Moore v Stockland South Beach Pty Ltd

[2011] WASC 337

MOORE -v- STOCKLAND SOUTH BEACH PTY LTD [2011] WASC 337

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2011] WASC 337
Case No:	CIV:2780/2009	Heard:	3 AUGUST 2011
Coram:	CORBOY J	Delivered:	5/12/11
No of pages:	23	Judgment Part:	1 of 1
Result:	Further submissions on the facts relevant to some of the proposed preliminary issues to be provided to enable the application to be determined in respect of those issues; balance of the application dismissed
Category:	B
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Parties:	BRADLEY COLIN MOORE REBECCA ANNE MOORE THE BUILDING DEVELOPMENT GROUP PTY LTD PHILLIP GORDON MARSH and KELLY ELIZABETH MARSH As trustees for the Anstey Trust, GORDON FRANK MARSH and JOAN IVY MARSH, and GOMAR PTY LTD As trustee for the Philgo Superannuation Fund IAN MATHIESON LINDSAY MATHIESON CHRISTOPHER JAMES THOMAS STOCKLAND SOUTH BEACH PTY LTD
Catchwords:	Practice and procedure Whether trial of preliminary issues should be ordered Turns on its own facts
Legislation:	Strata Titles Act 1985 (WA), s 69A, s 69C, s 69D, s 70
Case References:	AWB Ltd v Cole (No 2) [2006] FCA 913; 233 ALR 453 Carlo Nobili SpA Ribinetterie v Militaire Nominees Pty Ltd [2004] WASC 47 City of Swan v Lehman Brothers Australia Ltd [2009] FCA 784; 73 ACSR 86 Landsdale Pty Ltd v Moore [2009] WASCA 176 Reading Australia Pty Ltd v Australian Mutual Provident Society [1999] FCA 718; 217 ALR 495 Wilsmore v Court [1983] WAR 190

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION : MOORE -v- STOCKLAND SOUTH BEACH PTY LTD [2011] WASC 337 CORAM : CORBOY J HEARD : 3 AUGUST 2011 DELIVERED : 5 DECEMBER 2011 FILE NO/S : CIV 2780 of 2009 BETWEEN : BRADLEY COLIN MOORE

REBECCA ANNE MOORE
First Plaintiffs

THE BUILDING DEVELOPMENT GROUP PTY LTD
Second Plaintiff

PHILLIP GORDON MARSH and KELLY ELIZABETH MARSH As trustees for the Anstey Trust, GORDON FRANK MARSH and JOAN IVY MARSH, and GOMAR PTY LTD As trustee for the Philgo Superannuation Fund
Third Plaintiffs

IAN MATHIESON
LINDSAY MATHIESON
Fourth Plaintiffs

CHRISTOPHER JAMES THOMAS
Fifth Plaintiff

AND

STOCKLAND SOUTH BEACH PTY LTD
Defendant

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Catchwords:

Practice and procedure - Whether trial of preliminary issues should be ordered - Turns on its own facts

Legislation:

Strata Titles Act 1985 (WA), s 69A, s 69C, s 69D, s 70

Result:

Further submissions on the facts relevant to some of the proposed preliminary issues to be provided to enable the application to be determined in respect of those issues; balance of the application dismissed

Category: B

Representation:

Counsel:

First Plaintiffs : Mr D K Barker
Second Plaintiff : Mr D K Barker
Third Plaintiffs : Mr D K Barker
Fourth Plaintiffs : Mr D K Barker
Fifth Plaintiff : Mr D K Barker
Defendant : Mr S M Temby

Solicitors:

First Plaintiffs : Chalmers Legal Studio Pty Ltd
Second Plaintiff : Chalmers Legal Studio Pty Ltd
Third Plaintiffs : Chalmers Legal Studio Pty Ltd
Fourth Plaintiffs : Chalmers Legal Studio Pty Ltd
Fifth Plaintiff : Chalmers Legal Studio Pty Ltd
Defendant : Norton Rose Australia

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Case(s) referred to in judgment(s):

AWB Ltd v Cole (No 2) [2006] FCA 913; 233 ALR 453
Carlo Nobili SpA Ribinetterie v Militaire Nominees Pty Ltd [2004] WASC 47
City of Swan v Lehman Brothers Australia Ltd [2009] FCA 784; 73 ACSR 86
Landsdale Pty Ltd v Moore [2009] WASCA 176
Reading Australia Pty Ltd v Australian Mutual Provident Society [1999] FCA 718; 217 ALR 495
Wilsmore v Court [1983] WAR 190


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1 CORBOY J: The defendant was the owner of land located in Coogee. It developed the land by constructing an apartment complex. Each of the plaintiffs and the defendant entered into 'off the plan' contracts for the sale and purchase of lots to be created on registration of a strata plan for the development and the issue of separate titles (the Sale Contracts).

2 The plaintiffs allege that the Sale Contracts were void for uncertainty, alternatively that they were terminated under s 69D and/or s 70(4) of the Strata Titles Act 1985 (WA) (the Act). They claim declarations to that effect.

3 The plaintiffs further allege that the defendant engaged in misleading or deceptive conduct prior to the making of the Sale Contracts by misrepresenting aspects of the proposed development. They claim, in effect, orders under s 87 of the Trade Practices Act 1974 (Cth) declaring the Sale Contracts void. There is also an alternative claim for rescission.

4 The defendant denies that the Sale Contracts are void or at an end or are liable to be declared void or rescinded. It counterclaims for specific performance.

5 The plaintiffs have applied for a preliminary determination of particular issues that arise on the pleadings. I have concluded that there may be merit in a separate trial of certain issues but further clarification of those issues and the relevant facts is required. I will hear from the parties on that part of the plaintiffs' application in the light of these reasons. I do not consider that the other issues proposed by the plaintiffs as preliminary issues should be determined at a separate trial.

The structure of the statement of claim

6 The statement of claim is divided into four parts. Those parts are entitled in the pleading, 'Uncertainty of Subject Matter'; 'Alternative Plea - Termination Under s 70(4) of the Act'; 'Further Alternative Plea - Termination Under s 69D of the Act'; and 'Further Alternative Plea - Misrepresentation and Misleading and Deceptive Conduct'. The proposed preliminary issues relate to some (but not all) of the allegations made in those parts of the statement of claim that concern s 69D and s 70(4) of the Act.

7 The allegations of misrepresentation and misleading or deceptive conduct refer to statements allegedly made about numerous aspects of the proposed development prior to each of the plaintiffs entering into the Sale Contracts. It is only necessary to refer to one of the alleged statements.

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8 It is alleged that the defendant by its selling agent represented that 'on becoming an owner nothing further would need to be done in order to enjoy the Development' (statement of claim, par 40.1.4). It is further alleged (par 41.2.6) that the statement was

…taken by the Plaintiffs to erroneously mean that for an owner there would be nothing further to be done to enjoy the Development…[and] meant that there was no prospect of further monies having to be expended for the continued use and enjoyment of the Development, whereas there is a real prospect of the owners having to bear the cost of retro fitting pumps and water tanks in order to make the Development fire safe as approval of the Development was on the condition that such installation would be done should the Water Corporation's publicly stated intention to lower mains water pressure reduce pressure to a level necessitating such works.

9 It is alleged that the defendant knew or ought to have known that this statement was false, alternatively that it was indifferent to the truth of the statement (par 42). The particulars to that allegation plead that the 'fire engineered solution for the Development carried with it the risk that the owners may have to retrofit water tanks and pumps to make the Development fire safe, should the Water Corporation's published intention to lower mains water pressure necessitate such work being carried out'.

10 As will be seen, the defendant contends that those allegations of misrepresentation and misleading or deceptive conduct raise matters that are also relevant to some of the preliminary issues proposed by the plaintiffs.

The defendant's response to the plaintiffs' formulation of the proposed preliminary issues

11 The defendant in its submissions in opposition to the application identified what it regarded as being the issues sought to be advanced by the plaintiffs as preliminary issues (defendant's outline of submissions in opposition dated 1 August 2011, par 7). It emerged in argument that the defendant's statement of the proposed issues represented a reformulation of at least one of the issues put forward by the plaintiffs. The defendant's statement of the issues is further considered later in the reasons. This part of the reasons explains the issues as stated by the plaintiffs in their application.

The first proposed preliminary issue

12 Clauses 8.1 to 8.23 of the Sale Contracts contained provisions that generally stipulated the time by which certain events forming part of the development were to occur, including the date by which the strata plan

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was to be registered and a separate title issued for each lot (referred to in the Sale Contracts as the 'Registration Date'; 'Registration' being the term used to describe the issue of a separate title for the relevant lot). In particular, cl 8.4 provided that, 'the sale and purchase of the Property is conditional on Registration being effected by the Registration Date (or if applicable, any extended Registration Date under Sale Condition 8.18)'. Clause 8.5 of the Sale Contracts provided that either party could terminate the contract by giving notice to the other party at any time after the Registration Date if the condition contained in cl 8.4 was not satisfied.

13 The defendant could, if it chose, extend the Registration Date under cl 8.18 of the Sale Contracts if there were delays in completing the development for any of the reasons specified in the clause. The defendant was obliged to give the purchaser a notice where it intended to rely on cl 8.18 specifying the reason for the relevant delay and the extended date for Registration. The defendant was not, however, entitled to extend the Registration Date beyond a specified date (referred to in the contract as the 'Last Date') (cl 8.21).

14 Clause 8.23 of the Sale Contracts provided that the purchaser and the defendant agreed that the provisions of condition 8 were a valid agreement in relation to 'Registration' for the purpose of s 70(4) of the Act. That section provides that:

If the strata/survey-strata plan is not registered -

(a) within such period after the date of the contract as is agreed in writing by the purchaser and the vendor; or

(b) in the absence of any such agreement, within six months after that date,

the purchaser may avoid the sale at any time before plan is registered.

15 Further, s 70A of the Act provides that:

(1) A contract or arrangement is of no effect to the extent that it purports to exclude or restrict the operation of this Part or the rights and remedies conferred on a purchaser by this Part.

(2) A purported waiver of a right, remedy or benefit conferred on a purchaser by this Part is of no effect.

16 The plaintiffs allege that cl 8.1 to cl 8.22 did not contain an agreement about the date by which the strata plan was to be registered for the purpose of s 70(4) so that they were entitled at any time after the
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expiration of six months from the date of their respective contracts and before registration of the strata plan to avoid the purchase of the subject lots (statement of claim, pars 18 and 22). The defendant denies that allegation.

17 The first preliminary issue identified by the plaintiffs concerns the meaning and effect of cl 8.4 of the Sale Contracts. The issue sought to be determined is whether cl 8.4 constitutes an agreement in writing for the purpose of s 70(4)(a) of the Act.

The second proposed preliminary issue

18 The second preliminary issue proposed by the plaintiffs assumes that it is held that cl 8.4 of the Sale Contracts does not constitute an agreement for the purpose of s 70(4)(a). The issue sought to be determined on that assumption is whether notices of termination issued by each of the plaintiffs were effective to avoid the purchase of the subject lots. The notices relevant to this issue (and the fourth proposed preliminary issue) are alleged to have been issued by the first to third plaintiffs in August 2009, by the fourth plaintiffs on 17 November 2009 and the fifth plaintiff in March 2010 (statement of claim, par 24). March 2010 is after the date on which the defendant alleges that the strata plan was registered (12 February 2010; see defence and counterclaim, par 18(2)).

The third proposed preliminary issue

19 Clause 8.20 of the Sale Contracts provided that a purchaser was not entitled to 'make any Objection in relation to the [defendant] exercising its rights under Sale Condition 8.18' (the right to extend the Registration Date). The term 'Objection' was a defined term for the purpose of cl 8.20; it was defined in cl 38.1 to mean 'any objection, requisition, claim for compensation, withholding of all or part of the Purchase Price, refusal to complete Settlement or delay in completing Settlement'.

20 The third issue proposed by the plaintiffs as a preliminary issue assumes that cl 8.4 constituted an agreement for the purpose of s 70(4)(a) of the Act. The issue sought to be determined on that assumption is whether cl 8.18 also constituted such an agreement having regard to, among other things, cl 8.20.

The fourth proposed preliminary issue

21 The fourth proposed preliminary issue assumed that it was held that cl 8.18 did not constitute an agreement for the purpose of s 70(4)(a) of the Act. The preliminary issue sought to be determined on that assumption is

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whether the notices of termination issued by the plaintiffs avoided the sale of the lots the subject of the Sale Contracts.

The fifth proposed preliminary issue

22 The fifth preliminary issue proposed by the plaintiffs concerns the construction of s 69C(3)(b)(i) of the Act. That section forms part of a scheme created by the Act for notifying purchasers of strata titled lots or proposed lots about certain matters.

23 Section 69(1) requires a purchaser to be provided with 'notifiable information' prior to entering into a contract for the sale and purchase of a strata-titled lot or proposed lot. Section 69A of the Act specifies the notifiable information to be given under s 69 by every vendor. That information includes in the case of a proposed scheme, the proposed by-laws for the scheme but only so far as they amend, repeal or add to the by-laws set out in sch 1 and sch 2 to the Act (s 69A(e)).

24 Section 69C(1) imposes an obligation on a vendor under a contract to sell a lot or proposed lot to inform the purchaser in writing of full particulars of any notifiable variation. Subsection (3), in effect, defines what constitutes a notifiable variation; par (b)(i) provides that a notifiable variation occurs if before the registration of the purchaser as proprietor of the proposed lot or earlier avoidance of the contract, the strata company or the original proprietor, in its own right or exercising the power of the company, makes a by-law.

25 Section 69D(1) provides that a purchaser has a right to avoid a sale contract before the settlement of the contract if the vendor has failed to provide information that substantially complies with s 69 or s 69C and at the time required by that section. Further, s 69D(2) provides that a purchaser has a right to avoid the contract by notice given to a vendor within seven working days after the vendor gives to a purchaser information that substantially complies with s 69C and at the time required by that section but the purchaser has been materially prejudiced by any matter referred to in the notice and has not agreed to be bound by that matter.

26 The proposed fifth preliminary issue seeks to have determined whether a notifiable variation occurs for the purpose of s 69C(3)(b)(i) if the original proprietor of land proposes a by-law that amends, repeals or adds to the proposed by-laws previously notified under s 69A(e) of the Act.

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The sixth proposed preliminary issue

27 The sixth issue sought to be determined as a preliminary issue assumes that the fifth preliminary issue is answered in the affirmative. The issue sought to be determined on that assumption is whether the defendant ought to have given a notice to the plaintiffs in or about November 2007 of proposed by-laws dealing with a 'fire safety engineered solution' when it gave an undertaking to the City of Cockburn that it would amend the proposed by-laws dealing with that matter. The circumstances surrounding that issue are further explained later in the reasons.

The seventh proposed preliminary issue

28 The seventh proposed preliminary issue assumes that it is held that the defendant ought to have given a notice to the plaintiffs at the time that it allegedly gave the undertaking to the City of Cockburn. The issue sought to be determined on that assumption is whether notices of termination given by the plaintiffs under s 69D of the Act avoided the contracts for the sale and purchase of the subject lots. The notices were alleged to have been given in December 2009 (statement of claim, par 36).

The relevant principles

29 In Wilsmore v Court [1983] WAR 190 Burt CJ observed in relation to an order made by consent for the trial of certain points of law as a preliminary issue:

No doubt the parties at the time saw the course which they had embarked upon as being a cheap and quick way in which to have the case decided. They apparently saw it as a shortcut. It has not turned out that way. It seldom does. It is an exceptional way of proceeding and should be reserved for the exceptional case and when it is used the question of law should be formulated in the order with precision and it should be a question which on the admitted facts will finally dispose of the action or an identifiable cause of action within it. It should not be used when the question of law so called is but a step in the development of an argument. (193)

30 Similar sentiments have been expressed by judges on numerous other occasions. For example, Newnes JA recently observed in Landsdale Pty Ltd v Moore [2009] WASCA 176:

The respondents' application for separate trials of liability and damages was founded on the proposition that such a course would result in a more efficient and cost-effective resolution of the proceedings. There is no

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doubt that at a time when the time and cost involved in litigation is a matter of legitimate public concern, it behoves the court to approach each case which comes before it with the object of eliminating any unnecessary delay or cost, and ensuring the efficient and timely resolution of the case, consistent with doing justice to both sides. That is reflected in O 1 r 4A and r 4B of the Rules of the Supreme Court 1971 (WA). But while that will often require a more flexible approach than might have been taken in the past, at the same time it is important that the lessons of the past are not forgotten, and that the court and the parties do not succumb to the immediate attraction of apparently more efficient but less conventional procedures without careful regard to past experience with such procedures.

In relation to the present case, experience has shown that the attraction of a separate trial of issues is often illusory; it is a course that often causes the very delay, additional expense and uncertainty of outcome it was intended to avoid. [19] - [20]

31 See also the comments of Rares J in City of Swan v Lehman Brothers Australia Ltd [2009] FCA 784; 73 ACSR 86 [26].

32 The parties accepted that the principles relevant to an application for a trial of preliminary issues were conveniently summarised by McKechnie J in Carlo Nobili SpA Rubinetterie v Militaire Nominees Pty Ltd [2004] WASC 47 [4]. It is not necessary to reproduce in these reasons his Honour's summary of the relevant principles but I gratefully adopt and apply that summary. I note that, as would be expected, the emphasis is on the possible saving of costs and the speedy resolution of matters. That is most likely to occur where the preliminary issue is relatively simple and is not enmeshed in factual controversy. Ultimately, the question is whether the court is satisfied that it is 'just and convenient' for an order for a separate trial to be made: City of Swan [27] (2).

The grounds relied on by the plaintiffs

33 The plaintiffs relied in support of their application on an affidavit sworn by Bradley Colin Moore, who is one of the plaintiffs. The affidavit primarily recounted advice that had been given by the plaintiffs' solicitors on the benefits that might be derived by a separate trial of preliminary issues. In summary, Mr Moore stated that he has been advised that:

(a) the issues raised in the action, apart from the preliminary issues, will require the plaintiffs to give evidence and it will be necessary for evidence to be adduced from at least two experts;

(Page 11)

(b) it is estimated that the cost of retaining senior and junior counsel for a trial, including preparation, would be approximately $250,000;

(c) there is a dispute in relation to the discovery of documents that an expert proposed to be retained by the plaintiffs has advised he requires and the plaintiffs would be involved in additional expense in seeking further discovery.

The defendant's objections

34 Briefly stated, the defendant opposed the plaintiffs' application on four grounds:

(a) proposed preliminary issues five to seven raise questions on which a considerable body of contested evidence will be required;

(b) proposed preliminary issue six raises factual questions that are also relevant to the plaintiffs' allegations of misrepresentation and misleading or deceptive conduct;

(c) proposed preliminary issues one to four 'inappropriately' narrow the matters to be determined on the meaning and effect of s 70(4);

(d) proposed preliminary issues one to four are not raised by the fifth plaintiff so that the defendant will still be put to the expense of a trial even if the first to fourth plaintiffs succeed in establishing that their Sale Contracts were avoided pursuant to s 70(4) of the Act.

35 The defendant relied on an affidavit made by Kathryn May McDougall. Ms McDougall is a solicitor employed by the firm of solicitors who appear for the defendant. The purpose of her affidavit was to identify evidence that the defendant contends it would be required to adduce in its case on the matters raised by proposed preliminary issues five to seven. The matters stated by Ms McDougall are further considered later in the reasons.

The facts upon which the preliminary issues might be determined

36 Although affidavits in support and in opposition to the application were read, I was not provided with a copy of the Sale Contracts until during the hearing. There were other submissions made about aspects of the development, in particular the stages involved in completing the entire project, that were difficult to follow without the benefit of relevant evidence.

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37 It is common in an application for a separate trial of an issue for the applicant to provide a draft statement of the facts said to be relevant to the issue. That is a desirable practice. As Rares J observed in City of Swan:

The order must be made on concrete facts, either established or agreed, for the purpose of quelling a controversy between the parties so as to produce a conclusive or final judicial decision on the issue, which is of a real, not hypothetical, importance to the determination of the controversy.

There are special problems where the separate issue involves a mixed question of fact and law, although it may still be able to be decided as a separate issue. However, care must be taken in precisely formulating the question and specifying the facts upon which it is to be decided. [27]

38 In this instance, the plaintiffs did not provide a statement of the relevant facts for any of the preliminary issues. The statement of proposed preliminary issues listed a number of documents by their discovery numbers that were said to be relevant to proposed issue six but that, of course, did not assist in understanding the questions of fact relevant to that issue.

39 The primary relief sought by the plaintiffs under the Act is for orders declaring the legal effect of the Sale Contracts and the various notices of termination that they issued. Declaratory relief is discretionary. The court must be placed in a position where it can consider all relevant matters before it exercises its discretion if the proposed preliminary issue involves a claim for declaratory relief: AWB Ltd v Cole (No 2) [2006] FCA 913; 233 ALR 453 [33] (Young J).

Proposed issues five to seven

40 It is convenient to first consider whether there should be a separate trial of proposed preliminary issues five to seven.

41 The matters pleaded in pars 25 to 37 of the statement of claim concerning the alleged termination of the Sale Contracts under s 69D of the Act are not confined to the pleaded failure to comply with s 69C(3)(b)(i) that is the subject of proposed preliminary issues five to seven. The subject matter of those issues are substantially pleaded in pars 32 and 33 of the statement of claim but even those paragraphs raise other allegations of non-compliance with s 69C.

42 Paragraphs 27 and 29 of the statement of claim allege that by letters dated 30 November 2009 the defendant purported to give notice to the plaintiffs of notifiable variations under s 69C of the Act. Those variations

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concerned the proposed by-laws of the strata company and the plans for the development that formed an annexure to the Sale Contracts.

43 It is further alleged that:

(a) the variations were stated to be minor variations to the management statements attached to the Sale Contracts (pars 28 and 30);

(b) the changes notified were not, in fact, minor (par 30);

(c) the changes concerned new proposed by-laws 209, 210, 214, 215, 216 and 265 and changes to the plans referred to in by-laws 174, 176 and 177 that materially altered the plan for stages 2, 3 and 4 of the development as originally notified (the particulars to par 31);

(d) new proposed by-laws 209 and 210 were not minor variations as they 'mean[t] that construction is not in accordance with Australian Fire Safety Codes necessitating a FSED report which casts upon all proprietors, including the plaintiffs, fire safety obligations and associated costs' (par (a) to the particulars to par 31);

(e) the other new proposed by-laws meant that all administrative expenses associated with each stage of the development would not be borne proportionately according to lot entitlements as originally notified and the strata company's power to approve window treatments was 'abrogated' (pars (b) and (c) to the particulars to par 31).

44 Paragraph 32(1) of the statement of claim alleges that the defendant failed to comply with s 69C(3) of the Act by not notifying the plaintiffs of how the strata plan proposed to be registered differed in a material particular to the plans that had been annexed to the Sale Contracts. Paragraphs 32.2 and 33 of the statement of claim allege that the defendant failed to comply with s 69C(2) of the Act by not notifying the plaintiffs of notifiable variations as soon as it became aware of those variations. The particulars to those allegations refer separately to when the defendant knew of the need for proposed new by-laws 209 and 210; when it knew of the need for proposed by-laws 214, 215, 216 and 265; and when it knew of changes in the proposed strata plan. It is alleged that the defendant knew that a notifiable variation had occurred in relation to proposed by-laws 209 and 210 when it knew that the development was not
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constructed in accordance with Australian Fire Safety Codes (statement of claim, particulars to par 32.2).

45 Paragraph 34 of the statement of claim pleads that the notified variations were materially prejudicial to the plaintiffs, again separate particulars being provided as to why proposed by-laws 209 and 210 were allegedly prejudicial (although those particulars draw a connection between proposed by-laws 209 and 210 and proposed by-laws 214, 215 and 216). Paragraph 36 alleges that by notices dated 14 December 2009 the plaintiffs terminated the Sale Contracts pursuant to s 69D.

46 Many of the allegations made in pars 27 to 34 are put in issue by the defendant. It would appear, for example, that the variations notified to the fourth plaintiffs were different to those notified to the other plaintiffs (compare pars 27 and 29 of the statement of claim and the reference to 'Stage A Variations' and 'Stage B Variations'). As might be expected, the defendant denies the allegation that the notified variations were not minor and pleads various factual matters in answer to that allegation. Those matters include an allegation that 'by-laws 209 and 210 of the Final Management Statement do not mean that construction was not in accordance with Australian Fire Safety Codes and the obligation imposed by by-laws 209 and 210 on the strata company do not constitute a variation that materially prejudices [the plaintiffs]' (defence and counterclaim, par 29(1)). The question of whether the notified variations were 'minor' is relevant to whether there was substantial compliance with the requirements of s 69 or s 69C for the purpose of s 69D(1) of the Act.

47 The defendant also denies the allegations of material prejudice. It denies that the fifth plaintiff issued a notice to terminate his Sale Contract pursuant to s 69D on 14 December 2009 (defence and counterclaim, pars 31 and 33(2)).

48 Proposed preliminary issue five is intended to raise for determination the question of whether a notifiable variation occurs as soon as a vendor of a proposed lot that forms part of a proposed scheme becomes aware of the need to amend the proposed, previously notified by-laws for that scheme. That is an issue that arises in respect of each of the grounds relied on by the plaintiffs to allege that they were entitled to and did avoid the Sale Contracts pursuant to s 69D. However, proposed preliminary issues six and seven focus on only one of the alleged grounds for avoidance: the requirement for new by-laws concerning fire safety ('new by-laws 209 and 210'). Various other grounds on which it is alleged that the plaintiffs were entitled to avoid the Sale Contracts under s 69D would

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remain to be decided at trial if the plaintiffs failed to establish their case on proposed preliminary issues five to seven.

49 Proposed preliminary issue six refers to an undertaking said to have been given to the City of Cockburn to make by-laws dealing with a fire engineered solution. The particulars to par 32.2 and par 33 do not refer to such an undertaking. Rather, it is alleged that the defendant knew of the need to amend the proposed by-laws to introduce new by-laws 209 and 210 when 'the building was not to be constructed in accordance with Australian Fire Safety Codes'. Consequently, there is no obvious point of connection between the allegations made in the statement of claim and the matters sought to be determined by proposed preliminary issue six.

50 Ms McDougall's affidavit provided, however, some explanation of the context within which proposed preliminary issue six is said to arise for determination. There was no objection to Ms McDougall's affidavit and the plaintiffs offered no evidence that disputed what she stated.

51 The following matters were apparent from Ms McDougall's affidavit:

(a) the construction of the building forming the development was subject to the Building Code of Australia;

(b) that Code imposes certain design requirements for fire safety;

(c) the defendant proposed to use a fire safety engineered design to satisfy the requirements of the Building Code;

(d) it was necessary for the defendant to liaise with the City of Cockburn regarding the use of that design;

(e) there were certain requirements that were necessary to be satisfied before the design could be finally approved and the building certified by the City of Cockburn.

52 According to Ms McDougall, at the trial of the action (or on the hearing of preliminary issues five to seven) the defendant proposes to adduce evidence about those matters. The defendant also proposes to lead evidence about:

(a) its dealings with the City of Cockburn regarding the fire safety design;

(b) the decisions it made regarding the design of the development and fire safety;

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(c) the requirements and procedures for obtaining approval from the relevant local and fire authorities for the fire safety design of the building;

(d) the timing of those approvals and the effect that the procedures had on drafting amendments to the proposed by-laws.

53 It is proposed that evidence about those matters would be given by one of the defendant's managers; an engineer; an architect; a fire safety design consultant; a representative of the Water Corporation; and a quantity surveyor. It is anticipated that evidence from those witnesses would occupy approximately three days' hearing time.

54 Ms McDougall stated that the witnesses who may give evidence on the fire safety design of the development will also be required to give evidence on other matters in dispute in the action, including on alleged differences between the design and the development, the cost of retro fitting the development and whether other changes to the proposed by-laws were significant and likely to be materially prejudicial. Ms McDougall stated, 'there is a significant cross-over in the evidence that will be led in relation to the plaintiffs' issues five, six and seven and the balance of the issues arising out of the re-amended further amended statement of claim dated 22 October 2010' (Ms McDougall's affidavit sworn on 1 August 2011, par 9). She estimated that the cost of preparing for and attending at a trial of preliminary issues five, six and seven would be approximately $220,000 based on a hearing of four days plus four days' preparation for senior counsel, junior counsel and two instructing solicitors.

55 The plaintiffs' counsel in oral submissions disputed the need for evidence of the kind foreshadowed by Ms McDougall on proposed preliminary issues six and seven. It was, he contended, simply a question of construction concerning 'timing', by which I understood him to mean that the plaintiffs' case was that the defendant was obliged to notify the plaintiffs as soon as it had, according to the plaintiffs, given an undertaking to the City of Cockburn to make a by-law and no notification had been given by the time that the plaintiffs served their notices of termination. The reason why the by-law had been necessary and the circumstances in which it was made were irrelevant.

56 Four points arise out of that submission. First, it was said that the right to avoid the contract to which proposed preliminary issue seven refers was under s 69D(1). The statement of the issue refers to the notices

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pleaded in par 36 of the statement of claim. That paragraph does not distinguish between a right to avoid a contract under s 69D(1) and pursuant to s 69D(2). The circumstances in which a notice may be given under each subsection are different and the right of avoidance under s 69D(2) is dependent on the purchaser establishing material prejudice. I assume that the plaintiffs assert that they were entitled to avoid under the Sale Contracts under both s 69D(1) and s 69D(2) since par 34 of the statement of claim is directed to the question of material prejudice. Consequently, buried within preliminary issue seven is a further fragmentation of the issues to be determined on that part of the statement of the claim concerning s 69D of the Act.

57 Second, as previously noted s 69C(3)(b)(i) of the Act provides that a notifiable variation occurs when the strata company or the original proprietor 'makes' a by-law. The plaintiffs' contention on proposed preliminary issues five to seven is that the defendant made a by-law when it gave an undertaking to the City of Cockburn (assuming that an undertaking was given) as the word 'makes' must be read in the context of s 69A. On the plaintiffs' interpretation, a notifiable variation occurred when the defendant proposed to amend a proposed by-law that had been previously notified.

58 It appears that the plaintiffs consider that proposed preliminary issues five to seven could be determined on a very limited set of facts on that interpretation. It would only be necessary to know the dates on which the Sales Contract had been made, the content of the proposed by-laws that had been previously notified to the plaintiffs, the form of the undertaking, the date of the relevant notices of termination and the date on which Registration was effected.

59 However, in my view, preliminary issues five to seven potentially involve a wider factual enquiry. The undertaking that was allegedly given by the defendant to the City of Cockburn was not identified in the evidence submitted in support of the plaintiffs' application. The court was simply advised that the defendant had given what the plaintiffs characterised as an undertaking. Consequently, it is possible that the defendant would seek to adduce evidence on whether whatever communication is relied on by the plaintiffs is to be characterised as an undertaking. Further, the plaintiffs contend that the undertaking constituted a proposed by-law. That contention raises factual questions about whether the undertaking could be characterised as a proposed by-law within the meaning of s 69C. As the defendant intimated, that may involve considering its course of dealing with the City and others

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about fire safety designs, the nature of a fire safety design and related matters such as compliance with the relevant building code and the process by which by-laws were made.

60 The defendant's primary argument is that the meaning of the word 'makes' is plain and that the giving of an undertaking to the City of Cockburn could not constitute the making of a by-law according to the ordinary meaning of the word when used in s 69C(3)(b)(i). However, it wishes to adduce evidence in answer to the plaintiffs' claim and it appears that at least some of the evidence that it has foreshadowed may be relevant. Further, the defendant could not be denied an opportunity to adduce evidence at the hearing of the preliminary issues that was intended to demonstrate that it did not make a by-law in November 2007 when all of the circumstances are examined however s 69C(3)(b)(i) is construed.

61 The third point arising from the plaintiffs' submissions concerns the relevant pleadings. As has been explained, the proposed preliminary issues are not explicitly raised by the pleadings. Consequently, it is not clear on the pleadings whether the matters identified in the proposed preliminary issues represent the plaintiffs' entire case on why proposed by-laws 209 and 210 constituted notifiable variations.

62 Finally, the undertaking relied on by the plaintiffs was allegedly given before the Sale Contracts were made with the first to fourth plaintiffs. However, the fifth plaintiff entered into his Sale Contract after November 2007. It is not clear whether proposed preliminary issues five to seven - which refer to a notifiable variation - were intended to embrace the fifth plaintiff's claim. Paragraph 32.2 of the statement of claim alleges that defendant did not notify the fifth plaintiff of the 'need' for new by-laws 209 and 210 (and the use of the word 'need' in that allegation raises a further question regarding the meaning of 'makes' for the purpose of s 69C(3)(b)(i)). However, as I have indicated, it is not immediately apparent how proposed preliminary issue six relates to that allegation. I also note that there is no allegation in par 32.2 that the defendant failed to notify the fourth plaintiff of any notifiable variation. Again, that raises a doubt about the relationship between the pleadings and the statement of proposed preliminary issue six.

63 It is difficult to assess on the material before the court Ms McDougall's statements on the overlap between proposed preliminary issues five to seven and the balance of the matters that arise for determination on the pleadings. However, I accept her evidence that there a real risk of an overlap so that the defendant could be put to the cost of

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calling the same witnesses twice to deal with different aspects of the defendant's case. I also accept Ms McDougall's evidence regarding the possible length and expense of a trial of preliminary issues five to seven if the evidence that it has foreshadowed as being relevant is received on the preliminary issues. In Reading Australia Pty Ltd v Australian Mutual Provident Society [1999] FCA 718; 217 ALR 495 Branson J at [8] observed that the factors that tell against making an order for the determination of a preliminary issue include where the order may result in significant overlap between the evidence adduced on the hearing of the separate question and at trial with the risk that the same witnesses may be called at both stages of the hearing of the proceeding. Her Honour further noted that this factor may be particularly significant if the court could be required to form a view as to the credibility of witnesses who may give evidence at both stages of the proceeding.

64 In my view, this account of the preliminary issues, the relevant pleadings and Ms McDougall's evidence amply discloses that it is not appropriate that there be a separate trial of preliminary issues five to seven as proposed by the plaintiffs. In summary:

(a) The issues appear to raise factual questions that will inevitably be contested and which may occupy considerable hearing time.

(b) On the defendant's estimate, which I accept, the cost of separately determining the preliminary issues may be substantial.

(c) The preliminary issues are extracted from a complex set of related allegations which, in my view, would be more effectively and fairly heard and determined in a single hearing rather than in a fragmented way.

(d) The nature of the issues and the relevant pleadings are such that I consider that there is a risk that the number of matters that will fall to be determined may expand as the issues are further analysed in the course of preparing for a hearing. The comments of Newnes JA in Landsdale highlight that an application for a separate trial of a preliminary issue must necessarily be determined by the court using its experience to divine intuitively what course is most likely to best promote the case management objectives that underpin the court's procedures. My impression is that issues five to seven cannot be confined in a way that would be consistent with advancing those objectives.

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Preliminary issues one to four

65 It is not said by the defendant that preliminary issues one to four entail questions of fact on which evidence apart from the Sale Contracts would be required. However, it is contended that determination of those issues in favour of the plaintiff would not finally dispose of the matter. That, it is said, is because, 'in confining the court's consideration to only cl 8.4 and cl 8.18 of the contract, the court is asked to ignore the balance of the contracts and other potentially relevant clauses, such as cl 8.21 and cl 8.23 (in particular)' (defendant's outline of submissions in opposition to the plaintiffs' application for a trial of preliminary issues, par 27). That submission, in my view, suggests an overly narrow view of the process of construction that would be involved in determining preliminary issues one to four. In any event, the issues could be recast to ensure that, in effect, the court was asked to determine whether condition 8 in the Sale Contracts read as a whole contained an agreement in writing of the kind referred to in s 70(4)(a) of the Act.

66 The defendant contends that a separate trial on preliminary issues one to four should not be ordered for two further reasons: first, that it would be necessary to proceed to a trial if the plaintiffs failed on the proposed preliminary issues and second, the issues are irrelevant to the fifth plaintiff's claim so that the defendant would be required to incur the cost of defending that claim even if the preliminary issues were determined in favour of the first to fourth plaintiffs.

67 As to the first of those reasons, it is difficult to imagine a case where the outcome of a preliminary issue either way will determine the entire action. A separate trial of a preliminary issue is ordered in the expectation that it will dispose of the proceedings if determined one way or at least contribute to a saving of time and cost by substantially narrowing the matters to be contested at trial. As to the second reason, it was not clear from their submissions whether the plaintiffs accepted that the first four proposed preliminary issues did not embrace the claim made by the fifth plaintiff. The explanation of the plaintiffs' position involved documents and matters of fact about the stages of the development that were not before the court. However, the prospect that the defendant might be required to defend the fifth plaintiff's claim even if the actions by the first to fourth plaintiffs were determined on a trial of preliminary issues must be balanced against the interests of the first to fourth plaintiffs and the public interest in the efficient allocation of the court's resources.

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68 My preliminary view is that a separate trial of preliminary issues one to four should be ordered:

(a) Subject to what follows, the issues appear to be of narrow compass and capable of being heard and determined quickly and at significantly less cost to the parties than a trial of all of the issues raised on the pleadings.

(b) A determination of the preliminary issues in favour of the first to fourth plaintiffs would dispose of their claims. Obviously, that would achieve a significant cost saving for those parties.

(c) As has been indicated, it was not clear whether the fifth plaintiff's claim was excluded from the proposed preliminary issues. The defendant's concern was that it would be required to participate in two trials even if the first four plaintiffs succeeded on the proposed preliminary issues. However, part of a trial of all issues between all parties would be devoted to just those issues sought to be raised by preliminary issues one to four. A separate trial of those issues splits the hearing of all claims in a way that would occur de facto at trial. I acknowledge that there may be some additional expense and inconvenience to the defendant in having two trials but that cost should be limited. In any event, those costs would be substantially less than the costs that would be incurred by the first to fourth plaintiffs if there was only a single trial at which it was found that they were entitled to avoid their Sale Contracts under s 70(4) of the Act.

(d) A separate trial of preliminary issues one to four might assist in settling the entire action. It may be that the fifth plaintiff and the defendant can reach a compromise if the first to fourth plaintiffs succeed on the preliminary issues (assuming that the fifth plaintiff's claim is excluded from those issues). Alternatively, a settlement might be more readily achieved between some or all of the parties if it is found that the first to fourth plaintiffs have failed to establish that they are entitled to avoid the Sale Contracts on one of the principle grounds on which they rely for relief.

69 I have only expressed a preliminary view that a separate trial of proposed preliminary issues one to four should be ordered. That is because it has been necessary to make some assumptions in forming that view concerning the facts that might be relevant to the proposed preliminary issues in the absence of a draft statement of facts. For
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example, it is not clear whether either party would seek to adduce evidence of a kind said to be relevant to the proper construction of condition 8 of the Sale Contract.

70 Further, it was said in oral argument that cl 8.4 was 'not consistent throughout the documents' (ts 11). It was apparent that the plaintiffs thought that this was relevant to the statement of preliminary issues but the differences in the Sale Contracts and the possible implications for the statement of the proposed preliminary issues was not clearly explained. As has been mentioned, the defendant suggested that proposed preliminary issues one to four only contained three issues. The defendant's statement of the relevant issues deleted the separate references to cl 8.4 and cl 8.18 and simply posed the question whether the Sale Contracts extended the period by which the strata plan had to be registered under s 70(4) of the Act. I am not certain that this formulation correctly expresses the issue in contest but clearly, these matters need to be further clarified before a final decision can be made about whether there should be a separate trial.

71 The defendant's reformulation may also reflect another question that requires clarification. According to the matters alleged in pars 18 and 19 of the defence and counterclaim, it would have been necessary for the defendant to give notice under cl 8.18 of the Sale Contracts to extend the Registration Date for each contract. Neither party has expressly alleged in their pleadings that the defendant gave notice under cl 8.18. I assume from proposed preliminary issues three and four that the defendant did extend the Registration Date. I also assume from the pleadings that there is no question about the defendant's entitlement to extend the date for one or more of the reasons specified in cl 8.18 and that would appear to have the position adopted by the plaintiffs in the course of oral argument on their application. However, that needs to be confirmed to ensure that there are no factual questions buried within the proposed preliminary issues that have not been properly identified by the statement of the proposed issues or the relevant pleadings.

72 Finally, there is the question of whether the claim by the fifth plaintiff is affected by the proposed preliminary issues.

73 I propose to hear further from the parties as to what facts they contend would be relevant to a determination of proposed preliminary issues one to four. A final determination can be made on whether it is just and convenient to allow the plaintiffs' application for a separate trial of those issues once the queries raised in these reasons have been addressed

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by the parties. The defendant indicated that it wished to be heard on the formulation of the preliminary issues if it was concluded that there should be a separate trial on any of the issues proposed by the plaintiffs. It would be convenient to consider that matter at the same time as submissions are received on the facts that may be relevant to proposed preliminary issues one to four.