Lu v South Australian Housing Trust - [2008] SADC 153

DISTRICT COURT OF SOUTH AUSTRALIA
(District Court Administrative and Disciplinary Division)
In the Matter of HOUSING IMPROVEMENT ACT 1940
LU v SOUTH AUSTRALIAN HOUSING TRUST
[2008] SADC 153
Judgment of Her Honour Judge Trenorden
24 November 2008
ADMINISTRATIVE LAW
Appeal against a declaration that house substandard - Whether declaration is inconsistent with common law principles relating to contracts - Whether declaration in conflict with contract law principles of the common law - Whether breach of the Commonwealth Trade Practices Act - Whether breach of duty of care by housing authority in its administration of the Housing Improvement Act.
HELD: Appeal dismissed.
Housing Improvement Act 1940; Commonwealth Trade Practices Act 1974; District Court Civil Rules 1991, referred to.

LU v SOUTH AUSTRALIAN HOUSING TRUST
[2008] SADC 153
THE COURT DELIVERED THE FOLLOWING JUDGMENT:
The Respondent

This appeal was lodged by Mr Lu (the appellant) against the Department for Families and Communities – Housing Improvement Branch on 13 March 2008 following his receipt of a letter dated 14 February 2008 from the manager of the Housing Improvement Branch, Department for Families and Communities advising Mr Lu that a notice had been published in the Government Gazette, on 14 February 2008, declaring the property at 166 Senate Road, Port Pirie West as substandard, for the purposes of Part 7 of the Housing Improvement Act 1940.
Although the letter advised Mr Lu that he could appeal the declaration, a copy of the Government Gazette notice was not included with the letter and Mr Lu was not informed that the housing authority against whom an appeal lay, was the South Australian Housing Trust.
The relevant notice, appearing in the South Australian Government Gazette of 14 February 2008 at page 469 makes clear that it was the South Australian Housing Trust who, in the exercise of its powers under the Housing Improvement Act, declared the house at 166 Senate Road, Port Pirie West (the subject property) to be substandard for the purposes of Part 7 of that Act. It follows that this appeal by Mr Lu lies against the South Australian Housing Trust and not the Housing Improvement Branch, Department for Families and Communities. In these proceedings, there is nothing that follows from that finding, except the need to regularise the name of the respondent in the Court records. It would have been helpful if the letter dated 14 February 2008, referred to above, had identified that it was the South Australian Housing Trust who had made the declaration. The letter is ambiguous in that regard.
The Appellant’s Property
In January 2007, Mr Lu signed a contract to purchase the subject property. Settlement occurred in March 2007. At the time of purchase of the property by Mr Lu, there were tenants residing in the property. The tenants continued to reside in the property thereafter.
It appears that Mr Lu engaged solicitors to handle the conveyance of the property to him and relied upon them to carry out any necessary checks. Mr Lu was familiar with legal requirements in relation to the purchase of properties in other Australian states, but not in South Australia. No building inspection was undertaken by him. He was surprised that a building inspection was not required as part of the contractual arrangements, but did not opt to have an inspection carried out.
On 17 August 2007, the Housing Improvement Branch of the Department of Families and Communities received a complaint from the tenants of the subject property concerning the state of the property. These tenants appear to have been the same tenants who were in occupation of the property at the time of Mr Lu’s purchase of same. There had been no previous complaints with respect to the standard of the property. A declaration under the Housing Improvement Act has not previously been made in respect of the subject property.
The Grounds of Mr Lu’s Appeal
Mr Lu has appealed against the declaration on a number of grounds, which he pursued in the hearing of the appeal. The grounds for appeal were amended from time to time, but I understand them to be as follows:
·The Constitutional Issue: The Housing Improvement Act is to be read subject to the law of the Commonwealth of Australia, including the principles of common law relating to contracts, in accordance with the rule of law. The administration of the Housing Improvement Act resulting in the declaration which gave rise to this appeal is in effect inconsistent with the common law principles relating to contracts, because if the declaration is allowed to stand, the appellant would not be bound by the contract to purchase the subject property and the appellant would have the right to rescind the contract.
·The declaration is in conflict with the contract law principles of the common law. Given that a fundamental or essential term of the contract included in Clause L of the Schedule that the tenants in place had agreed to pay a rent of $160 per week and that Clause M provided that the subject property was “a normal residential property, which is not classified as declared or substandard”, the housing authority cannot by its action effectively override the essential terms, being promises made by the vendor as one of the parties to the contract. A consequence of the declaration having been made is that essential terms of the contract (as far as Mr Lu is concerned) are of no effect as a result of the actions of the housing authority who is not a party to the contract. That is not consistent with the common law relating to contract.
·The actions of the housing authority amount to unconscionable conduct on its part, given that Mr Lu had no knowledge about the Housing Improvement Act and its operation in South Australia and the way in which the housing authority operated. It is unconscionable for the housing authority to act to declare the subject property substandard when it was not required by law to inspect the property prior to sale nor did it require a building inspection to be carried out prior to a contract between a vendor and purchaser.
·The purchaser under a contract for the sale and purchase of a property has a legitimate expectation, by reason of the statement in Clause M of the Schedule to the contract, that there were no “notices, orders or charges issued or received” and that the property was a “normal residential property, not classified or declared as substandard”, that the situation would not change subsequent to the settlement of the contract. In other words, Mr Lu relied on the statement in Clause M of the contract in purchasing the subject property and it is unfair now for the housing authority to claim that the property is substandard and so to consider a rent reduction.
·There has been a breach of the Commonwealth Trade Practices Act 1974, in particular s 53A(1) in that Mr Lu has been misled by the false or misleading representation made by the real estate agent and the solicitors who acted for him (and the vendor) in the purchase of the subject property in that they represented that the building was classified as standard, when it appears to have been substandard, according to the housing authority.
·There has been a breach of duty of care by the housing authority in its administration of the Housing Improvement Act.
Orders Sought by the Appellant
In his amended Notice of Appeal filed on 22 July 2008, Mr Lu sought the following orders from this Court:
[1]    The declaration that the subject property is substandard, to be overturned;
[2]    (Presumably, in the event that the appeal is not upheld) the housing authority to advance funds to cover the building improvement construction cost;
[3]    (Presumably, in the event that the appeal is not upheld) the housing authority pay compensation (to fund the building improvement costs) to the appellant pursuant to its responsibility to protect the property purchasers right and interest;
[4]    That the housing authority pay damages to the appellant for its failure to disclose the material impact of the Housing Improvement Act to the appellant as potential purchaser;
[5]    That the housing authority pay damages to the appellant for its failure to provide correct information for the purposes of the contract (Clause M – regarding notices, orders or charges issued or received in relation to the property), given that the appellant relied heavily on Clause M when entering into the contract.
Consideration of the Arguments
It appears that Mr Lu is most concerned and upset about the declaration having been made in relation to the subject property for some reasons which can be summarised as follows:
·       Mr Lu relied on the rental income of $160 per week to service the financial arrangements he had entered into in order to purchase the property and any reduction of the rental income will cause him a financial problem.
·       The tenants who made the complaint were the tenants in occupation at the time of Mr Lu entering into the contract and it seems strange to Mr Lu that they have suddenly complained about the standard of the subject property, having lived there for some time.
·       Mr Lu finds it difficult to understand that the property could have deteriorated so as to be substandard, between the signing of the contract and 14 February 2008, given that Clause M of the contract assured him that there was no problem regarding the condition of the subject property.
I can understand Mr Lu’s surprise at the seemingly sudden concern by the longstanding tenants at the state of the property. I say this having regard to the nature of some of the defects identified, which by their description, would seem to have been evident for some time. However, it is not the role of the Court in this appeal to look into any of these matters.
I also understand and have sympathy for Mr Lu’s dilemma as far as the financial ramifications for him are concerned. It appears, as a result of the declaration, that he will have to spend some money on repairs and improvements to the subject property, faced with the possibility that the rent will be reduced if he does not carry out repair works. However, I hasten to say that no decision has yet been made about whether the rent will be reduced. I sympathise with Mr Lu because it appeared to him that the subject property was in an appropriate state of repair and fit for human habitation, based on a combination of his experience in property dealings in other states and the advice he claims to have received from his solicitors, together with his understanding of the effect of Clause M of the Schedule to the contract and the presence of existing tenants who would remain tenants.
Although I have some sympathy for Mr Lu, he has not presented any cogent reason to show that the declaration made by the Housing Trust should be overturned. The Court has to be satisfied that there is cogent reason to depart from the decision the subject of the appeal, before the appeal can be upheld: s 42E District Court Act 1991.
There was no constitutional issue. The Housing Improvement Act is an Act of the South Australian Parliament. The appellant has not identified any law of the Commonwealth of Australia with which any provision of the Housing Improvement Act could be said to be inconsistent.
It is correct to say that the laws relating to the sale and purchase of real estate are not uniform across Australia, but I do not understand how that may raise a constitutional issue.
In terms of the arguments based on the law of contract, as Mr Lu has rightly identified, the Housing Authority was not a party to the contract for sale and purchase of the subject property. Accordingly, the South Australian Housing Trust is not bound by any term of that contract.
It was open to Mr Lu to carry out a building inspection of the property prior to signing the contract, or to make his entry into the contract conditional upon a satisfactory report being received as to the standard of the property following a building inspection by a reputable building inspector.
Mr Lu claims that the contract should be rescinded, because the building could not have been in an appropriate condition, given that it has now been declared substandard. That is not a matter to be addressed by the Housing Authority. The South Australian Housing Trust is not in a position to rescind the contract.
Mr Lu claims that he was perhaps badly advised by his solicitors. That is a matter for him to take up with his solicitors. It cannot involve the South Australian Housing Authority, as they were not involved in dealings with Mr Lu in relation to his purchase of the subject property.
With respect to Mr Lu’s allegation of a breach of the Trade Practices Act, that is not a matter that this Court can address, in these proceedings. The allegation is that the land agent and the solicitors misled Mr Lu. This is a matter he may be able to take up with those persons, but it is not a matter for this Court to address in these proceedings.
Finally, the Housing Authority, namely the Housing Trust of South Australia had no duty of care to Mr Lu in relation to his purchase of the subject property. It had no obligation to conduct a building inspection and to advise him of the standard or state of the subject property, prior to his entering into the contract to purchase same.
The Housing Trust has acted within the law, as far as I can see. No argument has been presented to show that there was no justification for the declaration the subject of this appeal.
Mr Lu suggested that in fairness, if he has to carry out repairs, some part of the cost of doing so should be borne by the defendant. There is no basis, in fact or law, for the Court to so determine.
Order
There will be an order dismissing the appeal.