Mirvac (Docklands) Pty Ltd v La Rocca

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 4742 of 2004

MIRVAC (DOCKLANDS) PTY LTD	Plaintiff
v
JOSEPH PETER LA ROCCA	Defendant

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JUDGE:	HARGRAVE J
WHERE HELD:	Melbourne
DATES OF HEARING:	11, 12, 13, 14 October 2005
DATE OF JUDGMENT:	22 February 2006
CASE MAY BE CITED AS:	Mirvac (Docklands) Pty Ltd v La Rocca
MEDIUM NEUTRAL CITATION:	[2006] VSC 48

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Contracts – sale of apartment “off the plan” – whether contract of sale uncertain – alleged uncertainty in description of apartment and improvements – contract not uncertain.

Domestic Building Contract – whether sale of apartment “off the plan” was a “domestic building contract” – Domestic Building Contracts Act 1995 (Vic) s. 3(4) – contract of sale not a domestic building contract.

Trade Practices – misleading and deceptive conduct – alleged representations not established.

Equity – unconscionable conduct – whether purchaser of “off the plan” apartment under a special disability due to complexity of the contract – purchaser under no special disability – whether unconscionable conduct in contravention of s. 51AC of the Trade Practices Act 1974 (Cth) or s. 8A of the Fair Trading Act 1999 (Vic) – no unconscionable conduct by vendor – relevant principles discussed.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J Burnside QC with Mr P Chiappi	Arnold Bloch Leibler
For the Defendant	Mr J Bolton with Mr W Rimmer	Jerrard & Stuk

TABLE OF CONTENTS

Introduction

Parties and Witnesses

Facts

(1)     The Selling Process
(2)     The Release Day
(3)     The 16th Floor Representation
(4)     Other Representations
(5)     The Contract of Sale
(10)    The Building Contract
(11)    Satisfaction of Conditions Precedent
(12)    The Defendant Defaults

Uncertainty

Domestic Building Contract

Unconscionable Conduct

(1)     Applicable Law
(2)     Was the Defendant under a Special Disability?
(3)     Was the contract of sale fair, just and reasonable?
(4)     Statutory Unconscionable Conduct

Conclusion

HIS HONOUR:

Introduction

The plaintiff is a member of the Mirvac Group of companies. The Mirvac Group is in the business of large‑scale property development. One such development is the “Yarra’s Edge” development in the Docklands precinct in Melbourne (“the development”).

The development involves the construction of a number of buildings by another company in the Mirvac Group, Mirvac Constructions (Vic) Pty Ltd (“the Builder”). The architect for the development is another Mirvac company, HPA Pty Ltd (“the architect”). Another company in the Mirvac Group, Mirvac Real Estate Pty Ltd (“Mirvac Real Estate”), was responsible for marketing apartments in the development.

The development involves a number of stages. At present, four buildings have been constructed. This dispute involves an apartment in the second building (“the Building”). The Building comprises a low rise podium structure and two towers. One tower is referred to as the “West Tower”, or “Tower 3”. The other is referred to as the “East Tower”, or “Tower 2”. The apartment at issue is Apartment 1201 on the 12^th floor of the West Tower, or Tower 3, together with the appurtenant carparks and a storage area (“the Apartment”).

In May 2000, the Building was yet to be constructed. It was the subject of stage 5 of unregistered Plan of Subdivision PS428541D (“the Plan of Subdivision”). The Apartment was to be Lot 352 in the Plan of Subdivision.

Prior to commencing construction of the Building, the plaintiff commenced a process of selling apartments in the Building “off the plan”.

On 26 May 2000, the plaintiff and the defendant signed a contract of sale under which the plaintiff agreed to sell the Apartment, when constructed, to the defendant for the sum of $960,000 (“the contract of sale”). A deposit of $96,000 was payable under the contract of sale. The defendant did not pay the deposit in cash. Instead, he elected to provide a bank guarantee in the amount of $96,000 in favour of the plaintiff (“the bank guarantee”).

The contract of sale provides that completion is to occur, and the balance of the purchase price is to be paid, on the later of five business days from:

(1) the day on which the Plan of Subdivision is registered; and
(2) the date the architect certifies as being the date the Apartment was completed.

On 27 January 2004, the architect certified that the Apartment was completed. On 29 January 2004, the Plan of Subdivision was registered. Accordingly, completion of the contract of sale was due on 6 February 2004. Completion did not take place on that day, and has not occurred since.

In April 2004, the plaintiff commenced this proceeding against the defendant seeking specific performance of the contract of sale. Since that time, both parties have purported to rescind the contract of sale and there is no doubt that it has been terminated. Accordingly, the plaintiff’s claim in the proceeding is now limited to a claim for payment of the deposit of $96,000 together with interest, and interest on the balance of the sale price from the date for settlement until termination of the contract of sale. There was no evidence or explanation given as to why the plaintiff did not resort to the bank guarantee in order to obtain payment of the deposit from the defendant.

In its amended statement of claim, the plaintiff also sought damages for loss of bargain, comprising the difference between the purchase price of the Apartment and any price obtained by the plaintiff on a resale of the Apartment, body corporate fees paid by the plaintiff in respect of the Apartment from the date completion of the contract of sale was due and sales, marketing and legal costs incurred on a resale of the Apartment. These claims were abandoned at trial. The plaintiff has not resold the Apartment and did not pursue a claim based on the difference between the purchase price of $960,000 and the current value of the Apartment.

The defendant raises a number of defences to the claims against him by the plaintiff, and also counterclaims against the plaintiff for declarations and the return of the bank guarantee. In summary, the defendant alleges the following by way of defence and counterclaim:

(1) The contract of sale is uncertain and void ab initio.
(2)The contract of sale is a “domestic building contract” within the meaning of the Domestic Building Contracts Act 1995 (Vic) (“the Act”). Accordingly, the maximum deposit which the plaintiff was entitled to demand or receive under the contract of sale is five per cent of the contract price.[1] As the deposit payable under the contract of sale is ten per cent, the defendant was entitled to avoid the contract of sale before it was completed by him.[2] The defendant says that he has avoided the contract of sale on this ground.
(3)The defendant was induced to sign the contract of sale by misrepresentations made by the plaintiff, as a result of which the contract of sale should be declared void ab initio under the provisions of the Trade Practices Act 1974 (Cth) (“Trade Practices Act”) or the Fair Trading Act 1999 (Vic) (“Fair Trading Act”).
(4)The defendant is entitled to avoid the contract because it was procured by unconscionable conduct. In this regard, reliance is placed upon the general law and upon the provisions of Part IVA of the Trade Practices Act and corresponding provisions of the Fair Trading Act.

[1]Section 11(1)(a) of the Act.

[2]Section 11(3) of the Act.

The defendant claims declarations to give effect to the above allegations, the return of the bank guarantee and damages comprising the cost of the bank guarantee and conveyancing costs incurred by him in connection with the contract of sale.

Parties and Witnesses

As I have said, the plaintiff is a member of the Mirvac Group of companies, which engages in the business of large-scale property development in Australia and New Zealand. There was evidence before me, by way of Mirvac promotional material, that the plaintiff’s parent company is listed on the Australian Stock Exchange and is one of the largest property developers in Australia. This promotional material describes a number of very large property developments, including hotels, which the Mirvac Group has conceived, designed, constructed and marketed in Victoria, New South Wales, Queensland and Auckland.

A number of employees of the Mirvac Group, past and present, gave evidence before me.

Graeme Katz has worked for the Mirvac Group since 1999 in various management positions. He presently holds a senior management position in the Mirvac Group and has responsibility for a broad range of matters across the various companies within the Mirvac Group. He reports directly to the managing director of the Mirvac Group.

One of Mr Katz’ tasks from early 2004 has been to oversee settlements of sales by the plaintiff to purchasers of apartments in the development. In this capacity, following the failure of the defendant to complete the contract of sale when settlement was due in early 2004, Mr Katz had a number of relevant conversations with the defendant.

Lia Thomas assisted Mr Katz in overseeing the settlements of sales of apartments in the development. Ms Thomas, as a customer relations manager in the Mirvac Group, had a number of dealings with purchasers in this regard, including the defendant. Ms Thomas does not recall anything of significance about her dealings with the defendant. However, she did keep a written report, which was updated regularly, of her dealings with purchasers. This written report included file notes of relevant conversations with purchasers and also with other Mirvac Group employees. The relevant extracts from Ms Thomas’ “Outstanding Settlement Report” relating to the defendant were tendered in evidence, as were copies of a number of handwritten file notes made by Ms Thomas in the course of her duties.

Margaret McBride has been a sales representative in the real estate industry since about 1998. Between 1999 and early 2002, Ms McBride was a sales representative employed by the Mirvac Group and was involved in selling apartments in the development. In about early 2002, Ms McBride left her employment with the Mirvac Group and commenced employment with another property developer for a period of approximately 18 months. She then returned to work for the Mirvac Group, where she still works.

Ms McBride was the Mirvac sales representative who dealt with the defendant on 26 May 2000 and obtained his signature to the contract of sale. Ms McBride gave evidence as to the methods adopted by the plaintiff in selling apartments in the development. The defendant alleges that it was Ms McBride who made oral misrepresentations to him on the day that he signed the contract of sale. Ms McBride candidly admitted that she had no recollection of ever meeting the defendant or speaking with him. This is because Ms McBride sold approximately 100 apartments in the development prior to her leaving the Mirvac Group to work for another property developer in early 2002. In addition to dealing with these 100 or so purchasers, Ms McBride had contact with many other people who were interested in purchasing apartments in the development and, at the time, was also involved as a sales representative in respect of other Mirvac developments in Melbourne. However, as will appear, Ms McBride gave evidence as to her general practices as a sales representative and as to her knowledge of the development. Based on this evidence, Ms McBride denied making any of the representations which the defendant alleges were made by her to him.

Toben Long is the “development director” employed by the Mirvac Group for the development. Prior to commencing employment with the Mirvac Group about eight years ago, he was a practising architect for about six years. Mr Long gave evidence as to the present state of the Yarra’s Edge development, structural aspects of the complex contractual arrangements relating to the development and concerning the bodies corporate in which a purchaser of the Apartment will gain an interest on settlement. Mr Long also gave some opinion evidence as to the purposes of certain clauses in the contract of sale. This evidence as to subjective purpose may be relevant on the question of the claims by the defendant that the plaintiff engaged in unconscionable conduct by including these terms in the contract of sale.

The defendant is presently 61 years old. At the time of the contract of sale he was 56 years old. He left school when he was 14 and commenced an apprenticeship which he did not complete. He worked in unspecified employment until he was 21 years old. At that time, he commenced in business on his own account as a fruiterer and, subsequently, the proprietor of a mixed business. He was then employed in the bread baking industry for about five years. Since that time, when he was about 34, the defendant has been a contract cleaner operating his own businesses.

The defendant acknowledged that he had, by the time of the contract of sale, acquired a good deal of business acumen and understood commercial dealings. He had purchased a number of commercial properties. He was involved, from time to time, in tendering for large scale cleaning contracts and, for this purpose, he controlled the Salem Group of companies. There were three operating companies, Salem Cleaning Service, Salem Refrigeration Transport and Salem Trolleys. In 2002, the defendant oversaw a corporate restructure of the Salem Group of companies for “commercial strategic reasons” connected with a re-tendering process for some contracts previously held by the Salem Group. The defendant believed that this commercial strategy would assist him in retaining existing contracts. He said that he achieved some success through this strategy.

The defendant learned of the development from a friend of his in the cleaning industry, Rod Newman. Mr Newman had purchased an apartment in the first building in the development, known as “Tower 1”. As a purchaser in Tower 1, Mr Newman had been invited, as a “priority customer”, to register his interest in purchasing an apartment in Tower 3 and to attend a “release day” where he would have the opportunity of purchasing an apartment in Tower 3 before those apartments were made available for sale to the general public. In order to register and attend the release day for Tower 3, Mr Newman paid $10,000 as a registration fee to Mirvac. Prior to the release day, Mr Newman was sent a letter enclosing a copy of a draft contract of sale for apartments in Tower 3.

The defendant had a number of discussions with Mr Newman about the development. The defendant frankly acknowledged that Mr Newman was very enthusiastic about the development and this caused the defendant to become enthusiastic about purchasing an apartment in the development. As a result, the defendant attended with Mr Newman at the plaintiff’s display suite on the release day. It appears that an appointment time had been specified for Mr Newman to have an opportunity to purchase an apartment on that day. In fact, the defendant availed himself of this opportunity and met with Ms McBride at the appointed time. As a result, the defendant signed the contract of sale. I will explain these events in more detail later in this judgment.

Mr Newman was not called as a witness.

The defendant also called some expert evidence relevant to the issues of uncertainty, market value of the apartment and rental value of the apartment. In each case, the expert reports were admitted by consent without any cross-examination.

Two expert reports of John Sly, a certified practising valuer, were admitted into evidence. The first report gave an opinion as to the market value of the Apartment as at May 2000 and as to the rental value of the Apartment, following completion, as at February 2004. By consent, this report was admitted into evidence on the basis that the only opinion in evidence was as to the rental value of the Apartment as at February 2004. The report is otherwise in evidence, including as to its description of the completed Apartment.

The second report of Mr Sly gives a market value of the apartment as at 25 June 2004 in the sum of $825,000.

Two expert reports prepared by Stuart McFarland, a licensed surveyor, were admitted into evidence. Mr McFarland’s evidence concerned the ability to identify with precision, from the contract of sale and documents incorporated or referred to in it, where the apartment will be located once constructed. That is, where in the sky would the apartment be located both horizontally and vertically by reference to certain datum points.

Two expert reports of Peter Gray, a registered architect, were also admitted into evidence. In effect, Mr Gray said that the apartment could not be constructed from the building plans and specifications referred to in the contract of sale because those plans and specifications were, at best, “design development” drawings which are less developed than “for construction” drawings. Accordingly, no architect acting reasonably could certify, based on the plans and specifications referred to in the contract of sale, that the apartment had been completed in accordance with the contract of sale.

Facts
(1) The Selling Process

As I have said, before finalising the building plans and specifications and entering into a building contract with Mirvac Constructions for the construction of the Building, the plaintiff commenced a process of selling apartments in the Building “off the plan”. This involved the sale of apartments in each of Tower 2 and Tower 3.

The selling process involved the following core elements. First, there was a display suite at the development which was staffed by sales representatives such as Ms McBride. As I have said, Ms McBride did not work solely at the Yarra’s Edge display suite, but also worked from time to time at display suites for other Mirvac projects in Melbourne.

At the Yarra’s Edge display suite, there was a display of the development, including models of Towers 1, 2, 3, 4 and 5. There were also photographs, artwork and individual floor plans of the apartments on display. Prior to the release of apartments in Tower 3 for sale, a detailed model was available to show the position of each apartment in the Tower.

The display suite also contained sample colour schemes for items such as carpets and kitchen surfaces. Purchasers had an option in respect of a number of different colour schemes.

People attended at the display suite as a result of a number of factors. These included direct mail-outs to customers in the Mirvac data base and other persons attending as a result of on-site signage and advertisements in the print and electronic media.

Second, the plaintiff operated a system whereby the apartments in each tower were offered for sale to a select group of “priority customers” before they were made available for sale to the general public. The first day that apartments were made available for sale to priority customers was known as the “release day”.

In order to attend on the release day, a priority customer was required to register interest by completing a registration form and paying a $10,000 registration fee. This guaranteed an opportunity to purchase an apartment before apartments were made available to the general public. Each registrant was assigned to a particular sales agent who was their contact up to the time of purchase. The registration fee was refundable if the registrant did not proceed with the purchase of an apartment.

Ms McBride was the sales representative who was assigned to Mr Newman. As I have said, Mr Newman had already purchased an apartment in Tower 1. It appears that Mr Newman paid the $10,000 registration fee in respect of the Building and became a priority customer. As a result, Mr Newman was given an appointment with Ms McBride on the release day.

Ms McBride said that priority customers would occasionally allow other people to attend in their place at the time of such appointments. If so, she would deal with such people as if they were the priority customer with the appointment. Appointments were typically for a half hour period. At that time, it was up to the priority customer, or other person nominated, to decide whether or not to purchase a specific apartment and, if so, to sign a contract of sale.

Approximately one week prior to the release day, it was the practice of Mirvac Real Estate to send priority customers who had made an appointment on the release day a letter enclosing a draft of the contract of sale. The draft contract comprised 321 pages. I was not directed to any material difference between the draft contract sent out to priority customers, including Mr Newman, and the contract of sale signed by the defendant.

As I have said, Mr Newman had shown sufficient interest to make an appointment for the release day. Accordingly, by letter dated 22 May 2000, Mr Newman was sent a copy of the draft contract (the “22 May letter”). The 22 May letter was signed by Ms McBride. It states as follows:

“Dear Rod,
As you are aware, you are a priority customer who will be given the opportunity to acquire an apartment before the next public release of Melbourne’s most exciting Riverfront development ‘Yarra’s Edge’.
I have confirmed your appointment to meet at the Yarra’s Edge Information Centre with the plans, information and the opportunity to select your apartment.
Should you decide to purchase you will be required to sign the Contract of Sale to secure your selection. The Contract of Sale is an important document and once signed it will create obligations on both you and Mirvac (Docklands) Pty Ltd.
You will not have an opportunity to consider and seek advice about the Contract of Sale once you have made your selection. Therefore, it is important that any queries you might have are resolved prior to attending your appointment. You should read the enclosed copy thoroughly and seek independent legal and financial advice.
Please do not hesitate to call me if you have any queries regarding the purchase procedure or any of the enclosed material including the Contract of Sale.
Thank you for your interest and I look forward to meeting with you.
Yours sincerely
MARGARGET McBRIDE
Consultant” (Emphasis added.)

There were in fact three release days for the Building. The reasons for this are not relevant. Mr Newman’s appointment was on the second of the three release days, 26 May 2000.

Prior to this release day, the defendant and Mr Newman spoke about the development and, in particular, the possibility of the defendant buying an apartment in the Building. As a result of these discussions, the defendant became interested in purchasing an apartment. The extent of the interest of the defendant prior to attending on the release day is apparent from the following exchange in cross-examination of the defendant:

“Well now, how long before going along on the 26 May did you speak to Mr Newman about this third tower?--- How long before?
Yes. Days, weeks?--- I don’t remember.
Had you heard about the … Docklands development before you went along on 26 May?--- With Mr Newman.
Yes. And you had heard about it from him?--- Yes.
And did you spend much time talking to him about it? …
…--- Oh, yes. It would probably be a few times, yes.
A few times over the course of what, a few days, or a few weeks, something like that?--- From when he bought his. I don’t recall weeks, days or what; but, yes, we had spoken maybe a few times prior to going in.
And he was really enthusiastic about it, wasn’t he?--- Yes.
And he sort of fired you up to be enthusiastic about it too?--- I don’t know about firing me up; but he had me sort of, you know, interested, yes.
...Did he tell you his opinion of what he thought the market would do to properties like this? Did he express that view to you?--- Oh, he might have made a comment. Yes. ‘It looks like a good deal’ or something to that extent …
Yes. Did he give you the impression that if you bought an apartment like this, you would increase your money?--- Oh, probably, yes.
Yes?--- He would have said it was a good deal.
Yes. Did you tell him that you were interested in getting one, as an investment?--- Yes. Yes.
Yes. And in that context, did he tell you something to the effect that you would do really well out of it. You would increase your money, double your money, something like that?--- Oh, in the course of the conversation he may have. Yes.
Yes. So when you went along you had the idea that if you bought this you could double your money?--- Yes. I had his letter and I was on top of the world.”

The reference to the defendant having had “his letter” was an obvious reference to the 22 May letter to Mr Newman.

It was put to the defendant in cross-examination that, in addition to having the 22 May letter in his possession prior to attending the release day on 26 May 2000, he also had in his possession a copy of the draft contract of sale which was enclosed with that letter. The defendant steadfastly denied this. I reject this evidence of the defendant. I find that, prior to the defendant attending the release day on 26 May 2000, Mr Newman gave him both the 22 May letter and the enclosed draft contract. The draft contract appeared on the defendant’s file and he discovered it. In cross-examination the defendant agreed that there would be no point in Mr Newman giving him a copy of the draft contract after he had signed the contract of sale and been provided with a copy of it. In my view, it is more probable than not that the defendant received the draft contract from Mr Newman before he signed the contract of sale but he did not take the trouble to read it. He had been convinced by Mr Newman that an investment in the Building would be a good one. In the defendant’s own words, he was not concerned about the terms of the contract of sale, “Only the dollar signs”.

I find that, based on his conversations with Mr Newman and his belief that the 22 May letter would give him a priority over the general public in obtaining an apartment, the defendant attended at the plaintiff’s display suite on the release day with the intention of buying an apartment.

(2) The Release Day

On the release day, the defendant and Mr Newman attended at the plaintiff’s display suite some time after 10.00 am. I infer that this was about the time of Mr Newman’s appointment with Ms McBride. The actual time of the appointment was not in evidence.

In his witness statement, the defendant described his observations upon attending at the display suite in the following terms:

“I walked into the display centre some time after 10 in the morning. I saw a model of the development which showed five buildings and a few trees. There was a marina as well. There were about 20 people in the room.
...
I noticed that there were people queuing up to sign contracts and thought this was rather like the express lane in one of the Coles supermarkets that I clean. The place was so busy. It looked to me as if they were all waiting to sign contracts. I thought I would miss out if I did not sign up quickly.”

The defendant gave oral evidence as to the conversations which he had with Ms McBride at the display suite prior to him signing the contract of sale. He gave the following evidence-in-chief:

“Did you then speak to somebody?--- I did.
Who was that?--- Margaret McBride.
Yes. And can you recount the conversations you had with her, to the best of your ability?--- I was interested in buying a unit.
Yes. Did you say anything to her about what you thought about the apartments?--- Yes. I said they looked great.
Yes. Did she respond to that?--- Yes. ‘It looks good and they are selling very well.’
Yes. Did you say anything about – did you then have any other conversation with her about the – I won’t lead it as a subject? Did you have any further conversation with her about the apartments, at that point?--- Yes. I did. I said I wanted to purchase one.”

The defendant then gave unsatisfactory and confusing evidence about a series of representations which he says were made to him by Ms McBride prior to him signing the contract of sale. Before dealing with the evidence as to the alleged representations, it is convenient to say something about the general demeanour and credibility of the defendant and Ms McBride as witnesses.

The defendant was a most unsatisfactory witness. He is not unintelligent and clearly has a reasonable degree of business acumen. From my observation of him, he well understood the factual issues about which he was giving evidence. Notwithstanding these matters, the defendant gave inconsistent evidence on important issues, was evasive when challenged with these inconsistencies, was argumentative and prone to speculation and reconstruction. At times, he gave definite evidence that things did not happen when it was clear he had no recollection at all about the subject matter of the questioning. As appears hereafter, he admitted misleading Mr Katz in conversations with him. On occasions, his instructions to his lawyers were plainly false, and he could not justify them upon cross-examination. Finally, as will appear, I am satisfied that the defendant set out to mislead the Court as to the extent of his knowledge of a letter to the plaintiff which was signed by him, but which he says was written by his wife, as to the circumstances of him signing that letter and as to the reason why his wife did not give evidence at the trial.

As to Ms McBride, she was in general a convincing witness who acknowledged that she had no recollection whatsoever of her conversations with the defendant. As will appear, I am of the view that the reasons which she gives for denying that she said the words attributed to her by the defendant are cogent ones.

I was at first troubled by the evidence of Ms McBride that, at the release day, she said absolutely nothing “by way of pushing the sales along” or “to enhance the selling”. It seemed to me that it is not in accord with common experience for a sales representative to simply say to a potential purchaser “take it or leave it” without making some attempt to describe the virtues of the subject property and to persuade the purchaser to proceed with a purchase.

However, the defendant himself said his initial statements to Ms McBride were that he was “interested in buying a unit” and “wanted to purchase one”. Furthermore, the evidence of both Ms McBride and the defendant as to the high level of demand at the time for apartments in the development has caused me to accept Ms McBride’s evidence in this regard. It may be that Mirvac’s selling methodology, as described above, had the effect of creating pressure on priority customers to purchase during their allotted half hour appointment time on the release day, but this only serves to confirm Ms McBride’s evidence that there was no need for her to “sell” the apartments on that day by making representations as to their attributes. As she said, and I accept, priority customers had usually done their homework and there had been many discussions before the release day with priority customers. During these discussions, I have no doubt that there were representations made by Ms McBride as to the attributes of the apartments. However, it seems that there was no opportunity for this kind of “selling” on the release day. There was much to be done within the half hour timeframe, including ascertaining whether the apartment selected by the purchaser was still available, obtaining the contracts from the administration room in the display suite and then having a number of copies of the contract of sale signed by the purchaser and on behalf of Mirvac.

(3) The 16^th Floor Representation

The defendant relies upon a number of representations. In the first place, the defendant claimed that he believed he was purchasing an apartment on the 16^th floor of Tower 3, and that this belief was induced by a representation made by Ms McBride.

The defendant’s explanation as to how it was that he came to understand that the apartment he was purchasing was on the 16^th floor was unconvincing. First, he said that he nominated the 16^th floor before he and Ms McBride went over to the models. Later, he said that he nominated the 16^th floor when he and Ms McBride were at the models. When asked about the conversation with Ms McBride on the topic of the 16^th floor, the defendant said:

“Well, as I understood it, that put me half way up the building, which is the 16^th floor, and I can’t remember if she told me that there was X amount of floors, but I said ‘The 16^th floor seems to be half way up the building.’
Yes. And did you have a discussion on the price? --- Yes. She said to me –-- I said ‘How are these placed?’, sort of thing, and she said ‘They start off at $900,000 on the 10^th floor and they go up by $10,000 a floor.’
Yes? --- So I said ‘The 16^th floor would be $960,000?’ She said ‘Yes.’”

In fact, the documentary evidence discloses that the price of the apartment on the 10^th floor was not $900,000 but $940,000. There was no four bedroom apartment in Tower 3 with a purchase price of $900,000. The lowest priced four bedroom apartment in Tower 3 was apartment 6.01 which was for sale at $910,000. In my view, the lack of consistency between the defendant’s recollection as to the pricing structure of the four bedroom apartments tells against the probabilities of his evidence concerning his belief that he had bought an apartment on the 16^th floor. The objective evidence discloses only that there were $10,000 increments in price between levels 7 and 25 of Tower 3. Given that Ms McBride had a price list with her at all times on the release day, I am satisfied that she would not have told the defendant anything other than there were $10,000 increments between the four bedroom apartments from the 7^th floor upwards.

There are other reasons for rejecting the defendant’s evidence in this regard. In the first place, there are a number of documents which were signed by the defendant at the time that he signed the contract of sale, each of which indicates that he was buying apartment “12.01” on the 12^th floor of the Building. The contract of sale itself has hand-written on the front of it:

“CONTRACT FOR THE SALE OF REAL ESTATE
PROPERTY LOT 352 ~~256~~ (12.01) WEST TOWER BUILDING 2,
YARRA’S EDGE MELBOURNE DOCKLANDS” (Italicised portion in hand-writing.)

It is apparent that a mistake was made in completing the lot number in hand-writing when the hand-written portion was first completed. Lot 256 in the Plan of Subdivision is, in fact, the lot number for apartment 12.01 in the East Tower, or Tower 2. Although neither Ms McBride nor the defendant could recall, it appears that there may have been some confusion as to the tower in which the defendant was purchasing an apartment. However, the clear reference to “(12.01)” after the reference to the amended lot number is, in my view, an obvious reference to the apartment number.

Further, at the time of signing the contract of sale, the defendant also signed two single sheets which must have been the subject of discussion between him and Ms McBride. In the first sheet, the defendant registered his interest in a berth at the marina which it was intended to construct at Yarra’s Edge. The document contains, in hand-writing, details of the defendant’s name, address and contact details. Immediately below these details, it is stated:

“Apartment: ____ 12.01 ____
West Tower, Lorimer Street,
Melbourne Docklands Vic 3008” (Italicised portion in hand-writing.)

and immediately underneath this reference to Apartment 12.01, the defendant has signed the document. In his witness statement, the defendant said that he noted, at the time he signed the document, that the number of the Apartment which Ms McBride completed was 12.01.

Next, at the time of signing the contract of sale, the defendant also signed a “Customer Option Schedule” in respect of the apartment he was purchasing, in which he nominated his selections as to colour scheme, carpet selection, floor covering and other options in respect of the Apartment. The Apartment is described in this single sheet as:

“APARTMENT NO: 12.01 l352” (Italicised portion in hand-writing.)

The defendant signed this document at its foot under the heading “Customer Confirmation”.

In my view, the fact that the contract of sale referred to “12.01” after the reference to the lot number on its front sheet, combined with the fact that the defendant signed the two single page documents referred to above, each of which referred to the apartment being purchased as “Apartment 12.01” provides strong evidence that the defendant well understood that he was purchasing an apartment on the 12^th floor of Tower 3.

I reject the explanation of the defendant that the references to “Apartment 12.01” did not indicate to him that he was purchasing an apartment on the 12^th floor. The defendant is, notwithstanding his lack of formal education, no fool. As I have said, he has considerable experience in business. Further, he has owned a number of properties over the years, either directly or indirectly through his companies. If the defendant thought he was purchasing an apartment on the 16^th floor, it is unlikely that he would have asked no questions about the fact that the Apartment was described in the documents which he signed as Apartment 12.01. It must have been obvious to the defendant that the apartment was on the 12^th floor and not on the 16^th floor.

In paragraph 30 of his witness statement, the defendant stated:

“30.By letter by Ponte Earle Harrick dated 26 March 2004, I received a copy of a default notice that had been given by the vendor to them. About this time I realised that, despite me paying $960,000 I was in fact being sold an apartment on the 12^th floor and not on the 16^th floor, as I had been told that as I was buying by Margaret McBride.”

The clear impression conveyed by paragraph 30 of the defendant’s witness statement was that the letter dated 26 March 2004 from his solicitors and the enclosed default notice caused him to realise that he had agreed to purchase an apartment on the 12^th floor. It appears that the defendant compared the heading of the letter from his solicitors, which mistakenly referred to his purchase of “Apartment 16.02”[3] with the enclosed notice of default from the plaintiff’s solicitors, which referred to the Apartment as “Lot 352 (12.01)” in respect of both the “Land Description” and the “Property Address”. In my view, this indicates that the defendant well understood the significance of the apartment which he had purchased commencing with the description “12” as indicating that it was on the 12^th floor. When the defendant was pressed in cross-examination about paragraph 30 of his witness statement, and it was put to him that it sought to imply a realisation on his part that the Apartment was on the 12^th floor, the defendant was evasive and gave most unsatisfactory evidence. In the end, he resorted to saying that he could not remember when or how he first realised that the Apartment was on the 12^th floor. I reject this evidence.
[3]This mistake also appears in earlier correspondence from the defendant’s solicitors to the defendant. For example, the letter of 14 January 2004.

I find that the defendant well understood that he was purchasing an apartment on the 12^th floor at all relevant times. I note that the defendant had been in receipt of earlier correspondence which correctly described the apartment as Apartment 12.01. Before the mistake crept into the heading on the correspondence to the defendant from his solicitors, his solicitors correctly described the apartment in correspondence to the defendant as “Lot 352 Apartment 12.01”.[4]
[4]See the letter of 31 May 2000 from the defendant’s solicitors.

Further, in all of the correspondence from the Mirvac Group to the defendant in connection with the contract of sale, the Apartment was consistently described as “Lot 352, Apartment W12.01”.[5] Of particular note is the letter from Mirvac Group dated 7 August 2001. In that letter, the defendant was notified of a variation to the building plans and specification for structural reasons. A copy of the floor plan showing the variation was attached. That copy floor plan states that it relates to apartments in the West Tower designated “Apartment 01” on levels 8, 12 and 14. There is no reference to level 16. Given that the defendant was being given notice of a variation to the Apartment, I find that he must have read this letter and considered the variation described in the attached copy floor plan.
[5]See the letters from Mirvac Group to the defendant dated 7 August 2001, 5 December 2001, and 1 October 2003.

Finally, on the question of the 16^th floor representation, I have relied upon the general demeanour and credibility of the defendant and Ms McBride as witnesses in determining to reject the evidence of the defendant that he was mislead by Ms McBride in this regard. In have already made some general comments as to the credibility of each of them as witnesses. I will make further comment in connection with other relevant events. As will become apparent, there are other aspects of the evidence of the defendant which I reject. This affects his credibility generally.

On the other hand, Ms McBride had no reason to make a misrepresentation to the defendant concerning the level upon which he was purchasing. Ms McBride received the same commission in respect of any sale of any apartment in the Building. It was a matter of complete indifference to her whether the defendant purchased Apartment 12.01 or 16.01.

(4) Other Representations

The defendant relied upon a number of further alleged representations which he said were made to him by Ms McBride (“the other representations”). The other representations relied upon are to the effect that:

(1)the Apartment would appreciate in value to the extent that it would double in value in five years from the date of sale;
(2)when the Apartment was ready for occupation, the defendant would have no difficulty in obtaining a tenant at a rent of approximately $2,000 per week;
(3)the Apartment would have uninterrupted views of Port Phillip Bay and the city of Melbourne;
(4)upon completion of the Apartment, the Building would contain a medical centre, medical services, a supermarket, restaurants, convenience stores and child minding services.

As to the other representations alleged by the defendant, a number of general observations can be made. First, as I have said, I found Ms McBride to be a convincing witness and the defendant to be an unreliable witness. Secondly, the other representations relied upon are all of a “selling” character. As I have said, I accept the evidence of Ms McBride that she did absolutely nothing on the release day “by way of pushing the sales along” or “to enhance the selling”. Thirdly, the defendant had already determined that he wished to purchase an apartment, before he attended on the release day. Mr Newman had satisfied him that an investment in an apartment in the Yarra’s Edge development would be a good one and, because the defendant had Mr Newman’s letter entitling him to attend the release day as a priority customer, the defendant said he was “on top of the world”. Fourthly, the manner in which the defendant gave his evidence concerning the alleged representations was wholly unimpressive. The defendant was unable to recall Ms McBride saying anything on the subject of the other representations without being prompted by his counsel in the form of leading questions. Even when prompted, the evidence given by the defendant as to the other representations was perfunctory and gave the impression, at best, of general conversation with Ms McBride after he had already determined to purchase the apartment. Indeed, the defendant volunteered during his evidence concerning the other representations:

“I had already had a conversation with another owner which, he was – he had already bought one, and he said ‘this is good, a good investment for the future’.”

This was an obvious reference to the defendant’s conversations with Mr Newman prior to attending on the release day. Fifthly, although the defendant made mention of the 16^th floor representation in his conversations with Mr Katz, at no time during his conversations with Mr Katz did the defendant make any reference to the other representations. Nor were any representations, including the 16^th floor representation, referred to in the letter signed by the defendant in April 2004, to which I refer to later in these Reasons.

I find that none of the other representations relied upon by the defendant were made to him by Ms McBride. To the extent that there may have been some discussion concerning issues relevant to the alleged representations, I find that such discussion was of a general character and did not induce the defendant to purchase the apartment. In this regard, I note that the defendant did not give any evidence that he relied upon any of the other representations in making his decision to purchase the Apartment. As I have found, the defendant had already determined to purchase an apartment prior to attending on the release day.

(5) The Contract of Sale

The contract of sale comprises a cover sheet and 300 pages of contractual terms and annexures. Further, the contract of sale incorporates certain building plans by reference.

The particulars of sale in the contract of sale described the subject matter of the bargain in the following terms:

“LAND       Lot 352 on Stage 5 of unregistered plan of subdivision no. PS428514D being part of the land described in certificate of title volume 10269 folio 533.
PROPERTY       the Land together with all improvements known or to be known as
ADDRESS     Lot 352, West Tower, Building 2, Yarra’s Edge, 70 Lorimer Street, Melbourne, Docklands.”

The purchase price is stated to be $960,000 with a deposit of $96,000. The balance of the purchase monies are stated in the particulars of sale to be due on the later of five business days from the day on which the Plan of Subdivision is registered and the date the architect certifies as being the date the Apartment was completed.

For the purposes of special condition 8 of the contract of sale, the particulars of sale specify that the “Land Component” is agreed to be $77,822 and the “Construction Component” is agreed to be $882,178.

The schedule to the particulars of sale notes a number of encumbrances over the Apartment including:

(1)The access rights referred to in special condition 18. These access rights provide that the plaintiff and Mirvac Constructions may have continuing access to the Apartment, the Building and the common property of the Plan of Subdivision (“the common property”) for specified purposes after settlement of the contract of sale.
(2)The proposed Body Corporate rules governing the owners of apartments in the Building, together with other agreements and licenses specified in special condition 19.

There are many special conditions in the contract of sale. In order to understand them, it is necessary to refer to a number of the key definitions which are used throughout the special conditions. I have already referred to a number of these by the capitalised definitions contained in this judgment.

Special condition 27.1 defines many terms for the purposes of the contract of sale. I will refer to those which are of significance to the issues which I must decide:

(1)“Apartment” is defined as “the apartment generally described in the Building Plans and Specifications and identified by the address set out in the Particulars of Sale”. I have set out the relevant portion of the particulars of sale above. In my view, the description of the address of the apartment by reference to its lot number in the Plan of Subdivision indicates that references to the Apartment in the special conditions include a reference to the associated storage and car parking areas designated on the Plan of Subdivision as forming part of Lot 352.
(2)“Builder” is defined as Mirvac Constructions.
(3)“Building” means:
“... the 20 (East Tower) and 31 (West Tower) level building (inclusive of five carpark levels) comprising 281 apartments (154 East Tower and podium and 127 West Tower) to be constructed on the land in the Plan of Subdivision as generally described in the Building Plans and Specifications.”
(4)“Building Plans and Specifications” means:
“... the building plans and indicative specifications included in annexure ‘A’ to this contract to which the Building will be required to build the Apartment and the Building, as varied from time to time under special condition 6.3.”
(5)“Plan of Subdivision” means:
“... Stage 5 of unregistered plan of subdivision no. PS428541D a copy of which is included in the Vendor’s statement and includes any amendments or alterations made to the plan, any Restriction noted on the plan, the rules of the Body Corporate and the schedules of lot entitlement and liability.”

(6) “Precinct” means:
“... the Yarra Waters Precinct at Melbourne Docklands (being all of the land in certificate of title volume 10269 folio 533) and all of the land in parcel nos. 1 and 2 on Plan of Survey no. SP19744.”
(7)“Major Domestic Building Contract” means a major domestic building contract as defined in s. 3 of the Act.

There are a number of other defined terms which are capitalised in the text of the special conditions. Although a number of them are referred to in those parts of the special conditions which are quoted in this judgment, their meaning is either obvious from their context or no issue arises in the proceeding which makes it necessary for me to describe the manner in which they are defined.

Special condition 1 contains a number of conditions precedent to settlement. These may be summarised as follows:

(1)Settlement of the contract of sale is conditional upon registration of the Plan of Subdivision and construction of the apartment “under a Major Domestic Building Contract generally in accordance with the Building Plans and Specifications before the end of the Construction Period”. (Emphasis added.) (Clause 1.1)
(2)If the Plan of Subdivision is not registered before the end of the “Registration Period” either the plaintiff or the defendant may, before the Plan of Subdivision is in fact registered, terminate the contract by written notice to the other (Clause 1.2).
(3)If the Apartment is not constructed before the end of the “Construction Period”, either party may, before construction of the Apartment is completed, terminate the contract of sale by written notice to the other (Clause 1.3).
(4)If the construction of the Apartment is delayed as a result of a number of specified matters, the plaintiff has the right (acting reasonably) to extend the Registration Period or the Construction Period by notice to the defendant (Clause 1.4).
(5)If the contract of sale is terminated as a result of the Plan of Subdivision not being registered before the end of the Registration Period or any extension thereof, or by reason of the Apartment not being constructed before the end of the Construction Period or any extension thereof, then the plaintiff must repay to the defendant any amount paid by way of deposit, together with interest, or return the bank guarantee by which the deposit was provided. In such event, the defendant is not entitled to any compensation from the plaintiff in respect of any losses, costs, fees or other expenses paid or incurred by the defendant in relation to the contract of sale (Clause 1.5).
(6)For the purposes of the contract of sale, construction of the Apartment will be completed on the date certified by the architect as being the completion date of the Apartment (Clause 1.6).

Accordingly, it can be seen that the conditions precedent contemplate that the Apartment may never be constructed and, if so, the only entitlement of the defendant is to a return of his deposit (plus interest) or bank guarantee.

Reference to a number of the other special conditions discloses a clear intention, to ensure that the plaintiff is under no obligation to construct the Apartment. The only obligation of the plaintiff is to convey the Apartment to the defendant if, within the specified periods, the Apartment has been completed and the Plan of Subdivision has been registered. If one of these events does not occur within the specified period, then there is no obligation upon the plaintiff to do anything other than return the deposit (plus interest) or the bank guarantee by which the deposit was provided.

Further to special condition 1, this condition is most evident in special conditions 6.1 and 6.2, which provide:

"6.1 The Purchaser acknowledges that, although:
(a)part of the Price includes an amount in respect of the construction of the Apartment on the Land; and
(b)this Contract provides for the Apartment to be constructed under a Major Domestic Building contract,

nothing in this Contract will be construed as imposing on the Vendor any obligation in relation to construction, which will make this Contract a Major Domestic Building Contract.

6.2 The Vendor represents to and the Purchaser acknowledges that:
(a)the Apartment and the Building will be constructed by the Builder under a Major Domestic Building Contract and the construction work will be covered by the insurance required under the Building Act 1993;
(b)subject to special condition 6.3, the Apartment will be completed generally in accordance with the Building Plans and Specifications by the Settlement Date;
(c)on completing the purchase of the Property and Chattels under this Contract, the Purchaser will have (as the Vendor's successor in title) the benefit of the warranties by the Builder concerning construction of the Apartment specified in section 8 of the Domestic Building Contracts Act 1995; and
(d)any defects and other faults in the construction of the Apartment (excluding minor shrinkage and settlement cracks) due to faulty materials or poor workmanship, of which the Purchaser has given the Vendor written notice within 12 weeks from the Settlement Date, will be repaired in a proper and workmanlike manner by the Builder at the Builder's expense as soon as practicable after written notice is given." (Emphasis added.)

The special conditions to which I have so far referred are relevant to the defence based on the Act and the uncertainty defence.

There are a number of other special conditions which bear upon the uncertainty defence. As I have said, the particulars of sale contained in the contract of sale provide for the sale of land specified by reference to a lot on the Plan of Subdivision “together with all improvements”. As to the improvements, there are many relevant provisions of the contract of sale. Viewed as a whole, it can be seen that the parties intended the improvements to comprise:

(1)The Apartment constructed “generally in accordance with the Building Plans and Specifications”;[6] and
(2)The defendant’s proportionate share of the common property as improved “generally in accordance with the Building Plans and Specifications”.[7]

[6]Special condition 1.1(b); special condition 6.2(b); definition of “Apartment” in special condition 27.1.

[7]Section 28(d) of the Subdivision Act 1988 (Vic) provides that when a Plan of Subdivision containing common property is registered, any common property vests in the owners of lots in the Plan of Subdivision as tenants in common in shares proportional to their lot entitlement.

Special condition 4 of the contract of sale is headed “Plan of Subdivision and Identity of Land.” Special condition 4 provides:

“4. Plan of Subdivision and Identity of Land
4.1The Vendor may make any amendments and alterations to the Plan of Subdivision which are necessary to obtain the certification or registration of the Plan of Subdivision or the Vendor considers to be reasonably necessary.
4.2The Vendor will notify the Purchaser within a reasonable time of any amendment or alteration to the Plan of Subdivision which, in the Vendor’s opinion, materially and detrimentally affects the Purchaser.
4.3Subject to the Purchaser’s rights under the Sale of Land Act 1962,[8] the Purchaser will not make any objection, requisition or claim nor rescind, terminate or delay completion of this Contract because of:
(a)any amendment or alteration to the Plan of Subdivision which does not materially and detrimentally affect the Purchaser; or
(b)any alleged misdescription of the Land or deficiency in its area or measurements,

nor will the Purchaser call upon the Vendor to amend title or pay all or any part of the cost of doing so and condition 3 of Table A does not apply to this Contract.”

[8]No case based on the defendant’s rights under the Sale of Land Act 1962 (Vic) was pleaded or argued.

By special condition 6.3 of the contract of sale, the defendant agreed that the plaintiff and the Builder may vary or alter the Building Plans and Specifications. By special conditions 6.4, 6.5 and 6.6, the defendant is granted a right to terminate the contract of sale if the plaintiff gives him notice of any variation or alteration which, in the opinion of the plaintiff, “materially and detrimentally” affects him. These special conditions provide:

“6.3The Purchaser agrees that the Building Plans and Specifications may be varied or altered by the Vendor or the Builder from time to time in any manner the Vendor or the Builder (as the case may be) considers necessary or desirable, including by substituting any of the fixtures, fittings finishes and appliances specified in the Building Plans and Specifications with fixtures, fittings, finishes or appliances of like quality.
6.4The Vendor will notify the Purchaser within a reasonable time of any variation or alteration to the Building Plans and Specifications which, in the Vendor’s opinion, materially and detrimentally affects the Purchaser.
6.5The Purchaser may terminate this Contract by written notice to the Vendor within 21 days of notification under special condition 6.4.
6.6If the Purchaser lawfully terminates this Contract under special condition 6.5:
(a)all money paid by the Purchaser on account of the Price will be refunded to the Purchaser together with any interest earned (less all proper bank and government charges, fees and taxes); and
(b)where the Deposit (or any part of it) has been paid by way of Bank Guarantee under special condition 14, the Bank Guarantee will be returned to the Purchaser or the Bank Guarantee for cancellation; and
(c)the Purchaser will not be entitled to any compensation from the Vendor in respect of any losses, costs, fees or other expenses paid or incurred by the Purchaser in relation to this Contract.”

The Building Plans and Specifications are those included or referred to in annexure A to the contract of sale. First, there is a sketch of the floor plan of the four bedroom apartments on levels 7 to 16 of Tower 3, designated as “Apartment 01” (the “contract floor plan”). The contract floor plan contains the dimensions of each of the rooms, but not of the balcony areas.

Secondly, there is an identical plan containing an “extended hard flooring option”.

Thirdly, there is a statement that 27 building plans, numbered DP1000 to DP1026 are available for inspection at 85 Coventry Street, South Melbourne (the “27 Plans”). This is a different address to where the contract of sale was signed. As appears hereafter, the copies of the 27 Plans which have been discovered by the plaintiff and which are in evidence may not, in fact, be the same version of the 27 Plans which were in existence at the time the contract of sale was signed. In particular, there would appear to be some minor variations between the contract floor plan for “Apartment 01” on the 7^th to 16^th floors of Tower 3 and the version of Building Plan DP1008 discovered by the plaintiff. The 27 plans which are in evidence are dated 20 January 2000.

Fourthly, annexure A to the contract of sale comprises a six page document titled “Schedule of Fixtures, Fittings & Finishes” in respect of floors 6 to 28 of Tower 3. The Schedule is dated May 2000.

The Schedule of Fixtures, Fittings & Finishes is a sparse document. The specifications are generic in character, without any detail as to the type, brand or quality of the fixtures, fittings and finishes specified.

Finally, as to the identification of the land sold under the contract of sale, I note that a copy of the Plan of Subdivision is annexed to the contract of sale.

(10) The Building Contract

On 4 February 2001, sufficient sales having been achieved by the plaintiff “off the plan”, the plaintiff entered into a building contract with the Builder, under which Builder agreed to construct the Building at a contract price equivalent to the actual cost incurred by the Builder in carrying out its obligations thereunder (“the Building Contract”). On behalf of the defendant, it was submitted that the Building Contract was not an arms-length contract but was a contract between related companies containing such unusual features as to be regarded as a sham. It was submitted, in this regard, that the Building Contract was a sham because it was designed to disguise the fact that the plaintiff was the “de facto builder”. I will return to this submission when considering the defence based upon the Act.

(11) Satisfaction of Conditions Precedent

By letter dated 27 January 2004 from the architect to the plaintiff, the architect certified to the plaintiff that a number of lots on the Plan of Subdivision, including a lot described as “352-12.01/70 Lorimer Street” had been completed in accordance with “the building plans and specification”.

By letter dated 29 January 2004 from the Registrar of Titles to the solicitors for the plaintiff, the plaintiff was advised that the Plan of Subdivision was registered on 29 January 2004. The letter included new title particulars for each of the lots on the Plan of Subdivision, including the Apartment.

Accordingly, each of the events necessary to satisfy the conditions precedent to completion of the contract of sale had occurred by 29 January 2004. As a result, each of the parties was obliged to complete the contract of sale on the date which was five business days after 29 January 2004.

By letter dated 2 February 2004 from the plaintiff’s solicitors to the defendant’s solicitors, the defendant’s solicitors were informed that settlement of the contract of sale was required.

(12) The Defendant Defaults

As I have said, the defendant did not complete the contract of sale when required to do so. As a result, Ms Thomas contacted the defendant. Ms Thomas made handwritten notes of her dealings with the defendant regarding his obligation to settle the contract of sale and made summary entries of relevant events in her “Outstanding Settlement Report”. The tenor of these notes and conversations made by Ms Thomas is that the defendant was seeking to avoid his obligations under the contract of sale because he was financially unable to complete the sale.

In March 2004, the plaintiff served a notice of default in respect of the contract of sale. The notice of default was forwarded by the defendant’s solicitors to him, as discussed above in respect of the 16^th floor representation.

On 21 April 2004, the plaintiff issued this proceeding. In its initial form, the statement of claim claimed specific performance of the contract of sale. As I have said, it was later amended to seek only the payment of the deposit and damages.

Following the service of the writ, the defendant signed a letter which was forwarded to the plaintiff. Ms Thomas says she received it in late April 2004. The plaintiff’s discovered copy of the letter bears the handwritten date “27/4/04”. I find that this was the date it was received by the plaintiff. I will hereafter refer to it as “the April letter”. The April letter states:

“To Whom It May Concern:
It is with much regret that I have been forced to write to you.
Four years ago I entered into an agreement to purchase a Four-Bedroom Apartment in the Docklands Third Tower.
As you can appreciate Four years has been a long time and my circumstances have changed significantly since the original agreement. Four Years has seen myself get remarried and supporting three teenage children.
My Business, Salem Cleaning was placed in the hands of C.J.L., as all of my Cleaning contracts were not renewed with Coles Myer. This has left me currently unemployed and financially distressed. I am no longer in a position to purchases (sic) an Apartment in the Docklands Third Tower.
I understand that due to a lot of bad publicity purchasers are trying to renege on their initial agreement. This however is not the reason that I am writing to you with myself it is simply that under no circumstances will any Financial Institution lend me the funds to purchase this property. They have made it quite clear that with only my wife earning a regular income that they would not entertain a loan of that amount.
I have sought Legal Advice on the matter and do realise that all of the State Legislation has recently been changed to stop purchasers changing their minds. However I do not feel that I fall into that category as I would have purchased the property if I had been financially able too.
I understand that Mirvac is a Business and obviously must run as one but surely common sense must win over and if the Banks will not lend me the funds surely, you can release me from the initial agreement and re sale the property.
I hope that we will be able to come to a mutual agreement which makes sense to both of us.
(signed: JP La Rocca)
Yours Sincerely” (Emphasis added.)

As can be seen, the April letter makes no mention of any representations having been made to the defendant. It seeks to avoid the obligation to complete the contract of sale on one ground only, that the defendant did not have the financial capacity to do so. In his evidence, the defendant sought to distance himself from the April letter. The defendant said that he did not write the April letter. It was written by his wife. In substance, the defendant said that his wife tricked him into signing the April letter and that the letter was written and sent without his authority.

I reject this evidence on behalf of the defendant. The general tone of the letter is consistent with what the defendant admits that he stated to Mr Katz when he met with him. Furthermore, in my view, the defendant’s explanation for not calling his wife to give evidence on this issue is not credible. In his witness statement, the defendant said:

“My wife and I have now undergone an acrimonious separation and she does not want to have anything further to do with me. The last time I called her, she hung up on me.”

In my view, by this passage in his witness statement, the defendant was endeavouring to convey that he and his wife had finally separated. The implication is that a divorce was the likely result. However, in cross-examination, the impression which the defendant sought to convey by this paragraph of his witness statement was exposed as misleading. In fact, the extent of the separation between the defendant and his wife is that, a few weeks before the commencement of the trial, the defendant and his wife were arguing. As a result, the defendant moved to his mother’s house to live “for the time being”. He has still left most of his possessions and personal effects in the matrimonial home. The defendant conceded that he has not made a decision to move everything out of the matrimonial home and that he was waiting “until I got this court case sorted out” and “maybe I am a better person to live with, or something. I don’t know.”

In my view, that is not an appropriate explanation for the failure to call the defendant’s wife to give evidence about the April letter. I infer that the defendant’s wife, if called to give evidence, would not have given evidence which assisted the defendant’s case.

Mr Katz met with the defendant on two occasions, first on 20 May 2004. During this meeting, the defendant “cried poor” to Mr Katz. He explained that his various companies had all been placed in liquidation, and he only had a couple of months work left on his one remaining cleaning contract. According to Mr Katz, the defendant said to him that:

“... since entering into the contract, he had got divorced and his wife had ‘taken him to the cleaners’.” (Emphasis added.)

There was no cross-examination of Mr Katz on this aspect of his statement. Indeed, Mr Katz was not cross-examined at all. The significance of this is that, in cross-examination, the defendant admitted that, although his relationship with his current wife was strained at the present time, he had only been divorced once, in about 1990. I find that the defendant deliberately mislead Mr Katz in this respect. This reflects poorly on his credit.

Apart from stating to Mr Katz in this meeting that he could not afford to complete the contract of sale, the defendant said to Mr Katz that he thought he had purchased an apartment on the 16^th floor, not on the 12^th floor. Aside from this statement by the defendant, the defendant made no reference to any of the other representations which he alleges were made to him by Ms McBride.

Between the two meetings of Mr Katz and the defendant, Mr Katz and Ms Thomas made a number of enquiries to verify the defendant’s statements that he was financially unable to complete the contract of sale. The defendant assisted with these enquiries, for example by providing Mr Katz with contact details for the liquidator of his companies.

In late June 2004, Mr Katz met again with the defendant. He told the defendant that Mirvac was satisfied that he could not afford to complete the contract of sale. Accordingly, the contract of sale would be rescinded. Mr Katz explained to the defendant that the plaintiff would call on the defendant’s bank guarantee to obtain payment of the deposit and that the plaintiff had the ability to seek further compensation from the defendant if it suffered further loss. To this, the defendant replied with words to the effect of “stuff you guys... I’ve got $30,000 sitting in a bank account and I’d rather fight you.” Further, the defendant said to Mr Katz that he had been to court before and that “the person who lies best wins.”

Once again, there was no cross-examination of Mr Katz in respect of these statements attributed by Mr Katz to the defendant.

Uncertainty

A contract will not be binding and enforceable if one of its essential terms has not been agreed upon. In Thorby v Goldberg[9] Menzies J, in considering arguments that the agreement in question was void for incompleteness or uncertainty, adopted a statement in the dissenting judgment appealed from as summarising the relevant principles:

“It will therefore be necessary to examine the agreement as a whole but, before I do so, I would say that I do not think the law to be applied is in any doubt and I agree with and will apply the following statement of that law from the dissenting judgment of Sugerman J. He said:- ‘It is a first principle of the law of contracts that there can be no binding and enforceable obligation unless the terms of the bargain, or at least its essential critical terms, have been agreed upon. So, there is no concluded contract where an essential or critical term is left to be settled by future agreement of the parties. Again, there is no binding contract where the language used is so obscure and incapable of any precise or definite meaning that the court is unable to attribute to the parties any particular contractual intention’.”

[9](1964) 112 CLR 597 at 606-7.

There is, of course, no issue that identification of the land and improvements comprising the Apartment is an essential term of the contract of sale.

It is settled law that it is the duty of a court in construing a commercial contract to approach its task in a commonsense way in an endeavour to give effect to the bargain reached between the parties. It is only where the Court encounters a level of ambiguity which is so obscure as to indicate that the parties did not in fact reach agreement that a court should hold an agreed contractual provision to be void for uncertainty. The relevant principles were recently reviewed by Dodds-Streeton J in Unique Lifestyle Investments Pty Ltd v Robertson[10], where her Honour stated:
[10][2005] VSC 347 at [88] to [94]; see also Patrick Corporation Ltd v Toll Holdings Ltd [2005] VSC 392 at [81] to [87] per Dodds-Streeton J.

“88.Relevant authority establishes that the modern approach to the construction of commercial agreements of business people is, generally, to endeavour to uphold the bargain by eschewing a narrow or pedantic approach in favour of a commercially sensible construction, unless irremediable obscurity or a like fundamental flaw indicates that there is, in fact, no agreement. It is permissible to have regard to extrinsic evidence of the ‘factual matrix’[11] or surrounding circumstances in determining the meaning of contractual terms.
[11]Reardon Smith Line Ltd v Ynngar Hansen-Tangen [1976] 1 WLR 989 at 997; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337.

89. In Hillas & Co Ltd v Arcos Ltd,[12] Lord Tomlin stated:
[12][1932] All ER 494.
‘the problem for a court of construction must always be so to balance matters that, without violation of essential principle, the dealings of men may as far as possible be treated as effective, and that the law may not incur the reproach of being the destroyer of bargains.’[13]
[13][1932] All ER 494 at 499.

90. Lord Wright stated:
‘Businessmen often record the most important agreements in crude and summary fashion. Modes of expression sufficient and clear to them in the course of their business may appear to those unfamiliar with the business far from complete or precise. It is, accordingly, the duty of the court to construe such documents fairly and broadly, without being too astute or subtle in finding defects.’[14]
[14][1932] All ER 494 at 503-4.
91.In Biotechnology Australia Ltd v Pace,[15] Kirby J, in acknowledging the difficulty of reconciling the competing principles, stated as a general observation that:
‘The determination of every case depends upon its own facts. The meaning of the agreement between the parties must be discovered objectively. Where there is suggested ambiguity or vagueness or where it is urged that a term is illusory, it may sometimes be both necessary and appropriate to have regard to extrinsic evidence in order to give meaning to that to which the parties have agreed.
The court will endeavour to uphold the validity of the agreement between the parties. The court will attempt to avoid frustrating the wishes of the contracting parties so far as those wishes may be ascertained from the agreement between them: see Meehan (at 589); see also Barwick CJ in Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 437 where his Honour said that: “… In the search for that intention no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements.”
But the court will not do so, where, in effect, it is asked to spell out, to an unacceptable extent, that to which the parties have themselves failed to agree. Nor will the court clarify that which is irremediably obscure … ‘. [16]
92.In Vroon BV v Fosters Brewing Group Ltd,[17] Ormiston J also stated ‘that in commercial transactions the court should strive to give effect to the expressed arrangements and expectations of those engaged in business, notwithstanding that there are areas of uncertainty and notwithstanding that particular terms have been omitted and not fully worked out’ whilst acknowledging that ‘[w]here one should draw the line is difficult to state and equally difficult to apply’.[18]
93.Consistently with the above principles, in MLW Technology Pty Ltd v May,[19] Gillard AJA, (with whom Winneke P and Buchanan JA agreed), stated:
‘The court, in construing contracts between businessmen and also their actions, should proceed in a commonsense, non-technical way. How would the businessmen construe the agreement in the light of the commercial purpose of the setting … ‘[20]
94.His Honour referred[21] to Lord Wright’s observations in Hillas, supra, and to Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd[22] in which Lord Steyn, noting that the law had moved on from a strict technical approach, stated:
‘Since then there has been a shift from strict construction of commercial instruments to what is sometimes called purposive construction of such documents … It is better to speak of a shift towards commercial interpretation. About the change in approach to construction there is no doubt. … In determining the meaning of the language of commercial contract, and unilateral contractual notices, the law therefore generally favours a commercially sensible construction. The reason for this approach is that a commercial contract is more likely to give effect to the intention of the parties. Words are therefore interpreted in the way in which a reasonable commercial person would construe them. And the standard of the reasonable commercial person is generally hostile to technical interpretations and undue emphasis on niceties of language.’”[23]

[15][1988] 15 NSWLR 130.

[16][1988] 15 NSWLR 130 at 136.

[17][1994] 2 VR 32.

[18][1994] 2 VR 32 at 67.

[19][2005] VSCA 29.

[20][2005] VSCA 29 at [76]

[21][2005] VSCA 29 at [77]-[81].

[22][1997] AC 749.

[23][1997] AC 749 at 770-1.

The most recent statements of principle by the High Court as to the task of a court in construing a commercial contract, and as to the material available, are consistent with the above quoted passage. The task of a court in construing a clause in a commercial contract is to be determined by a consideration of what a reasonable person in the position of the parties would have understood the clause to mean. In Pacific Carriers Ltd v BNP Paribas[24], Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ stated:

“The case provides a good example of the reason why the meaning of commercial documents is determined objectively: it was only the documents that spoke to Pacific. The construction of the letters of indemnity is to be determined by what a reasonable person in the position of Pacific would have understood them to mean. That requires consideration, not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP, and the purpose and object of the transaction. In Codelfa Constructions Pty Ltd v State Rail Authority of NSW, Mason J set out with evident approval the statement by Lord Wilberforce in Reardon Smith Line Ltd v Hansen-Tangen:
‘In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.’” (Citations omitted.)

[24](2004) 218 CLR 451 at [22].

In Toll (FGCT) v Alphapharm[25], Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ stated:

“This court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other part to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.”

Domestic Building Contract

Section 11(1)(a) of the Act provides that a “builder” must not demand or receive a deposit under a “domestic building contract” of more than 5 per cent of any contract price that is $20,000 or more. The terms “builder” and “domestic building contract” are defined in s. 3(1) the Act. These definitions also use terminology which is the subject of definition in s. 3(1).

By s. 11(3) of the Act, non-compliance by a builder with s. 11(1)(a) has the consequence that the person for whom the relevant domestic building work is being carried out has the entitlement to avoid the domestic building contract at any time before it is completed.

If s. 11(1)(a) of the Act applies to the contract of sale, there is no dispute that the plaintiff has demanded a deposit of more than 5 per cent of the contract price from the defendant and that, on this assumption, the defendant is entitled to avoid the contract of sale on this ground as he has purported to do.

In Mirvac (Docklands) Pty Ltd v Philp[39], Byrne J held in relation to an identical contract to the contract of sale in this case that the plaintiff had failed to comply with s. 11(1)(a) of the Act and that, accordingly, Mr Philp was entitled to avoid the contract.
[39][2004] VSC 301.

However, the contract considered by Byrne J in Philp was not subject to the provisions of the Domestic Building Contracts (Amendment) Act 2004 (“the amending Act”). The amending Act inserted sub-sections 3(4) and 3(5) into s. 3 of the Act. Those subsections provide:

“(4)A contract for the sale of land on which a home[40] is being constructed or is to be constructed that provides or contemplates that the construction of the home will be completed before the completion of the contract is not, and is not to be taken to form part of, a domestic building contract within the meaning of this Act if –
(a)the home is being constructed under a separate contract that is a major domestic building contract; or
(b)the contract of sale provides that the home is to be constructed under a separate contract that is a major domestic building contract.

(5)Sub-section (4) does not apply to a contract for the sale of land that is the subject of proceedings commenced in a court or tribunal before 16 March 2004 but not completed before that date in which it was alleged, before that date, that the contract was, or formed part of, a domestic building contract.”

[40]Under s. 3(1) of the Act, “home” is defined to mean “any residential premises”.

On behalf of the plaintiff, it was submitted that the decision of Byrne J in Philp was incorrect and that I ought not follow it. However, as I have noted, the decision in Philp was in respect of a contract to which the amending Act did not apply. There is no dispute that the provisions of the amending Act apply to the contract of sale in this case.[41] Accordingly, if the effect of sub-s. 3(4) of the Act (as amended) is that the contract of sale in this case is not a domestic building contract within the meaning of the Act, it will be unnecessary for me to consider whether the decision in Philp was correct.
[41]The proceeding was commenced on 21 April 2004.

In my view, even if the contract of sale was a domestic building contract within the meaning of the Act prior to the amending Act, the effect of the introduction of sub‑s. 3(4) into the Act has the effect that the contract of sale is not a domestic building contract within the meaning of the Act.

Section 3(4) has two elements. First, the contract in question must be one “that provides or contemplates that the construction of the home will be completed before the completion of the contract”. Secondly, the home in question must be either being constructed under, or the contract of sale must provide that the home is to be constructed under, a separate contract that is “a major domestic building contract” as defined in the Act.

I will deal with the second element first. In my view, this element has been established in this case. Under special condition 1.1 of the contract of sale, settlement is conditional upon registration of the Plan of Subdivision and construction of the Apartment “under a Major Domestic Building Contract”. The contract of sale defines “Major Domestic Building Contract” as a major domestic building contract as defined in s. 3 of the Act. Under special conditions 6.1 and 6.2, the plaintiff represents that the Apartment will be constructed by the Builder under a major domestic building contract. The Builder is not a party to the contract of sale. It is clear that the contract of sale provides for the major domestic building contract under which the Apartment is to be constructed to be separate from the contract of sale. In my view, this is so even if the representations in special conditions 6.1 and 6.2 are construed as warranties by the plaintiff that it will ensure that the Apartment will be constructed by the Builder. On this construction of the contract of sale, it would still provide for the Apartment to be constructed under a separate contract. Accordingly, the decision of Byrne J in Philp is of no assistance to the defendant in respect of this limb of s. 3(4).

Finally, as to the first limb of s. 3(4) of the Act, I reject the submission put on behalf of the defendant that the Building Contract provided for in the contract of sale and in fact entered into between the plaintiff and the Builder is a sham, because the plaintiff was the “de facto builder”. This submission is wholly inconsistent with the express terms of the contract of sale to which I have referred, and which have been carried into effect by the construction of the Building and the Apartment by the Builder under the Building Contract.

As to the remaining element of s. 3(4), the issue is whether the contract of sale “provides or contemplates that the construction of the [Apartment] will be completed before the completion of the contract [of sale]”.

On behalf of the plaintiff, it was submitted that the terms of special condition 1.1 of the contract of sale so provided or contemplated. This is because settlement of the contract of sale is conditional upon both registration of the Plan of Subdivision and construction of the Apartment under a major domestic building contract. Accordingly, the contract of sale both provides and contemplates that construction of the Apartment will be completed before the plaintiff can demand settlement of the contract of sale.

On behalf of the defendant, it was submitted that the contract of sale did not provide, or even contemplate, that construction of the Apartment would be completed before completion of the contract of sale. This submission was put on a number of grounds.

First, it was submitted on behalf of the defendant that the contract of sale permits the plaintiff to insist upon settlement by the defendant in circumstances where construction of the Apartment has not been completed. The basis of this submission was that the contract of sale does not require the plaintiff to ensure that construction of the Apartment is in fact completed prior to requiring settlement, but only requires the plaintiff to procure the architect to certify, pursuant to special condition 1.6, that the Apartment has been completed. Accordingly, so it was submitted, the plaintiff could procure the architect to issue such a certificate even though construction of the Apartment was incomplete. In this regard, my attention was drawn to s. 42 of the Act, which provides:

“42. When work is to be considered to have been completed
A builder must not demand final payment under a major domestic building contract until –
(a)the work carried out under the contract has been completed in accordance with the plans and specifications set out in the contract...”

It was submitted on behalf of the defendant that the provisions of s. 42 were inconsistent with any agreement between the parties as to a time at which construction would be deemed to be completed.

In my view, s. 3(4) is concerned with what the contract of sale in issue actually provides or contemplates, not what might theoretically happen if one of the parties did not act in good faith in respect of determining whether construction has been completed. The contract of sale in this case does provide or contemplate that construction of the Apartment will be completed before the completion of the contract of sale. This is evident from the particulars of sale and from special condition 1.1.

Secondly, it was submitted on behalf of the defendant that the contract of sale does not provide or contemplate that construction of the Apartment will be completed before the completion of the contract, because the contract of sale requires only the Apartment to be completed “generally” in accordance with the Building Plans and Specifications and because these plans and specifications may be the subject of variation under special condition 6.3 of the contract of sale. Further, reliance was placed upon the power of the plaintiff to amend the Plan of Subdivision under special condition 4.1 of the contract of sale.

In my opinion, these matters are relevant only to the uncertainty issue discussed above. I have found that the contract of sale is not uncertain or incomplete by reason of the generality of the description of the Apartment and its fixtures, fittings and finishes. Nor is it uncertain because the defendant has agreed that the plaintiff may amend the Building Plans and Specifications and the Plan of Subdivision.

Thirdly, it was submitted on behalf of the defendant that the contract of sale does not provide or contemplate that the construction of the Apartment will be completed before the completion of the contract because of the provisions of special condition 18 of the contract of sale. Special condition 18 provides:

“18. Access for Construction and Post-Settlement Matters
18.1 The Purchaser acknowledges that:
(a)the Plan of Subdivision is Stage 5 of a staged plan of subdivision and as subsequent stages of the plan of subdivision are registered the membership of Bodies Corporate nos. 1 and 2 will increase and the unit entitlement and liability for Bodies Corporate nos. 1 and 2 will be adjusted accordingly;
(b)as at the Day of Sale, the Vendor proposes to develop the balance of the Precinct generally in accordance with the details set out in the Vendor’s Statement;
(c)not all of the lots on Stage 5 of plan of subdivision no. PS 428541F may be sold before Settlement Date and lots on previous and future stages of plan of subdivision no. PS428541D may not be sold before Settlement Date;
(d)the Vendor may conduct marketing activities in or about the Building and the common property on the Plan of Subdivision for the marketing of unsold lots in the Building and for the marketing of lots on previous and future stages of plan of subdivision no. PS428541D involving, among other things, placing signs and other marketing material on lots and apartments (except the Apartment) and the common property on the Plan of Subdivision (‘Marketing Activities’) after Settlement Date;
(e)there will be continuing surveying, engineering and construction works on the land in the Plan of Subdivision and the balance of the Precinct (‘Ongoing Works’) and the Vendor and the Builder may need access to the Building and the common property on the Plan of Subdivision to carry out the Ongoing Works after Settlement; and
(f)the Builder may be obliged to carry out rectification and repair works after the Settlement Date (‘Repair Works’) and may need to access the Apartment, the Building and the common property on the Plan of Subdivision to carry out the works.

18.2 The Purchaser grants:
(a)the Vendor (and its related bodies corporate) a right to access the Building and the common property on the Plan of Subdivision to carry on the Marketing Activities;
(b)the Vendor and the Builder (and their respective contractors) a right to access the Apartment (where necessary), the Building and the common property on the Plan of Subdivision to carry out the Ongoing Works and the Repair Works.

18.3The Purchaser will not, and will use its best endeavours to procure that the Body Corporate does not, make any objection or requisition or bring any claim or action, against either the Vendor or the Builder as a consequence of anything connected with:
(a)the Ongoing Works and any access rights exercised by the Vendor or the Builder in respect of them and any inconvenience, nuisance, noise, dust, vibration, loss of amenity or discomfort that may result from the Ongoing Works; or
(b)the Marketing Activities and any access rights exercised by the Vendor in respect of the Marketing Activities and any inconvenience that may result from them.”

On behalf of the defendant, it was submitted that these special conditions were inconsistent with a finding that the contract of sale provides or contemplates that the construction of the Apartment will be completed before the completion of the contract of sale. It was submitted in this regard that construction of the Apartment is not completed until all works associated with the Apartment, including all works in respect of the common property are completed. Reliance was placed upon the definition of “domestic building work” in s. 3(1) of the Act. That definition provides that domestic building work means any work referred to in s. 5 of the Act.

Section 5(1)(a) provides:

“(1) This Act applies to the following work –
(a) the erection or construction of a home, including –
(i)any associated work including, but not limited to, landscaping, paving and the erection or construction of any building or fixture associated with the home (such as retaining structures, driveways, fencing, garages, carports, workshops, swimming pools or spas); and
(ii)the provision of lighting, heating, ventilation, air conditioning, water supply, sewerage or drainage to the home or the property on which the home is, or is to be.”

It was submitted that the effect of the definition of “domestic building work” for the purposes of the Act has the effect that, in considering whether the contract of sale provides or contemplates that construction of the Apartment will be completed before completion of the contract, the Apartment which is to be constructed is not only the Apartment but includes all of the associated work integral to the use of the Apartment. It was submitted that this extended to the whole of the common property, a proportionate share of which vests in the owner of each lot in the Plan of Subdivision.[42] I accept that this is the case. However, as will appear, I do not accept that this assists the defendant’s submission that, by reason of the provisions of special condition 18 of the contract of sale, the contract of sale does not provide or contemplate that the construction of the Apartment will be completed before the completion of the contract of sale.
[42]See s. 28(d) of the Subdivision Act 1988 (Vic).

When special condition 18 of the contract of sale is read as a whole, it is apparent that its intention is to ensure that the plaintiff may continue to develop and market the remainder of the development after completion of the contract of sale without interference or complaint by the defendant. In this regard, it must be remembered that the Plan of Subdivision is only one stage of a larger plan of subdivision involving further stages. For this purpose, special condition 18.1(e) contains an acknowledgement by the defendant that there will be ongoing works “on the land in the Plan of Subdivision and the balance of the Precinct” (emphasis added). For this purpose, the plaintiff and Mirvac Constructions “may need access to the Building and the common property on the Plan of Subdivision to carry out the Ongoing Works after Settlement”.

In my view, cl. 18.1(e) does not involve a statement or contemplation that there will be ongoing works within the Apartment, the Building or the common property after completion of the contract of sale. In cl. 18.1, a distinction is drawn between, on the one hand, land in the Plan of Subdivision and, on the other hand, the Apartment, the Building, the common property and the Precinct. This is evident from cl. 18.1 when read as a whole and from the definitions of “Apartment”, “Building”, “Plan of Subdivision” and “Precinct” in the contract of sale.

“Apartment” is defined in special condition 27.1 of the contract of sale to mean “the apartment generally described in the Building Plans and Specifications and identified by the address set out in the Particulars of Sale”.

The Particulars of Sale identify the address of the Apartment by reference to its lot number in the Plan of Subdivision:

“LAND  Lot 352 on Stage 5 of unregistered plan of subdivision no. PS428514D being part of the land described in certificate of title volume 10269 folio 533.
PROPERTY             the Land together with all improvements known or to be known as
ADDRESS               Lot 352, West Tower, Building 2, Yarra’s Edge, 70 Lorimer Street, Melbourne, Docklands.” (Emphasis added.)

“Building” is defined in special condition 27.1 of the contract of sale to mean:

“... the 20 (East Tower) and 31 (West Tower) level building (inclusive of five carpark levels) comprising 281 apartments (154 East Tower and podium and 127 West Tower) to be constructed on the land in the Plan of Subdivision as generally described in the Building Plans and Specifications.” (Emphasis added.)

“Plan of Subdivision” is defined in special condition 27.1 of the contract of sale to mean:

“... Stage 5 of unregistered plan of subdivision no. PS428541D a copy of which is included in the Vendor’s statement and includes any amendments or alterations made to the plan, any Restriction noted on the plan, the rules of the Body Corporate and the schedules of lot entitlement and liability.”

“Precinct” is defined in special condition 27.1 of the contract of sale to mean:

“... the Yarra Waters Precinct at Melbourne Docklands (being all of the land in certificate of title volume 10269 folio 533) and all of the land in parcel nos. 1 and 2 on Plan of Survey no. SP19744.” (Emphasis added.)

As can be seen from these definitions, the land in the Plan of Subdivision is only part of the land in the total Precinct upon which the development is taking place. In my view, the fact that special condition 18.1(e) provides that there will be ongoing works on the land in the Plan of Subdivision is not inconsistent with the contract of sale providing or contemplating that construction of the Apartment will be completed before the completion of the contract of sale. There may be many reasons why the plaintiff or the Builder will need to conduct ongoing works on the land in the Plan of Subdivision after completion of the Apartment, the Building and the common property. Such works may include surveyors being present on the land in the Plan of Subdivision for the purposes of surveying works relevant to the development of the balance of the Precinct. Further, there may need to be ongoing works within other apartments within the Building. In my view, ongoing construction works within apartments other than the Apartment, which would necessarily involve construction works on the land in the Plan of Subdivision, would not be inconsistent with the contract of sale providing or contemplating completion of the construction of the Apartment before completion of the contract of sale.

I refer also to the provisions of special condition 18.1(d), which provide that the plaintiff may conduct marketing activities “in or about the Building and the common property on the Plan of Subdivision”. This language is to be contrasted with that in special condition 18.1(e), where there is no acknowledgement as to ongoing works in the Building or on the common property.

Insofar as reliance is placed on behalf of the defendant upon special condition 18.1(f), such reliance is misplaced. In my view, an entitlement on behalf of Mirvac Constructions to carry out rectification and repair works within the Apartment, the Building and upon the common property is wholly consistent with the contract of sale providing or contemplating that the construction of the Apartment will be completed before the completion of the contract of sale.

Finally on this issue, I note that there was no evidence led on behalf of the defendant that any part of the Apartment, the Building or the common property was not completed at the time the plaintiff required completion of the contract of sale. No case was pleaded or put that there was a contravention of s. 42 of the Act.

Unconscionable Conduct
(1) Applicable Law

In his defence, the defendant alleges that the contract of sale contains terms which were unconscionable, and that the plaintiff acted unconscionably in procuring his signature to the contract of sale. It is alleged that this conduct was in contravention of s. 51AC of the Trade Practices Act, s. 8A of the Fair Trading Act, s. 51AA of the Trade Practices Act and s. 7 of the Fair Trading Act.

Section 51AC of the Trade Practices Act and s. 8A of the Fair Trading Act are in substantially similar terms. Section 51AC(1) of the Trade Practices Act relevantly provides:

“(1)A corporation must not, in trade or commerce, in connection with:
(a)the supply or possible supply of goods or services to a person...; or
(b)...

engage in conduct that is, in all the circumstances, unconscionable.”

Section 51AC(3) of the Trade Practices Act and s. 8A(3) of the Fair Trading Act provide that the Court may, in considering whether there has been unconscionable conduct, have regard to a number of specified matters. These specified matters are stated as not in any way limiting the matters to which a Court may have regard to for the purpose of determining whether there has been unconscionable conduct under sub‑s(1).

Section 51AA of the Trade Practices Act and s. 7 of the Fair Trading Act are in substantially the same terms. Section 51AA of the Trade Practices Act provides:

“(1)A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories.”

The reference to “the unwritten law” in s. 51AA is a reference to the equitable concept of unconscionable conduct. In this regard, the applicable law is not in doubt and was not the subject of any dispute between the parties.

In Commercial Bank of Australia Ltd v Amadio[43], the High Court considered the equitable jurisdiction to set aside a transaction on the ground of unconscionable conduct where a party to the transaction, who suffers detriment by reason of the transaction, is suffering from some special disability or is placed in some special situation of disadvantage at the time of the transaction.
[43](1983) 151 CLR 447.

Mason J, as he then was, stated the applicable principles as follows[44]:
[44](1983) 151 CLR 447 at 461-2.

“It almost goes without saying that it is impossible to describe definitively all the situations in which relief will be granted on the ground of unconscionable conduct. As Fullagar J said in Blomley v Ryan:
‘The circumstances adversely affecting a party which may induce a court of equity either to refuse its aid or to set a transaction aside are of great variety and can hardly be satisfactorily classified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary. The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis à vis the other’.

Likewise Kitto J spoke of it as ‘a well-known head of equity’ which –
‘...applies whenever one party to a transaction is at a special disadvantage in dealing with the other party because illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands’.

It is not to be thought that relief will be granted only in the particular situations mentioned by their Honours. It is made plain enough, especially by Fullagar J, that the situations mentioned are no more than particular exemplifications of an underlying general principle which may be invoked whenever one party by reason of some condition of circumstance is placed at a special disadvantage vis à vis another and unfair and unconscientious advantage is then taken of the opportunity thereby created. I qualify the word ‘disadvantage’ by the adjective ‘special’ in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to emphasise that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other parties knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party.”

The High Court considered the content of the unwritten law in the context of s. 51AA in ACCC v GC Berbatis Holdings Pty Ltd[45]. In that case it was held that a landlord did not engage in unconscionable conduct by requiring a tenant to agree to abandon claims against it as a condition of giving consent to the assignment of the lease, when the tenant had sold the business subject to the lease being granted. Gleeson CJ stated[46]:

“A person is not in a position of relevant disadvantage, constitutional, situational, or otherwise, simply because of inequality of bargaining power. Many, perhaps even most, contracts are made between parties of unequal bargaining power, and good conscience does not require parties to contractual negotiations to forfeit their advantages, or neglect their own interests.
...
Unconscientious exploitation of another’s inability, or diminished ability, to conserve his or her own interests is not to be confused with taking advantage of a superior bargaining position. There may be cases where both elements are involved, but, in such cases, it is the first, not the second, element that is of legal consequence.”

[45](2003) 214 CLR 51.

[46](2003) 214 CLR 51 at [10].

In the same case, Callinan J said[47]:

“Two circumstances which almost always will have the capacity to affect a person’s ability to protect or further his or her own interests, are the financial capacity of that person, and its relativity to the financial capacity of a person with a competing interest. Mason J was conscious of this in Amadio, and accordingly qualified the word ‘disadvantage’ by the adjective ‘special’ in order to disavow any suggestion that the principle applies whenever, and because there is some difference, even substantial, in the bargaining power of the parties. His Honour also obviously thought it necessary to emphasise that the relevant conditions or circumstances calling for the application of the doctrine be ones which seriously affect the ability of an innocent party to make the judgment as to his or her own best interests, when the other party knows, or ought to know of that condition or circumstance, and its effect on the innocent party.”

[47](2003) 214 CLR 51 at [184].

Section 51AC of the Trade Practices Act and s. 8A of the Fair Trading Act do not prohibit unconscionable conduct within the meaning of the unwritten law. The term “unconscionable” is not defined in the Trade Practices Act or the Fair Trading Act. The question arises as to whether unconscionable conduct in these sections is a concept which differs, and to what extent, from the equitable principles discussed above. In my view, the authorities favour the conclusion that, in order for there to be unconscionable conduct under s. 51AA and s. 8A, there must be conduct which is unconscionable within the ordinary dictionary meaning of that word.

In Hurley v McDonald’s Australia[48] Heerey, Drummond and Emmett JJ considered an application for leave to appeal a trial judge’s decision not to allow an amendment to a statement of claim. The Full Court held:

“[22]For conduct to be regarded as unconscionable, serious misconduct or something clearly unfair or unreasonable, must be demonstrated – Cameron v Qantas Airways Ltd (1994) 55 FCR 147 at 179. Whatever ‘unconscionable’ means in s51AB and s51AC, the term carries the meaning given by the Shorter Oxford English Dictionary, namely, actions showing no regard for conscience, or that are irreconcilable with what is right or reasonable – Qantas Airways Ltd v Cameron (1996) 66 FCR 246 at 262. The various synonyms used in relation to the term ‘unconscionable’ import a pejorative moral judgment – Qantas Airways Ltd v Cameron (1996) 66 FCR 246 at 283-284 and 298.
...
[31]Before s51AA, s51AB or s51AC will be applicable, there must be some circumstance other than the mere terms of the contract itself that would render reliance on the terms of the contract ‘unfair’ or ‘unreasonable’ or ‘immoral’ or ‘wrong’.” (Original emphasis.)

[48](2000) ATPR 41-741.

In ACCC v Oceana Commercial Pty Ltd[49] Heerey, Sundberg and Dowsett JJ held:

“... it distorts the proper operation of s51AC to search through the twelve criteria set out in subs (3), find one that seems to fit the case in hand, and then move to a conclusion of unconscionable conduct.”

(2) Was the Defendant under a Special Disability?

[49](2004) ATPR 46-255 at [181].

It was submitted on behalf of the defendant that, at the time he signed the contract of sale, he was under a special disability, or at a special disadvantage, in his dealings with the plaintiff. It was submitted that this special disability arose because of the knowledge of the plaintiff as to the terms and conditions of the contract of sale and, in particular, as to the ability of the plaintiff to direct the Builder as to how to perform its obligations under the Building Contract. It was submitted that the disparity between the knowledge of the plaintiff as to the terms of the contract of sale and as to its relationship with the Builder, and the defendant’s lack of knowledge about these matters, established a position of special disadvantage on the part of the defendant because of his “lack of understanding without further explanation”. It was submitted that this situation was recognised by Fullagar J in Blomley v Ryan[50] as a category of special disadvantage. I do not accept this submission.
[50](1956) 99 CLR 362 at 405-6. The relevant passage is quoted in the judgment of Mason J in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 461-2, as set out above.

In my view, the defendant was not in a position of special disadvantage vis-à-vis the plaintiff at the time he signed the contract of sale. I accept that the defendant did not fully understand the terms of the contract of sale. However, this lack of understanding was brought about by his own failure to look out for his own interests by reading and trying to understand the contract of sale and, if he could not do so, obtaining advice or assistance so as to enable him to understand it. This is what the 22 May letter to Mr Newman, which the plaintiff had in his possession, recommended.

Further, there is no evidence of Ms McBride placing any pressure upon the defendant to sign the contract of sale. I find that she did not do so. It was a matter for the defendant as to whether he wished to proceed, and he made his own decision to do so. As I have said, he made that decision before he attended on the release day on the basis of his discussions with Mr Newman.

(3) Was the contract of sale fair, just and reasonable?

As I have found that the defendant was not in a position of special disadvantage at the time he signed the contract of sale, there was no onus upon the plaintiff to show that the contract of sale was fair, just and reasonable. However, it is alleged on behalf of the defendant that the plaintiff engaged in unconscionable conduct within the meaning of the unwritten law by including special conditions 6.3 and 19 in the contract of sale. Further, it is contended on behalf of the defendant that the inclusion of these special conditions in the contract of sale amounts to unconscionable conduct in contravention of s. 51AC of Trade Practices Act or s. 8A of the Fair Trading Act.

On behalf of the defendant, it was submitted that the provisions of special conditions 6.3 and 19 of the contract of sale were not fair, just or reasonable. It is alleged on behalf of the defendant that the plaintiff acted unconscionably in binding the defendant to these special conditions.

Special condition 6.3 of the contract of sale provides:

“The Purchaser agrees that the Building Plans and Specifications may be varied or altered by the Vendor or the Builder from time to time in any manner the Vendor or the Builder (as the case may be) considers necessary or desirable, including by substituting any of the fixtures, fittings, finishes and appliances specified in the Building Plans and Specifications with fixtures, fittings, finishes or appliances of like quality.”

Special condition 19 of the contract of sale deals with the body corporate for the Plan of Subdivision when registered. In summary, special condition 19 provides that the plaintiff will have control of the body corporate to the exclusion of the defendant (and other owners of lots) until the completion of the whole of the development.

In my view, there is nothing unfair, unjust or unreasonable in special condition 6.3 of the contract of sale. The development is of an extremely large scale and it is to be expected that the plaintiff will, acting reasonably, wish to provide for some reasonable flexibility to amend the Building Plans and Specifications during the construction phase. As discussed in relation to uncertainty issues, this is what special condition 6.3 provides for. In the absence of such a provision, the plaintiff would be exposing itself to the cost, which I infer is in the order of tens of millions of dollars, of constructing the Building on the faith of “off the plan” contracts of sale which would be subject to the risk of avoidance if alterations, however immaterial, are made to the Building Plans and Specifications.

It is true that the right in special condition 6.3 to vary or alter the Building Plans and Specifications is not limited by any objective criterion other than that the plaintiff or the Builder considers such variation or alteration to be “necessary or desirable” and, in connection with fixtures, fittings, finishes and appliances, a criterion of “like quality” is stated. However, special conditions 6.4, 6.5 and 6.6 provide for the plaintiff to give notice of any amendment which, in the plaintiff’s opinion, materially and detrimentally affects the defendant.

Although the objective standard of material and detrimental effect upon the defendant is left to the opinion of the plaintiff, it is in my opinion to be implied that the plaintiff must act honestly and reasonably in deciding whether or not to form such an opinion and to serve a notice under special condition 6.4. In my view, the conditions necessary for the implication of such a term have been established.[51]
[51]Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347.

Nor, in my view is special condition 19 unjust, unfair or unreasonable. Given the size of the development, there is potential for a body corporate of a plan of subdivision for one stage of the development to cause difficulties and delays for the completion of the whole development. Mr Long gave evidence as to the commercial justification for special condition 19. In my view, that evidence was admissible to show that it was a fair, just and reasonable term to insert in the contract of sale. I accept the justifications put forward in evidence by Mr Long. However, even without that evidence, it was in my view, wholly understandable, and commercially justifiable, for the plaintiff to have insisted that it retain control of the body corporate of the Plan of Subdivision until completion of the whole of the development.

(4) Statutory Unconscionable Conduct

The question remains as to whether the defendant has established that the plaintiff engaged in unconscionable conduct in contravention of s. 51AC of the Trade Practices Act or s. 8A of the Fair Trading Act. In my opinion, there is no aspect of the conduct of the plaintiff on the release day which attracts the pejorative moral judgment that it was unconscionable within the meaning of the sections. This is especially so in circumstances where I have found that the transaction constituted by the contract of sale was just, fair and reasonable.

Conclusion

In summary, I have found that the defendant was not induced to sign the contract of sale by any misrepresentation, the contract of sale is not void for uncertainty, the contract of sale is not a domestic building contract which is liable to be avoided under the provisions of s. 11(3) of the Act and that the plaintiff did not engage in unconscionable conduct in connection with the contract of sale. As a result, the plaintiff’s claim for payment of the deposit, and interest, must succeed. I will hear the parties as to the form of orders and as to costs.

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“Quality fixtures and fittings have been used throughout the unit complex and were in ‘new’ condition as at the date of inspection.”

[2006] VSC 48

22 February 2006