Marguerite Pocknell v Payce Properties Pty Ltd - [2008] NSWDC 5

No judgment structure available for this case.

CITATION: Marguerite Pocknell v Payce Properties Pty Ltd [2008] NSWDC 5

HEARING DATE(S): 22/11/07

JUDGMENT DATE:
7 February 2008

JUDGMENT OF: Rein SC DCJ

DECISION: Verdict and judgment for the defendant.
Plaintiffs to pay defendant's costs.

CATCHWORDS: Contract for Sale of Land, whether validly rescinded, based on failure of vendor/developer to provide a certificate of insurance and/or to enter into a contract of insurance. Whether Option Deed is a Contract for Sale of land - Principles of construction of a commercial contract

LEGISLATION CITED: Home Building Act 1989; s.96(1), s.96A, s.92
Home Building Regulation 2004; Cl.66, Cl.74(2)
Home Building Amendment (Insurance Exemptions) Regulation 2003; Cl 57BC, Cl.74

CASES CITED: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Toll (FGCT) Pty Ltd (formerly Finemores GCT Pty Ltd) v Alphapharm Pty Ltd (2004) 219 CLR 165
Equuscorp Pty Ltd v HGT Investments Pty Ltd (2005) 218 CLR 47
Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429
Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2
McCann v Switzerland Insurance Australia Ltd. (2000) 176 ALR 711
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Waterways Authority of New South Wales v Coal & Allied (Operations) Pty Limited [2007] NSWCA 276
Fitzgerald v Masters (1956) CLR 420

PARTIES: Marguerite Pocknell (First Plaintiff)
Tracy Davidson (Second Plaintiff)
Paul Lytwyn (Third Plaintiff)
Payce Properties Pty Ltd (Defendant)

FILE NUMBER(S): 2868 of 2007

COUNSEL: Mr S. Wells (Plaintiffs)
Mr D. Bruckner (Defendants)

JUDGMENT

1 The plaintiffs (for whom Mr S. Wells of Counsel appears) on 21 November 2003 entered into an option deed giving them the right to exercise an option for purchase of a unit in a development (known as The Waterfront at 8 Stromboli Strait Homebush Bay), being undertaken by the defendant Payce Properties Pty Ltd (“Payce”) (for whom Mr D. Bruckner of Counsel appears). The Option Deed annexed a form of contract upon which, if the option was exercised, the sale of the unit would proceed.

2 On or about 1 November 2006 the plaintiffs, having exercised their option to purchase, entered into a contract for sale, which I was informed was in identical terms to the form of contract which had been annexed to the Option Deed.

3 On 29 March 2007 the plaintiffs wrote to the defendant rescinding the Contract for Sale or purporting to rescind the contract, on the basis that no copy of a certificate of an insurance contract had been provided to them which was said to be a breach of Special Condition 36 of the Contract for Sale – which clause is in the following terms:

4 The plaintiffs seek return of $71, 380.00 paid as a deposit. They also seek payment of interest to which they would be entitled if the notice of rescission was valid.

5 No certificate of insurance was provided to the plaintiffs and it was agreed that no contract of insurance was ever entered into by Payce. There is no dispute that a notice of rescission was served on 29 March 2007 purporting to rescind based on an alleged breach of Special Condition 36(c). There is no dispute that if the plaintiffs were entitled to rescind, they are entitled to the return of the amount paid as a deposit, although the amount of interest which would be payable were the rescission to be found to have been valid was not agreed.

6 At the hearing the plaintiffs sought and were granted leave to file an amended statement of claim which asserted that the failure of Payce to enter into a contract of insurance in compliance with s.96 (1) of the Home Building Act (“the Act”) was itself a breach of Special Condition 36 and not just (as previously had been pleaded) the failure to provide a certificate of insurance within 14 days of the contract of insurance having been entered into.

7 The question of whether or not the rescission was valid falls within a fairly narrow compass – and involves construction of the contract and in particular Special Condition 36, and consideration of the legislative framework.

8 S.96A of the Act is in the following terms:

9 S.92 of the Act provides that a person “must not do residential building work under a contract” unless a contract of insurance that complies with the Act in the name of the person who contracted to do the work is in force and a certificate of insurance meeting the requirements of the regulations has been provided to the parties to the building contract, and imposes a penalty for a breach.

10 As at 2003 when the Option Deed was entered into the Home Building Regulations relevantly provided:

11 By the Home Building Amendment (Insurance Exemptions) Regulation 2003 No. 948 (which by Clause 2 commenced on 31 December 2003), amendments were introduced to the Home Building Regulations, the relevant clause of which Clause 57BC was in the following terms:

12 Part 6 of the Act comprises s.89E to s.103E. Clause 57BC was, in late 2004, replaced by Clause 74 which is in identical terms save for Subclause (3) which excludes from its operation residential building work commenced before 31 December 2003. There is no dispute that the defendant was a developer or that the building in question is a “multi-storey building” within the meaning of the amendments. There is no dispute that building work on the Waterfront development commenced in June 2005, that is, after commencement of Clause 57BC and later, Clause 74. The Contract for Sale was entered into in November 2006 after the commencement of building work.

13 It will be observed that by virtue of Subclause 66(2) a reference in a contract for sale to s.96 (2) or (2A) of the Act is to be taken to be a reference to s.96A and it was agreed that s.96 is not relevant to the building construction in question.

14 At the close of the hearing Mr Wells sought and was granted an opportunity to provide the Court with a written outline of the oral argument advanced and Mr Bruckner sought and was granted an opportunity to deal with the issue of late reliance on a further ground of rescission by the plaintiffs. Further submissions were received and this prompted a further set of submissions from the defendant and by subsequent agreement, from the plaintiff. The plaintiff’s submissions in reply were received on 29 January 2008.

15 The following issues emerge from the submissions:

(1) Was Payce exempt from the requirements of S.96A of the Act

16 It was agreed that s.96A of the Act was the section relevant to developers. The Contract of Sale was entered into on 1 November 2006. Subclause 74(2) applies because Payce (who it is agreed was a developer within the meaning of the Regulations) entered into a contract for the sale of land on which residential work relating to the construction of a multi-storey building as at that date “had been done” (and was “to be done”). Payce was therefore, by virtue of Subclause 74(2) (no point of distinction was drawn by the parties between Acts and Regulations), exempt from the requirements of s.96A of the Act and was therefore not required to provide a certificate of insurance: see s.96A (1); and the contract was not voidable for contravention of s.96A (1).

17 In taking this view, I accept the plaintiff’s submission that Subclause 74(4) cannot be relied on by Payce as it only applies if building work had commenced before the commencement of the Clause. This point is amplified by the unavailability of Clause 66 for the same reason: see Clause 66(1)(a). Mr Bruckner accepted that to come within 74(4) the Option Deed would have to be treated as the Contract for Sale of Land. Although he set out in his written submissions matters which might be pertinent to reaching a conclusion on that point, he did not contend that the Court should make such a finding. In my view it is clear that the Option Deed is not itself a contract of or for the sale of land. The plaintiffs were free not to exercise the option if they wished. Clause 3.1 of the Option Deed noted the parties’ agreement that if the Option was exercised, the parties “are regarded as having entered into the contract” but by 3.1(b) it was agreed that the date of the contract was the option notice service date, and the Contract for Sale is dated 1 November 2006. In any event, the plaintiffs pleaded that on or about 1 November 2006 they and Payce entered into a contract for sale of land and that pleading was admitted by Payce’s defence, so the Court is dealing with a claim based on a contract dated approximately 1 November 2006 and not a case based on the Option Deed.

18 Mr Wells in his submissions (see para 17 of plaintiff’s Outline of Submissions dated 29 November 2007) argued that Subclause 57BC(2) had no application in this case because it was clearly inconsistent with the terms of the Contract for Sale of Land on 1 November 2006. I deal below separately with the question of whether, even if the statute did not require a contract of insurance or a certificate of insurance, Payce was contractually bound to obtain or provide such but Subclause (2) operates to exempt Payce from any statutory obligation to do so.

(2) Requirement to Notify

19 It follows that in my view neither Subclause 57BC(4) and its successor, Subclause 74(4) can be relied on by Payce whether notification was given by it or not and whether or not Clause 66 had been complied with by it.

(3) Was Payce contractually bound to enter into a contract of insurance and/or to provide a certificate

20 Mr Bruckner and Mr Wells referred to principles of construction that the Court should have regard to in construing Special Condition 36 (both submissions proceed on the basis that the Contract for Sale was a commercial contract), although there was not precise agreement regarding these principles. I shall summarise the relevant principles extracted from pronouncements of the High Court as follows:

21 Special Condition 36 by its introductory words “the vendor discloses that”, appears on its face to itself provide no substantive rights but rather to alert the purchasers to their rights under the Act as qualified by the Regulations. It is true that in so doing the draftsperson has referred to s.96(1) (and may therefore not have met the requirements of s.66 of the Act) but that it is an attempt to obtain the benefit of Clause 66 of the Regulations is obvious.

22 To meet the requirements of Clause 66, the contract must not only disclose the matters in (b)(i) and (ii) but must require the developer (or any assignee) to provide a certificate of insurance as required by s.96A(1) of the Act to the purchaser within 14 days after the contract of insurance in respect of that work is made and must enable the purchaser to rescind if the certificate of insurance is not provided.

23 The difference in wording between (a) and (b) on the one hand and (c) supports the conclusion that by Special Condition 36(c) Payce was promising to provide a certificate of insurance in conformity with the requirements of the Act and Regulations within 14 days of the contract of insurance being entered into, and providing a contractual remedy to the purchaser of rescission should that certificate of insurance not be provided within 14 days of the contract of insurance having been entered into, rather than simply stating (or purporting to state) what was provided by statute. If Special Condition 36 did require Payce to obtain insurance and to provide a certificate then I agree with the plaintiff’s submission that Special Condition 36(c) should be construed as conferring a right of rescission where no contract has been entered into and not only when a certificate is not provided after a contract of insurance is entered into. The question is however, should Special Condition 36 be construed as imposing those obligations.

24 Clause (a), of Special Condition 36 is, as I have noted, a disclosure, or attempt at disclosure, of what is contained in the legislation. Clause (c) of Special Condition 36 standing alone does not specify when the contract of insurance must be entered into, or even, when read literally, that a contract of insurance must be entered into.

25 Absent the legislative changes which occurred, the entry into a contract of sale without a contract of insurance effected by the person doing the work for the developer, was an offence and itself rendered the contract voidable at the option of the purchaser: see s.96A(3). That might explain why the contract annexed to the Option Deed did not have to provide that a contract of insurance had to be entered into and induces doubt as to whether it can be said that there was imposed on the developer a contractual obligation to ensure that a contract of insurance had been entered into even prior to the legislative changes. The fact that s.96(1) imposed no obligation on the developer even before the introduction of Clause 57BC (and then Clause 74) is another difficulty. Further, if the contract of sale did require an insurance contract to be entered into on or prior to the commencement of the building work, it was required to have been effected by June 2005 and a copy of the Certificate would have had to have been available as at November 2006 since that was well after 14 days since the commencement of the building work.

26 The context within which Special Condition 36 sits, is as a part of a proposed contract originally annexed to an option deed prepared before the introduction of legislative changes in a form which attempted whether successfully or not to gain the benefit of a legislative exemption. The fact that a statute does not require something to be done is not determinative of whether or not the parties have agreed that it will be done, but the obviously close relationship between Special Condition 36 and Clause 66 and the intervening legislative changes, the fact that Clause 66 could not apply to the contract because, by the time contract had been entered into (as opposed to the date of the Option Deed), building work had commenced, and the fact that s.96(1) of the Act did not in any event apply because s.96A had been introduced to deal with developers (although well before even the Option Deed) are relevant matters in considering whether the literal words, which do not require a contract to be entered into by Payce and which require provision of a certificate of insurance only within 14 days of such a contract having been entered into, should be read as requiring something more. If the statute, as at the date of contracting, required something to be done it could well assist the argument that the contract should be read as imposing such an obligation. Here, we have the opposite situation; the legislation at the date of the Contract of Sale exempts Payce from the obligations that the plaintiffs assert are to be drawn from Special Condition 36. Looked at objectively in context and given the legislative framework, and the fact that work on the development had already commenced in June 2005 and with no contract or certificate of insurance appended to the Contract of Sale more than a year after the commencement of the building work, I do not think that it was intended by the parties that Payce was required to obtain a contract of insurance or provide the plaintiffs with a certificate of insurance. It follows that it is not appropriate, in my view, to read Special Condition 36 as imposing on Payce as at November 2006 an obligation to obtain an insurance policy or to provide a certificate of insurance.

(4) Was the rescission valid

26 It follows from the earlier conclusions that the purported rescission was not valid.

(5) Interest

27 This issue does not arise.

(6) Reliance on the absence of contract
28 The conclusion that I have reached is that the plaintiffs could not validly rescind by reason of the failure to obtain a contract of insurance or absence of a certificate of insurance. It is therefore not necessary for me to consider the further question of whether, given the terms of the letter purporting to rescind, the plaintiffs are able to rely on an automatic right of rescission due to the failure to obtain a contract of insurance as opposed to the failure to provide a certificate of insurance.

Conclusion
29 It follows that there should be verdict and judgment for Payce and the plaintiffs should pay Payce’s costs.

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Citations

Marguerite Pocknell v Payce Properties Pty Ltd [2008] NSWDC 5

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CITATION:	Marguerite Pocknell v Payce Properties Pty Ltd [2008] NSWDC 5
HEARING DATE(S):	22/11/07
JUDGMENT DATE:	7 February 2008
JUDGMENT OF:	Rein SC DCJ
DECISION:	Verdict and judgment for the defendant. Plaintiffs to pay defendant's costs.
CATCHWORDS:	Contract for Sale of Land, whether validly rescinded, based on failure of vendor/developer to provide a certificate of insurance and/or to enter into a contract of insurance. Whether Option Deed is a Contract for Sale of land - Principles of construction of a commercial contract
LEGISLATION CITED:	Home Building Act 1989; s.96(1), s.96A, s.92 Home Building Regulation 2004; Cl.66, Cl.74(2) Home Building Amendment (Insurance Exemptions) Regulation 2003; Cl 57BC, Cl.74
CASES CITED:	Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 Toll (FGCT) Pty Ltd (formerly Finemores GCT Pty Ltd) v Alphapharm Pty Ltd (2004) 219 CLR 165 Equuscorp Pty Ltd v HGT Investments Pty Ltd (2005) 218 CLR 47 Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2 McCann v Switzerland Insurance Australia Ltd. (2000) 176 ALR 711 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Waterways Authority of New South Wales v Coal & Allied (Operations) Pty Limited [2007] NSWCA 276 Fitzgerald v Masters (1956) CLR 420
PARTIES:	Marguerite Pocknell (First Plaintiff) Tracy Davidson (Second Plaintiff) Paul Lytwyn (Third Plaintiff) Payce Properties Pty Ltd (Defendant)
FILE NUMBER(S):	2868 of 2007
COUNSEL:	Mr S. Wells (Plaintiffs) Mr D. Bruckner (Defendants)