Myles Pearce & Co Pty Ltd v Leuci and Martin

[1997] SASC 6360

IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA

DOYLE CJ, DUGGAN AND BLEBY JJ

Contracts - particular parties - vendor and purchaser - contract for the sale of land - purchasers purported to rescind the contract apparently outside the time prescribed by s88 of the Land Agents, Brokers and Valuers Act 1973 - whether purported vendor's statement served under s90 of the Act was a valid statement - failure to disclose the existence of a mortgage, information about a previous transaction affecting the land, and the nature and extent of an encumbrance each separately invalidated the vendor's statement - need for substantial compliance, having regard to the purpose of the statement - whether s91G provides exclusive remedies for defective vendor's statements. Land Agents, Brokers and Valuers Act 1973 ss88,90,91,103; Land Agents, Brokers and Valuers Regulations 1986 , referred to. Golden-Brown v Hunt (1972) 19 FLR
438; South Australian Planning Commission and Wylie v McNeil (1985) 42 SASR
524; Wilson v City of Mitcham (1986) 61 LGRA 126, discussed.

Damages - measure and remoteness of damages in actions for tort - whether the measure of damages awarded to the vendor against the agents for legal costs incurred as a result of the agent's breach of its duty of care was excessive - held that it was not.

ADELAIDE, 4 August 1997 (hearing), 12 September 1997 (decision)

#DATE 12:9:1997

#ADD 22:9:1997

Appearances:

Appellant:

Counsel: Mr R W Sallis

Solicitors: Andersons

Respondent:

Alfredo Leuci:

Counsel: Mr G W Dart

Solicitors: Ward & Partners

Respondents Robert Martin and Roslyn Jean Martin:

Counsel: Mr G A Britton

Solicitors: Geoffrey Adam & Co

Order: appeal dismissed.

DOYLE CJ

In my opinion the appeal should be dismissed. I agree with the reasons of Bleby J for dismissing the appeal, and I have nothing to add to those reasons.

DUGGAN J

I am of the view that this appeal should be dismissed for the reasons given by Bleby J.

BLEBY J

The appellant ("the agent") was at all material times a land agent licensed under the provisions of the Land Agents, Brokers and Valuers Act 1973 ("the Act"), which Act has since been repealed, but the repeal does not affect its operation for the purpose of these proceedings.

The first respondent ("the vendor") was the vendor of a house property situated at 41 Bowden Grove, Marion. The first respondent engaged the agent to effect a sale of the property.

The second respondents, Mr and Mrs Martin ("the purchasers"), on 30 December 1995, signed a contract for the purchase of the property for the sum of $185,000, which contract was negotiated through the agency of the agent.

So far as is relevant s88 of the Act reads as follows:

"88. (1) Subject to this section, a purchaser under contract for the sale of land or a small business may, by giving the vendor written notice before the prescribed time of the purchaser's intention not to be bound by the contract, rescind the contract.

....

(3) If a contract is rescinded under subsection (1), the purchaser is, subject to subsection (4), entitled to the return of money paid under the contract.

(4) Where a contract is rescinded under subsection (1), the vendor may retain money paid by the purchaser -

(a) in consideration of an option to purchase the land or small business subject to the sale; or

(b) by way of deposit in respect of the sale if the deposit does not exceed $50 or, if a greater amount is prescribed, that amount. ....

(7) This section does not apply in respect of a contract for the sale of land or a small business where -

(a) in the case of a contract for the sale of land, the purchaser is a body corporate; or

(b) the purchaser has before entering into the contract received independent advice from a legal practitioner and the legal practitioner has signed a certificate in the prescribed form as to the giving of that advice; or

(c) the sale is by auction; or

(d) the land or business is offered for sale, but not sold, by auction and a person by whom, or on whose behalf, a bid for the land or business was made at the auction enters into the contract on the same day as the auction; or

....

(8) In this section -

'the prescribed time' means -

(a) in relation to the sale of land -

(i) where the vendor's statement is served on the prospective purchaser before the making of the contract - the end of the second clear business day after the day on which the contract was made;

(ii) where the vendor's statement is served on the purchaser after the making of the contract - the end of the second clear business day from the day on which the statement was served,

or the time settlement takes place (whichever is the earlier); ........"

It will be noted that in order to be effective, a cooling-off notice must be given before the prescribed time, and the definition of "prescribed time" ensures that that cannot occur until after the service on the purchaser of what is known as a "vendor's statement". This is subject only to the proviso that if settlement takes place without a valid statement having been served, the right to cool-off is lost. For the purposes of the Division of the Act in which this section appears, "vendor's statement" is defined as follows:

"'vendor's statement' means the statement that the vendor of land or a small business is required to serve under section 90 or 91 and includes all certificates that are required to be endorsed on or attached to the statement."

The obligation of a vendor to supply a vendor's statement in cases such as the present is contained in s90 of the Act which reads as follows:

"90. (1) A vendor of land must, at least ten clear days before the date of settlement, serve, or cause to be served, on the purchaser a statement in the prescribed form (signed by or on behalf of the vendor) setting out -

(a) the rights of a purchaser under section 88; and

(b) prescribed particulars of -

(i) all mortgages, charges and prescribed encumbrances affecting the land subject to the sale; and

(ii) where the vendor obtained title to the land within 12 months before the date of the contract of sale, all transactions involving transfer of title to the land occurring within that period; and

(iii) any prescribed matters.

(2) For the purposes of subsection (1)(b)(ii), where a person enters into a transaction for the purpose of obtaining title to land and an instrument of transfer, conveyance or other instrument relating to the transaction is lodged at the Land Titles Registration Office or the General Registry Office, the person will be taken to have obtained title to the land not later than the day on which the instrument of transfer, conveyance or other instrument is so lodged.

(3) The statement need not include reference to charges arising from the imposition of rates or taxes less than 12 months before the date of service of the statement.

(4) This section -

(a) applies only to the sale of land where the interest being sold is an estate in fee simple or leasehold interest granted by the Crown in pursuance of statute;

(b) does not apply where land is sold in pursuance of a contract for the sale of a business."

Section 91A places on a licensed agent the obligation to make the necessary enquiries and to certify to the completeness and accuracy of the information obtained.

The Land Agents, Brokers and Valuers Regulations 1986 ("the Regulations") prescribe a number of matters which need to be included in the vendor's statement, and also prescribe a form for such statement (Form 18). Part B of Form 18 describes the extent of the cooling-off rights that a purchaser has under s88. Part C of the form contains a certificate that the Schedule to the form contains all the particulars required to be given pursuant to s90(1)(b) of the Act. Part D contains a certificate with respect to prescribed enquiries by a licensed agent, and the Schedule contains a Table of a great many prescribed particulars relating to the land. These include particulars relating to mortgages of the land, easements over the land, restrictive covenants affecting the land, leases and tenancy agreements relating to the land, conditions associated with development and restrictions on activities that can be carried out on the land pursuant to a wide variety of planning and other legislation, notices which may have been given affecting the land under a number of Acts and particulars of caveats, liens and other notices which affect the land. The matters referred to in s90(1)(b) of the Act and the matters that are prescribed in the Regulations are all matters which may affect the decision of a purchaser of the land to purchase the land or to decide what price he or she will offer for the land.

In this case what purported to be a vendor's statement was delivered to the purchasers on the day on which they signed the contract (30 December 1994). The vendor had also signed the contract on that day. It was a contract which was expressed to be subject to the purchasers obtaining finance on certain stated conditions, and settlement was to be on 27 March 1995. If the vendor's statement was a valid statement, after allowing for a weekend and public holiday, the purchasers' right to cool off expired at the end of 4 January 1995. (Section 88(8)).

On 24 February 1995 the purchasers gave a notice of cooling-off pursuant to s88 of the Act. They claimed that they could do so because there were defects in the vendor's statement which had been served on them on 30 December 1994, the defects being such that it was not a valid statement for the purposes of s90 of the Act, and that accordingly the prescribed time for the purposes of s88(1) of the Act had not then passed. The defects in the statement (as to which there was no dispute) were said to be:

(1) That the statement did not refer to a transaction which had happened within twelve months before the date of the contract of sale involving a transfer of title to the land from the vendor and his former wife to the vendor, that transfer being part of the settlement consequent upon the dissolution of their marriage;

(2) That the statement did not refer to a mortgage of the land to the National Australia Bank to secure a loan to the vendor in order that he could make the agreed payments to his former wife;

(3) That particulars of an encumbrance which, although it was referred to in the statement, was not in the right place on the form, and which although it referred to the identity of the encumbrancee and the registration number of the encumbrance, did not, as Form 18 required, specify the nature of the restrictive covenant, whether it affected the whole of the land and whether it affected land other than that the subject of the contract. In fact, it was an encumbrance relating to the nature and style of fencing which could be erected on the land, but that was not apparent from the Form 18.

It seems that the vendor, having received the cooling-off notice, then took legal advice, and after the date for settlement had passed, gave a notice to complete to the purchasers in accordance with the requirements of the contract. The notice was not complied with, and the vendor then proceeded, through another agent, to place the land on the market again, and subsequently sold it at public auction for a price of $169,500, an amount of $15,500 less than the purchase price agreed between the vendor and the purchasers.

The vendor then commenced an action in the Civil Division of the Magistrates' Court of South Australia claiming damages against the purchasers, or in the alternative against the agent. The principal issue at trial concerned the validity of the vendor's statement and whether the defects to which I have referred justified the purchasers' contention that the notice was invalid, and that they could therefore lawfully exercise their right to cool-off under s88 of the Act when they did.

It was conceded that the vendor had to succeed against either the purchasers or the agent, although, for reasons which need not be explained, the method of calculating damages was slightly different according to whether the vendor succeeded against the purchasers or the agent. It was also conceded at trial that the reason for the purchasers cooling-off was because they did not wish to proceed with the sale for personal reasons, and their decision had nothing to do with the defects in the vendor's statement or with their becoming aware of the true position.

The magistrate found that the statement was defective and a nullity by virtue of the first two defects mentioned above. He did not consider that the third defect in relation to the encumbrance was an invalidating defect. The magistrate found that the defects were caused by the agent's breach of duty and accordingly awarded damages to the vendor against the agent. The agent appealed to a single judge of this Court who dismissed the appeal. The agent now appeals to the Full Court against that dismissal, contending that the vendor's statement was valid and that the purchasers had no right to cool-off when they purported to do so. The principal respondents to the appeal were the purchasers, defending their right to cool-off.

Before us the purchasers sought to rely not only on the defects in the vendor's statement which the magistrate found to exist, but by way of alternative contention argued not only that the third defect mentioned above also invalidated the statement, but that there were other misstatements and non-disclosures which invalidated the statement as well.

The first was that the agent's certificate (Part D of the Statement) was inaccurate because it certified that enquiries had been made which in fact had not been made, and that it failed to disclose the result of enquiries that had been made. The second was that in relation to a shed on the property, the Form 18 failed to disclose a condition imposed by the Marion Council concerning the use to which the shed could be put. These two matters had not been pleaded in the Magistrates' Court. They became the subject of an application to amend the purchasers' defence and counterclaim very late in the trial not, as I understand it, by way of further grounds as to why the notice was invalid, but in respect of a claim then sought to be introduced pursuant to s91G of the Act alleging prejudice to the purchasers by virtue of such failure, and in support of an order of the court, by way of alternative, avoiding the contract pursuant to that section. I will need to make further reference to s91G below. The amendment was disallowed for the quite proper reasons explained by the magistrate. The hearing then proceeded on the original particulars of defence and counterclaim filed by the purchasers, namely that the contract had lawfully been avoided by the purchasers' cooling-off because they had never received a valid vendor's statement by reason of the three identified defects.

There was, as I understand it, no application to amend the defence and counterclaim to allege that these further defects also invalidated the notice, and accordingly the effect of such defects, if they existed, was not the subject of argument before or decision by the magistrate.

There was no appeal or cross-appeal against the refusal of the magistrate to allow the amendment, but there was a notice of alternative contention filed in the appeal to the single judge of this court, purporting to raise the same issues sought to be ventilated before us. Those questions were not dealt with by the single judge who heard the appeal.

In my opinion, they were properly ignored by the single judge, and should not be considered by us. The notice of alternative contention in respect of these matters raises issues in a form which were not pleaded or argued in the Magistrates' Court, and which would appear to require the resolution of disputed questions of fact which were not required to be addressed by the magistrate. I therefore proceed to deal with the matter only in relation to the three defects addressed by the magistrate which were alleged to have invalidated the vendor's statement.

Before I deal with the appellant's argument, it is necessary to refer to some other sections of the Act. Section 91B reads as follows:

"91B. (1) A vendor's statement must be accurate as at the date of service on the purchaser.

(2) If after the service of a vendor's statement but before the purchaser signs the contract circumstances change so that if a fresh statement were to be prepared there would have to be some change in the particulars contained in the statement, then the vendor's statement will be regarded as defective until a notice of amendment is served and when such a notice is served it will be presumed that the vendor's statement was served, as amended by the notice, on the date of service of the notice."

Section 91G reads as follows:

"91G. (1) Where a vendor's statement is not given or certified as required by this Division, or the statement given is defective, the purchaser may apply to a court of competent jurisdiction for an order under this section.

(2) On the hearing of an application under subsection (1) the Court may, if satisfied that the purchaser has been prejudiced by the failure to comply with this Division, exercise any one or more of the following powers:

(a) avoid the contract and make such other orders as the Court thinks necessary or desirable to restore the parties to the contract to their respective positions before entering into the contract;

(b) award such damages as may, in the opinion of the Court, be necessary to compensate loss arising from the non-compliance;

(c) make such other orders as may be just in the circumstances.

(3) Damages may be awarded under subsection (2)(b) against -

(a) the vendor;

(b) if it appears that the purchaser has been prejudiced by a failure on the part of an agent to carry out duties imposed by this Division - the agent, or both."

I should also mention that s103 of the Act provides that nothing in the Act prejudices any civil remedy available apart from the Act.

It was the appellant's argument in essence that the remedies provided for under s91G and preserved under s103 were the only remedies that a purchaser had in respect of any defects in the vendor's statement. In order to succeed under s91G the purchasers had to show some prejudice, and they acknowledged that they had not been prejudiced by any defect in the notice. It was said that a defect in the notice would not allow a purchaser to treat the notice as not having been given, and therefore allow the purchaser to cool-off under s88 after the expiry of two clear business days after delivery of the notice referred to in s88(8) of the Act. Counsel for the appellant conceded, however, that if the vendor's statement did not contain the required statement of the purchaser's rights under s88 (Part B of Form 18), the cooling-off right could be exercised until an amended statement was given. He confined his argument to defects in the particulars required by s90 and the Regulations. It was said that s88, with the opening words "Subject to this section..." was a code dealing with cooling-off, whilst s91G was an exclusive code dealing with remedies for non-compliance with s90 and therefore with defective vendor's statements.

I do not accept the appellant's argument. It might, perhaps, have had some substance if the cooling-off rights under s88 were not linked to the delivery of the vendor's statement required by s90. One could then argue that the cooling-off period was designed to enable the casual Sunday afternoon impulse buyer to cool-off when faced with the reality of the real world the next day.

The cooling-off period is inextricably linked with the delivery of the vendor's statement, and it must be linked for a reason. That reason is not difficult to discern. The information required to be given by s90 and by the Regulations is information which a purchaser in many cases will not be able readily to obtain. It is information which may well affect the purchaser's decision to buy at all, or which may affect the price which the purchaser is prepared to pay. It appears reasonably clear that Parliament intended that a purchaser should be given all that relevant information, and then be allowed a reasonably short period in which to review the decision to purchase before becoming irrevocably bound by it.

Parliament and the Governor in Council have determined what information must be supplied to the purchaser, and by inference have determined what information may be material to the purchaser's decision. Parliament has also made plain by s91B(1) that the information in the vendor's statement must be accurate. In sub-section (2) it has taken the further expedient that where the vendor's statement has been served before the contract is signed and so the cooling-off period has not yet begun to run, the information must be accurate at the time when the cooling-off period does start to run. By linking the commencement of the cooling-off period to the provision of accurate information in the vendor's statement, Parliament has provided the clearest inference that the cooling-off period is not to run until accurate information of a material kind has been provided. If some of that material information is not supplied or is misleading, the purchaser cannot make an informed decision, and the cooling-off period will not commence to run against the purchaser.

If that places a heavy onus on vendors and agents to provide complete and accurate information, that merely reflects the policy of the legislation.

Information about a previous transaction affecting the land is a matter which Parliament has prescribed must be included in the vendor's statement: s90(1)(b)(ii). It is plainly relevant to the price a purchaser may be willing to pay. Failure to give the information is a material omission which may affect a person's decision to proceed with the purchase at the price agreed. The policy of the Act is that the purchaser should not be deprived of the right to cool-off merely because the information is not given. The failure to give that information will constitute a material defect which invalidates the notice.

Failure to disclose the existence of a mortgage is in a similar category. Even though it may be intended to discharge the mortgage before settlement, its existence in some circumstances may alert a purchaser to enquire as to whether a breach of its terms has occurred and whether the purchaser might be deprived of the benefit of his or her contract by the mortgagee exercising powers of sale or foreclosure contained in the mortgage. However, one need not speculate as to why the provision of the information is significant. Parliament has decreed that it is. Failure to provide information as to the existence of a mortgage is a material defect which invalidates the notice.

Thus, either one of those defects by itself would have invalidated the notice. There was, in my opinion, non-compliance with the statutory requirements in those two material respects. In my opinion, the same would apply to non-disclosure of any of the relevant items listed in Column 1 of Form 18.

The question of the encumbrance raises slightly different issues. The existence of the encumbrance, its registered number and the identity of the encumbrancee were all identified. What was not identified (but which the Form 18 required to be identified) was the nature of the restrictive covenant contained therein, whether it affected the whole of the land and whether it affected other land. In view of my decision as to the other defects, it is not necessary to decide whether this defect too would have invalidated the notice. However, I express the view that those defects were also sufficient to render the notice invalid. In this respect, there was not a failure to disclose at all. The information disclosed was incomplete. It told the purchasers nothing about the nature and extent of the encumbrance at all. To find this out they would have to have conducted a search of the Lands Titles Office or have made enquiries of the encumbrancee. However, the address of the encumbrancee might not have been able to be ascertained without a search at the office of the Australian Securities Commission. Not every purchaser would have access to facilities to enable such searches to be undertaken and the results to be considered and, if necessary, acted upon within two business days of receiving bare notice of the existence of an encumbrance.

There exist reasonably analogous situations where courts have had to consider the validity of the actions of statutory authorities where incomplete information has been given by way of public notice. One of such cases is Golden-Brown v Hunt (1972) 19 FLR 438. In that case, subordinate legislation governing the ACT was required to be notified in the Commonwealth Gazette before it took effect. The relevant Commonwealth Act provided that there was sufficient compliance with the notification requirement if notice was published of the ordinance having been made and of the place where copies of the ordinance could be purchased. The relevant notice did not expressly state that the particular ordinance had been made, and specified that ordinances could be purchased by mail through a post office box address in Canberra or "over the counter" from the AGPS book centres in Canberra, Melbourne, Perth and Sydney. This was held by the Full Court of the Supreme Court of the ACT not to comply with the notification requirements. Fox J held that the designation of a post office box and the reference to "AGPS book centres in Canberra, Melbourne, Perth and Sydney" was insufficient compliance with the requirement of notice of the place where copies of the ordinance could be purchased. Blackburn and Connor JJ agreed with that and further held that the notice did not sufficiently specify that the ordinance had been made. The reasoning behind the decisions was that the ordinance was intended to affect people's rights, that it could be made without public debate or any notoriety at all before gazettal, and that the purpose of the requirement was to inform members of the public of the fact of its making and of where they could quickly obtain a copy. That purpose could not be fulfilled by the nature of the publication in fact made. The ordinance was accordingly invalid.

South Australian Planning Commission and Wylie v McNeil (1985) 42 SASR 524 was a case arising under the South Australian planning legislation which required notice of an application for consent to undertake development to be published in accordance with the requirements of Regulation 33 of the then Development Control Regulations. The notice was defective in that it did not include an accurate description of the land the subject of the application. It was argued that because of that defect the decision of the SA Planning Commission to grant consent to the application was invalid. The Full Court of this Court held that there had been sufficient compliance with the purpose of the statutory scheme. The relevant test adopted by the Full Court was stated by Jacobs J as follows (at p534):

"The test to be applied, therefore, is whether the notice, when read as a whole, substantially complies with and achieves the purpose of the statutory scheme."

That test was applied in similar circumstances arising under the planning legislation in Wilson v City of Mitcham (1986) 61 LGRA 126 at 134.

What amounts to substantial compliance with the statutory requirements will of course be a matter of fact and degree, but the common thread running through these cases is that it must be assessed against the purpose of the legislation.

I have already noted that the purpose of s88 of the Act is to enable purchasers to make an informed decision about whether they will proceed with the contract or exercise their rights to cool-off. The nature of the information required to be given about an encumbrance is such that it should not require the purchaser to conduct one or more searches at Government offices in order to ascertain the nature and extent of the encumbrance. That is information which the legislation has decreed is relevant to a purchaser exercising cooling-off rights. There was not substantial compliance with the requirements of the legislation having regard to its purpose, and accordingly I would hold that for this reason also the vendor's statement was invalid.

The agent argued that a purchaser should not in these circumstances be permitted to cool-off for reasons not associated with the defects in the statement. Cooling-off is a summary self-help remedy. The purchaser does not have to justify the decision to cool-off to anyone. The decision to cool-off may or may not be related to the provision of the information required by s90 and the Regulations. That is a necessary consequence of the summary remedy that Parliament has provided. The mere fact that it may have taken the purchasers in this case some time to realise that the notice was defective does not deny them the right to cool-off for any reason at any time occurring before the prescribed time referred to in s88(8). In the circumstances of this case, that time had not passed, and the cooling-off rights granted by the Act could be exercised at any time and for any reason.

In my opinion it does not matter that an alternative remedy is provided by s91G. That is not a summary remedy. It is one that can only be invoked with the aid of a court. The right to cool-off does not survive settlement on the contract. The remedy under s91G does. Section 91G is not an exclusive remedy available to the recipient of a defective statement. It should be seen as an alternative remedy. A purchaser who receives a defective statement, upon becoming aware of the defect, may choose to cool-off or alternatively may choose to affirm the contract and seek damages or some other remedy under s91G or at common law. It cannot be said that s91G provides an exclusive remedy for a defective vendor's statement. It provides an additional range of remedies where prejudice can be shown, and can be invoked before or after settlement.

A further ground of the agent's appeal complained about one component of the damages awarded against it to the vendor. The vendor's case against the agent was pleaded both as a breach of a common law duty of care and also as breach of contract. The magistrate found the breach of duty of care established and proceeded to assess damages in tort. One of the components which he awarded was $1,000 for legal costs incurred by the vendor prior to the termination of the contract. It was not argued that the incurring by the vendor of legal costs was not a foreseeable result of the agent's breach of its duty. The complaint was as to the quantum of those costs.

The magistrate found that the actual legal costs incurred by the vendor was an amount of $1,958. He specifically found that those were costs incurred by the vendor in obtaining advice and in serving upon the purchaser a notice to complete, and in subsequently proceeding to a termination of the contract before commencing the action the subject of this appeal. He found that they were all incurred prior to the date of termination of the contract and not thereafter. However, he was unable to say to what extent the costs were confined to matters arising from the default of the agent. He said:

"They may well have included costs of a solicitor/client nature in the form of general advice, negotiations concerning possible compromises, questions of professional indemnity or the like. In the circumstances I propose to use a broad axe. I allow the sum of $1,000 under this heading."

The agent's complaint before us was that there was no evidence as to the reasonableness of the amount incurred.

An exhibit containing a number of detailed solicitor's cost entries was tendered without explanation. In those circumstances the magistrate was justified in not awarding the full amount claimed. He had to do the best he could on the rather meagre information before him. His reduction of the amount actually incurred by almost one half was not unreasonable in the circumstances, and I see no ground for disturbing the magistrate's assessment of damages.

I would therefore dismiss the appeal.