each of which consisted of an apartment and a car park. It is entirely artificial to look only at each individual contract, on a stand‑alone basis, when considering the impact of an amendment to the plan on a particular lot and contract.
It is possible that a purchaser might have acquired the car park lots with the object of selling for a profit to other apartment owners, who were unable to acquire a car park lot due to their short supply. But in the circumstances of this case, such a course would be counter‑intuitive, because the on‑sale of a car park would have the immediate effect of diminishing the value to the plaintiff of the ‘package’ he had purchased. I find that the deletion of all car park lots, and the inability of the defendant to complete those contracts, materially and adversely affected each apartment lot.
The defendant sought to persuade the Court that the appropriate way to analyse the impact of any amendment was to look at the effect upon the proportional entitlement and liability of each apartment lot. There was some disagreement between the parties as to the calculations involved and the accuracy of the Owners Corporation schedule on sheet 8 of the plan annexed to each contract. The defendant contended, from lot entitlement calculations made to correct the evidence of Mr Gibbins, that the elimination of the car park lots made an insignificant change to individual lot entitlements.
Each apartment was attributed a lot entitlement of 100. Prior to the amendment, the aggregate of all entitlements, including the car park lots and lot 800, was 8720. Following the amendment, with the deletion of the car park lots and lot 800, the aggregate of all entitlements was 8600. Thus, the change following the amendments was the difference between and . Calculated in this way, it would be difficult to contend that the change was material. But in my opinion, an analysis of the proportional entitlement and liability is not determinative. Such an analysis overlooks the various elements of the project in which the plaintiff invested, the obvious connection between the apartments and car park lots, and the consequential change to the project from one in which there would be 10 privately owned car park lots to a project in which the ground floor and the whole of the rooftop became common property.
The plaintiff contended that he was unable to fully investigate the extent of the impact because he had not been provided with sufficient information about the proposed amendment by the defendant. He referred to s 30 of the Owners Corporation Act 2006 and cl 3.2 of sch 2, which contains Model Rules for an Owners Corporation. These are reflected in the Model Rules incorporated in each contract of sale. The plaintiff contended that the rights and limitations on parking would be quite different under the amended plan than would be the case where the owner of an apartment also owned a car park lot. That assumed, of course, a connection between an apartment and a car park contract. But such a connection is unnecessary in order to identify a material change to each apartment lot.
Even if the Court were to consider each apartment lot and contract in isolation, as the defendant would have it, the amendment will materially affect each lot to which an apartment contract related. The amendment brought about a substantial change by increasing the common property. On one view, the change might be thought to be beneficial to an apartment lot. The plaintiff contended that, beneficial or not, the increase in the common area had a material effect on each apartment lot because of the operation of s 30(1) of the Owners Corporation Act. That provision vests in the apartment owners, as tenants in common, a substantially greater proportion of common property, than would have been the case under the plan annexed to the contracts. While that contention was focused upon the position of the owners, rather than the effect on the lot as such, it highlights a substantial change in the bundle of rights comprising each apartment lot. Following the amendment, the entitlement of each owner of an apartment lot would be different to their entitlement prior to the amendment.
Such a change in entitlement, even though it might be regarded by some as beneficial would, in my view, materially affect each apartment lot. The effect is significant, and may not be as beneficial some might first think. The change resulted in the conversion of 10 privately owned car parks and lot 800 into common property. There were other important consequences. Special condition 11.5 provides:
The Purchaser acknowledges and agrees that:
11.5.1The Owners Corporation will, when operative, within seven (7) days of a request from the Vendor, grant a Lease of the rooftop of the buildings constructed on the land comprised in the Plan of Subdivision to the Vendor or such other entity as may be nominated by the Vendor. The Owners Corporation will do all things and sign all documents necessary to enable the Owners Corporation to execute the Lease and will not object in any way to such Lease. The Lease will be for a term of ninety‑nine (99) years at an annual rental of $1.00 per annum payable on demand which shall allow the Vendor to use the rooftop for any legal purpose and shall otherwise be on such terms and conditions as are acceptable to the Vendor in its absolute discretion.
11.5.2The Owners Corporation will, when operative, within seven (7) days of a request from the Vendor, grant a signage Lease over any land described as common property on the Plan of Subdivision to the Vendor or such other entity as may be nominated by the Vendor. The Owners Corporation will do all things and sign all documents necessary to enable the Owners Corporation to execut[e] the Lease and will not object in any way to such Lease. The Lease will be for a term of 99 years at an annual rental of $1.00 payable on demand and shall otherwise be on such terms and conditions as are acceptable to the Vendor in its absolute discretion.
The ability of the defendant to demand a signage lease of any land described as common property makes the expansion or contraction of common property a matter of concern to any owner of an apartment lot. That issue was not explored at trial. Nor was the effect of special condition 11.5.1, which appears to confer on the defendant the right to take a lease of the whole of the rooftop after the deletion of lot 800. While these matters were not addressed at trial, they illustrate the complexity involved in an assessment of materiality and, more particularly, whether a change to a plan might be regarded as beneficial or detrimental. These examples reinforce the conclusion that the purpose of the statute may be undermined if a purchaser were to be required to establish detriment in addition to a material effect. It also leads to the conclusion that the evidentiary burden on the purchaser, to establish materiality of a change in the plan, should not require the kind of precision contended for by the defendant. A material change may be established, as in the present case, by production of the contracts containing the initial plan and the amended plan.
It is also worth noting that the defendant attributed significance to the value each car park lot had to the apartment lots. In his letter of 24 August 2012, Mr Kyriakou offered the plaintiff a 99‑year lease of each of the four car park lots. That offer was made in circumstances where, at the time, the car park contracts had failed. The defendant had no prospect of completing the sale because the car park lots had been deleted. The defendant might have contended, as it does now, that the only interest the plaintiff had in the development was his contracts for the purchase of the apartment lots. The offer made by the defendant was inconsistent with its attempt in this case to isolate the apartment lots from the expectation of combination with a car park lot. The offer also tends to confirm the existence of a common understanding between the parties that the apartments and car park lots were part of a package of rights purchased by the plaintiff.
While the deletion of lot 800 on the rooftop may not be regarded as of such importance, when compared with the loss of the car park lots, that amendment also materially affected each apartment lot because it translated into an increase in common area on the rooftop. The plan had changed, with the conferral of additional rights on the defendant who was entitled to call for a lease over the whole of that space.
Other amendments, identified by the plaintiff, were not material. For example, the plaintiff identified what he described as changes to the configuration of his apartments. These changes appeared to involve a notching in the south‑eastern corner of apartments 609 and 709. As the defendant pointed out, the notching identified by the plaintiff seemed consistent with the configuration to be observed in the sales brochure attached to each of the contracts. I am not satisfied that the changes, if any were made, were material. There was nothing to suggest that the area of the apartment had been diminished in any respect.
The plaintiff has established that the amendments to the Plan of Subdivision reflected in version 3, dated 13 August 2012, materially affected each of the apartment lots. Consequently, the plaintiff had the right to rescind each of those contracts and to a return of the deposits.
Section 49 of the Property Law Act 1958
In the alternative, the plaintiff sought a declaration under s 49(2) of the Property Law Act 1958 and a return of his deposits. Having determined the legal rights of the parties under s 9AC(2) of the Sale of Land Act, there would seem no residual scope for the operation of s 49(2) of the Property Law Act. But if I am wrong, and the plaintiff had no right to rescind the apartment contracts, the question arises as to whether the discretion, expressly reserved under s 9AF(2) of the Transfer of Land Act, to order the return of the deposit or to relieve the purchaser against forfeiture of the deposit, should be exercised.
In Poort v Development Underwriting (Victoria) Pty Ltd,[16] Gillard J reviewed the authorities and concluded that the provision removed the necessity for the purchaser to show that the forfeiture of deposit constituted a penalty in order to obtain relief and that it presupposed a breach by the purchaser of his obligations under a contract. The jurisdiction is to grant relief to defaulting purchasers. His Honour followed the approach adopted by Dean and Smith JJ in Mallett v Jones,[17] that required exceptional circumstances to justify a departure from the agreed contractual terms. The question for determination was whether or not there exist in the facts of a particular case exceptional circumstances that would justify the exercise of the wide discretion given.
[16][1976] VR 779.
[17][1959] VR 122.
If called upon to exercise the discretion under s 49(2), I would, in the circumstances of this case, order the return of the deposits paid under the apartment contracts. For the reasons given above, I am of the opinion that all eight contracts ought to be considered as a single transaction, or at least four transactions for the purchase of an apartment lot and a car park. The value of that transaction to the plaintiff was undermined by factors beyond his control. The vendor was unable to deliver the car parks. There was no suggestion that the plaintiff was not ready and willing to complete the purchase of all lots.
It was the defendant’s conduct in requesting an amendment to the Plan of Subdivision that denied to the plaintiff the benefit of four contracts for the purchase of car park lots which, in my view, formed the part of a package of rights acquired by the plaintiff in a development scheme. Those events were detrimental to the plaintiff’s interests. The defendant, in effect, disabled itself from completing those contracts. Such an analysis, based on the substantive effect of the amendment on the plaintiff’s position, is not inhibited by the defendant’s contention that when determining the material effect on a lot, for the purpose of s 9AC(2) of the Sale of Land Act, each apartment lot and contract should be considered without regard to the car park lots.
Conclusion
I declare that each contract of sale dated 24 January 2010 in respect of lots 609, 611, 709 and 711 at 13K Raleigh Street, Windsor, Victoria were validly rescinded by the plaintiff pursuant to s 9AC(2) of the Sale of Land Act 1962. I further order pursuant to s 9AF(1)(b) that the deposit monies paid in respect of each such contract be returned to the plaintiff forthwith.
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