Nevitoro Investments P/L v Turner and 5 Ors

[2004] NSWSC 102

Reported Decision: (2005) NSW ConvR 56-115

Supreme Court

CITATION:

Nevitoro Investments P/L v Turner & 5 Ors [2004] NSWSC 102

HEARING DATE(S):

20 February 2004

JUDGMENT DATE:

2 March 2004

JURISDICTION:

Common Law

JUDGMENT OF:

Master Harrison

DECISION:

(1) The appeal is upheld; (2) I set aside the judgment in favour of Peter William Turner and others against Nevitoro Investments Pty Limited on the cross claim made by Magistrate Lulham on 29 April 2003. In lieu I enter judgment in favour of Nevitoro Investments Pty Limited against Peter William Turner, Phillipa Frances Turner, Colin George Wise, Roslyn Wise, Darien Wise and Cherie Anne Lennon in the sum of $850.00; (3) The defendants are to pay the plaintiff's costs

CATCHWORDS:

Appeal decision of LCM - damage to ceiling - equitable adjustment - s 66M of Conveyanct Act 1919

LEGISLATION CITED:

Local Courts (Civil Claims) Act 1970 (NSW)
Conveyancing Act 1999 (NSW) - s 66M

CASES CITED:

Allen v Kerr & Anor (1995) Aust Torts Reports 81-354
Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139
Devries v Australian National Railways Commission (1993) 177 CLR 472
State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588
Stephenson v State Bank of NSW (1996) 39 NSWLR 101
Shadlow v Skiadopoulos (1987) 4 BPR 9259

PARTIES :

Nevitoro Investments Pty Limited [ACN 003 328 719]
(Plaintiff)

Peter William Turner
(First Defendant)

Phillipa Frances Turner
(Second Defendant)

Colin George Wise (Third Defendant)

Roslyn Wise
(Fourth Defendant)

Darien Wise
(Fifth Defendant)

Cherie Anne Lennon
(Sixth Defendant)

FILE NUMBER(S):

SC 11281/2003

COUNSEL:

Mr P A Regattieri
(Plaintiff)

Mr A Jamieson
(Defendants)

SOLICITORS:

KA Garling
(Plaintiff)

Wood Marshall Williams
(Defendants)

LOWER COURTJURISDICTION:	Local Court
LOWER COURT FILE NUMBER(S):	1726/2002
LOWER COURT JUDICIAL OFFICER :	B Lulham LCM

- 9 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

MASTER HARRISON

TUESDAY, 2 MARCH 2004

11281/2003 - NEVITORO INVESTMENTS PTY LIMITED
[ACN 003 328 710] v PETER WILLIAM
TURNER & 5 ORS

JUDGMENT (Appeal decision of LCM – damage to
ceiling – equitable adjustment – s 66M of
Conveyancing Act 1919)

1 MASTER: By summons filed 26 May 2003 the plaintiff seeks orders firstly, that the decision of Magistrate B Lulham Local Court Magistrate dated 29 April 2003 in proceedings 1726/2002 be set aside and the appeal upheld; and secondly, that the defendants pay the plaintiff the sum of $32,153.00. The plaintiff relied on two affidavits of Kim Adrian Garling sworn 4 August 2003 and 12 November 2003.

2 The plaintiff is Nevitoro Investments Pty Limited. The first defendant is Peter William Turner. The second defendant is Phillipa Frances Turner. The third defendant is Colin George Wise. The fourth defendant is Roslyn Wise. The fifth defendant is Darien Wise. The sixth defendant is Cherie Anne Lennon.

The appeal

3 At the outset, it may be helpful to make some brief comments concerning the remedy pursued by the plaintiff. Section 69(2) of the Local Courts (Civil Claims) Act 1970 (NSW) permits a party who is dissatisfied with a judgment as being erroneous in point of law to appeal to this Court. The onus lies on the plaintiff to demonstrate that there has been an error of law. What is a question of law (as opposed to a question of fact) was considered, inter alia, in Allen v Kerr & Anor (1995) Aust Torts Reports 81-354 and Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156. It cannot be said that the Tribunal member acted on evidence inconsistent with facts incontrovertibly established by the evidence - see Devries v Australian National Railways Commission (1993) 177 CLR 472 per Brennan, Gaudron and McHugh JJ at 479 and State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588.

Grounds of appeal

4 The plaintiff appeals the Magistrate’s decision in its entirety. The grounds of appeal are firstly, that having found that there was damage to the ceiling the Magistrate failed to make a just and equitable adjustment as required by s 66M of the Conveyancing Act 1919 (NSW) (the Act); secondly, the Magistrate failed to allow the whole of the sum of $32,153.00 when the uncontradicted evidence was that the work done by the builder was to replace what was damaged; thirdly, having found that there was damage to the ceiling the Magistrate failed to find in accordance with the evidence that all the work carried out was necessary to repair the damage to the ceiling; fourthly, the Magistrate failed to find that the cause of the damage was water seepage which took some months to build up in the ceiling and that part of the build up of that water occurred between 10 October 2000 and 3 November 2000; fifthly, the Magistrate erred in holding that the plaintiff had not provided any evidence as to the costs of the repair of the degree of damage.

5 This is an appeal from the Local Court in relation to proceedings heard by Lulham LCM on 29 April 2003. The Local Court proceedings were commenced on 14 February 2002. A cross claim was filed by the plaintiff seeking an abatement of the purchase price pursuant to s 66M of the Act. The Magistrate gave judgment in favour of the defendants on the cross claim.

6 On 11 October 2000 contracts were exchanged between the plaintiff as purchaser and the defendant as vendor in relation the property, a building and a business situated at 116 New Canterbury Road, Petersham, known as the “Livingstone Hotel”. The purchase price was $4.95 million. The hotel building is three storeys, with bars and gaming rooms on the ground floor and accommodation facilities on the first and second floors. A ceiling under an upstairs bathroom collapsed on 3 December 2000. The contract was completed on Thursday, 30 November 2000.

7 This appeal essentially involves the Magistrate’s reasoning in relation to s 66M of the Act.

8 This section states:

“66M Abatement of purchase price where land damaged

(1) Where land is damaged after the making of a contract for the sale of the land and before the risk in respect of the damage passes to the purchaser, the purchase price shall be reduced on completion of the sale by such amount as is just and equitable in the circumstances.

(2) Subsection (1) applies whether or not the land concerned is substantially damaged.

(3) Subsection (1) does not apply where the damage was caused by a wilful or negligent act or omission on the part of the purchaser.

(4) If the purchase price is not reduced on completion of the sale of land as required by subsection (1), the amount by which the purchase price should have been reduced may be recovered by the purchaser from the vendor as a debt.”

9 It is common ground that in the circumstances s 66M(3) did not apply.

10 The critical dates are the date of exchange, 11 October 2000 and the date of settlement, 30 November 2000. The Magistrate was of the view that “the plaintiff on the evidence is unable to prove on the balance of probabilities what damage was done to the ceiling between 11 October and 30 November 2000”. The Magistrate was however, prepared to make a finding that there was “some damage caused” during that period and on that basis he stated that it was necessary for the plaintiff/purchaser, to prove damages so that he could determine the just and equitable reduction which should be made in the purchase price.

11 The Magistrate (t 45.43) continued:

“Stephenson v State Bank of New South Wales Limited is authority per Sheller that the starting point for determining a just and equitable reduction of the purchase price is to calculate the cost of restoration of the dwelling house, in the case, to its condition prior to damage.

In this case I am not satisfied that the plaintiff has proved any damage to the upstairs bathrooms of the premises. I am satisfied on the evidence of Mr Brennan that the upstairs bathrooms were in the same condition at the date of completion as they were at the date of the contract of sale.

The only damage which had been caused was the damage to the gyprock ceiling which on the evidence of Mr Brennan had already been damaged from the time of its installation to 11 October and was further damaged clearly from 30 November 2000 to 3 December.
On the evidence, as I have already indicated, I am unable to quantify the amount of that damage and certainly on the evidence there is absolutely no evidence on which I could calculate the just and equitable allowance to be made for the replacement of what was already, on my findings, at the date of contract a damaged gyprock ceiling. All of the costs associated with the replacement of the upstairs bathrooms was work necessary to replace those bathrooms, bearing in mind the condition they were in as at the date of contract. It was work, in my view, which was inevitable. The damage to the ceilings below merely, in my view, brought forward the necessity for such work to be done. Although it is not perhaps necessary for the findings I am satisfied on the evidence of Mr Brennan that all of the defects present at his inspection in the bathrooms were present at the date of exchange of contracts and would have been determinable upon a proper inspection of the premises at that time.
For those reasons and the basis that the plaintiff has been unable to prove the degree damage (sic) and has not provided any evidence as to the cost of repair of that damage the plaintiff in these proceedings must fail.”

12 Earlier in the reasons for judgment the Magistrate recorded that the plaintiff submitted that a sum which is just and equitable to deduct from the purchase price is $32,153.00 (t 43.22-25). The issue in this appeal is whether the Magistrate’s approach, after finding that there was “some damage” (which he later defined as being the damage to the gyprock ceiling) decided not to quantify the amount because there was no evidence upon which he could calculate the just and equitable allowance, is correct.

13 The defendant submitted that there has been no error of fact or law. The plaintiff submitted that the Magistrate applied the wrong test, and that in the circumstances what the Magistrate should have done is find a just and equitable amount which compensated the purchaser for the damage that occurred during the relevant period. According to the plaintiff, it is clear from Mr Brennan’s evidence that at least the costs of the replacement of the damaged ceiling was easily identifiable from the invoice.

14 In Stephenson v State Bank of NSW (1996) 39 NSWLR 101 at 103D Gleeson CJ stated:

“When one comes to s 66M, the problem being addressed is that a purchaser, who is not at risk, but who has not exercised a right to rescind, is bound by a contract of sale to purchase land which was damaged after the purchase price was agreed. Section 66M provides that, in such a situation, the purchase price is to be reduced. In the language of the report of the Law Reform Commission, there is to be an abatement of the purchase price.

…

The primary object of the adjustment is to take account of the fact that the subject matter of the contract has been damaged, and the purchaser will, on completion, take title to property the condition of which is different from its condition at the time the parties agreed upon a price. That ordinarily means that the property is worth less than the amount the purchaser agreed to pay for it. That, however, is not always necessarily so.”

15 At 104A Gleeson CJ continued:

“When a question arises as to the cost of repairing minor damage to a dwelling-house, there may be little room for argument as to what is an appropriate allowance to be made. On the other hand, where substantial repairs are involved, there may be more difficulty in determining an appropriate allowance. If what is envisaged is reinstatement, then a further question may arise as to whether the appropriate basis of adjustment of the purchase price is the full cost of reinstatement, or whether some allowance should be made for betterment in order to give a true reflex of the damage that has been suffered to the property.”

16 And Sheller JA stated at 112E and 113A:

“In my opinion the starting point, in determining a just and equitable reduction of the purchase price in a contract for the sale of a dwelling-house which the purchaser has purchased intending to live in it, is to determine the cost of restoring the building or the damaged part of it to the state it was in before the fire. There is the risk, as Bryson J pointed out, that the purchaser may pay the reduced price and then sell at a profit but that, to my mind, does not mean that as a matter of principle the reduction of the purchase price of dwelling-houses is limited to an amount reflecting diminution in value.
…
The determination of what is just and equitable in the circumstances is not a matter of unfettered individual opinion, nor does it involve a discretion of an arbitrary kind.”

17 It is my view that once the Magistrate made a finding that there was some damage, an amount reflecting an assessment of a just and equitable sum should have been awarded. The invoice (Annexure A to the affidavit of KA Garling sworn 12 November 2003) does not specifically refer to the costs of the replacement the ceiling. The plaintiff referred to an amount in this quote of $1,960.00 which specifies for “carpenter to make good”. I accept that it is far from clear that the written reference “carpenter to make good” relates to the ceiling. However, attached to the first defendant’s statement (Annexure F to the affidavit of KA Garling sworn 12 November 2003) is a copy of an invoice from David Ross Professional Painting Services which referred the cost of work to scrape down and repaint the side wall and water pipes and patch and paint the ceiling in men’s toilet, this amounting to some $2,100.00. Not all the damage to the ceiling was caused during the relevant period. Once the Magistrate had made the finding that some damage to the ceiling had occurred during the relevant period, a determination should have been made on the available evidence. At best, the amount would have been a modest one. By that I mean less than $1,000.00. Rather than remit this issue to the Magistrate over such a modest sum, I determine a just and equitable reduction in the sum of $850.00.

Notice of contention

18 In relation to the insurance point raised by the notice of contention, Gleeson CJ in Stephenson v State Bank of NSW stated that a vendor may or may not be insured, and the rights of a vendor against an insurer will vary from case to case. The existence of insurance over the land, and the nature of the vendor's rights under the policy of insurance, may, in some circumstances, be relevant to what is just and equitable in a given case (Shadlow v Skiadopoulos (1987) 4 BPR 9259). However, in the ordinary case, what is just and equitable as between the vendor and the purchaser will not be controlled by the insurance arrangements that have been made by the vendor. The reasoning behind this is to make that a matter of controlling importance that would defeat the intention of the legislature. The Magistrate has an unfettered discretion and is not obliged to take into account the rights of the purchaser under a policy of insurance.

19 Special condition 29 of the contract apparently relates to the state of the condition of the property as observed by the plaintiff. The Magistrate made a finding that all the defects present at Mr Brennan’s inspection would have been determinable upon a proper inspection of the premises at that time. Mr Brennan was requested by the plaintiff to inspect the collapsed ceiling. Although general reference is made to the existence of special condition 29 in the transcript of the local court proceedings, as a copy of the special condition is not in evidence before me, I am unable to decide this issue.

20 I uphold the appeal. I set aside the judgment of Magistrate B Lulham dated 29 April 2003 in favour of Peter William Turner and others against Nevitoro Investments Pty Limited on the cross claim made by Magistrate Lulham on 29 April 2003. In lieu I enter judgment in favour of Nevitoro Investments Pty Limited against Peter William Turner, Phillipa Frances Turner, Colin George Wise, Roslyn Wise Darien Wise and Cherie Anne Lennon in the sum of $850.00.

21 Costs are discretionary. Costs normally follow the event. The defendants are to pay the plaintiff’s costs.

Orders

(1) The appeal is upheld.

(2) I set aside the judgment in favour of Peter William Turner and others against Nevitoro Investments Pty Limited on the cross claim made by Magistrate Lulham on 29 April 2003. In lieu I enter judgment in favour of Nevitoro Investments Pty Limited against Peter William Turner, Phillipa Frances Turner, Colin George Wise, Roslyn Wise Darien Wise and Cherie Anne Lennon in the sum of $850.00.

(3) The defendants are to pay the plaintiff’s costs.
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Last Modified: 03/05/2004