Nicolacopoulos v Khoury

[2010] VCC 1576

IN THE COUNTY COURT OF VICTORIA Revised

Not Restricted

AT MELBOURNE
CIVIL DIVISION
COMMERCIAL

GENERAL DIVISION

Case No. CI-10-04454

CHRISTINE NICOLACOPOULOS	Plaintiff
v
CLAUDETTE KHOURY	Defendant

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JUDGE:	HIS HONOUR JUDGE GINNANE
WHERE HELD:	Melbourne
DATE OF HEARING:	4 November 2010
DATE OF JUDGMENT:	17 November 2010
CASE MAY BE CITED AS:	Nicolacopoulos v Khoury
MEDIUM NEUTRAL CITATION:	[2010] VCC 1576

REASONS FOR JUDGMENT

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Catchwords: SALE OF LAND – vendor and purchaser proceeding – vendor’s statement – failure to provide information and documents revealing that land was affected by an owners corporation – whether failure reasonable – whether purchaser in substantially as good as position as if legislation complied with: Sale of Land Act 1962, ss.32(3A), (5), (7) and Owners Corporation Act 2006, s.151.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr W F Rimmer	Peter Boyle & Associates
For the Defendant	Mr P W Lithgow	Kearneys
HIS HONOUR:

1          This proceeding concerns whether a contract by the plaintiff, as purchaser, and the defendant, as vendor, for the sale of Unit 1, 45 Brett Street, Murrumbeena dated 24 August 2010 has been rescinded.

2          The vendor and the purchaser request the Court to answer questions arising out of or connected with the contract.[1]

[1] The Court is given jurisdiction to answer these questions by s.49 of the Property Law Act 1958

3 The purchaser says that the contract was validly rescinded because of the failure of the vendor to disclose “that the property was affected by an ‘owners corporation’ within the meaning of s.32(3A) of the Sale of Land Act 1962”. On 2 September 2010, the purchaser gave notice to rescind the contract.

4          The parties, sensibly, agreed on Statements of Agreed Facts which are in the following terms:

1.         The Plaintiff as purchaser and the Defendant as vendor executed a Contract for Sale of Real Estate being the property situated at and known as Unit 1, 45 Brett Street Murrumbeena (‘the property’) on 28 August 2010 (‘the Contract’).

2. The property is affected by an ‘owners corporation’ within the meaning of s32(3A) of the Sale of Land Act 1962.

3. At the time she executed the Contract the Plaintiff was provided with a Vendors Statement dated 26 August 2010 as required by s32 of the Sale of Land Act 1962 (‘the Vendors Statement’).

4. The Vendors Statement did not contain a Certificate pursuant to s151 of the Owners Corporation Act 2006 (‘the s151 Certificate’) or comply with s32(3A) of the Sale of Land Act 1962.

5. The Vendors Statement does contain reference to an Owners Corporation in relation to the property:-

- Clause 8 (‘Not applicable — no common ground.’);

- copy Title Search (annexure);

- Owners Corporation Search Report (annexure).

6. The Plaintiff does not allege that the Defendant acted otherwise than honestly in preparing the Vendors Statement.

7.         The parties will rely at the hearing on other facts alleged in their affidavit material filed in this proceeding, except to the extent those allegations are contrary to or inconsistent with any agreed fact set out above.”

“ADDITIONAL STATEMENT OF AGREED FACTS

1.         For the purposes of s.151(4)(a) of the Owners Corporation Act 2006 (the Act), the prescribed information under Regulation 11 of the Owners Corporation Regulations 2007 (the Regulations) is:

(a)	the current fees for the lot for each quarter or annually or other period;
(b)	the date up to which the fees for the lot have been paid;

(c) the total of any unpaid fees or charges for the lot;

(d)	any special fees or levies which have been struck, and the dates on which they were struck and are payable;
(e)	any repairs, maintenance or other work which has been or is about to be performed which may incur additional charges to those set out in paragraphs (a) to (d);
(f)	in relation to the owners corporation’s insurance cover—

(i)     the name of the company;

(ii) the number of the policy;

(iii) the kind of policy;

(iv) the buildings covered;

(v) the building amount;

(vi) the public liability amount;

(vii) the renewal date.

(g) if the owners corporation has resolved that the members may arrange their own insurance under section 63 of the Act, the date of this resolution;

(h) the total funds held by the owners corporation;

(i)    whether the owners corporation has any liabilities (in addition to any such liabilities specified in paragraphs (a) to (d)) and, if so, the details of those liabilities;

(j)	details of any current contracts, leases, licences or agreements affecting the common property;
(k)	details of any current agreements to provide services to lot owners, occupiers or the public;
(l)	details of any notices or orders served on the owners corporation in the last 12 months that have not been satisfied;
(m)	details of any legal proceedings to which the owners corporation is a party and any circumstances of which the owners corporation is aware that are likely to give rise to proceedings;
(n)	whether the owners corporation has appointed, or has resolved to appoint, a manager and, if so, the name and address of the manager;
(o)	whether an administrator has been appointed for the owners corporation, or whether there has been a proposal for the appointment of an administrator;
(p)	the minutes of the most recent annual general meeting of the owners corporation.

2.         For the purposes of section 151 (4)(b)(ii) of the Act, the prescribed form of statement is the form in Schedule 3 in the Regulations. That schedule prescribes the following statement:

What is an owners corporation?

The lot you are considering buying is part of an owners corporation. Whenever a plan of subdivision creates common property, an owners corporation is responsible for managing the common property. A purchaser of a lot that is part of an owners corporation automatically becomes a member of the owners corporation when the transfer of that lot to the purchaser has been registered with Land Victoria.

If you buy into an owners corporation, you will be purchasing not only the individual property, but also ownership of, and the right to use, the common property as set out in the plan of subdivision. This common property may include driveways, stairs, paths, passages, lifts, lobbies, common garden areas and other facilities set up for use by owners and occupiers. In order to identify the boundary between the individual lot you are purchasing (for which the owner is solely responsible) and the common property (for which all members of the owners corporation are responsible), you should closely inspect the plan of subdivision.

How are decisions made by an owners corporation?

As an owner you will be required to make financial contributions to the owners corporation, in particular for the repair, maintenance and management of the common property. Decisions as to the management of this common property will be the subject of collective decision making. Decisions as to these financial contributions, which may involve significant expenditure, will be decided by a vote.

Owners corporation rules

The owners corporation rules may deal with matters such as car parking, noise, pets, the appearance or use of lots, behaviour of owners, occupiers or guests and grievance procedures. You should look at the owners corporation rules to consider any restrictions imposed by the rules.

Lot entitlement and lot liability

The plan of subdivision will also show your lot entitlement and lot liability. Lot liability represents the share of owners corporation expenses that each lot owner is required to pay. Lot entitlement is an owner’s share of ownership of the common property, which determines voting rights. You should make sure that the allocation of lot liability and entitlement for the lot you are considering buying seems fair and reasonable.

Further information

If you are interested in finding out more about living in an owners corporation, you can contact Consumer Affairs Victoria. If you require further information about the particular owners corporation you are buying into you can inspect that owners corporation’s information register.

Management of an owners corporation

An owners corporation may be self-managed by the lot owners or professionally managed by an owners corporation manager. If an owners corporation chooses to appoint a professional manager, it must be a manager registered with the Business Licensing Authority (BLA).

IF YOU ARE UNCERTAIN ABOUT ANY ASPECT OF THE

OWNERS CORPORATION OR ANY DOCUMENTS YOU

HAVE RECEIVED IN RELATION TO THE OWNERS

CORPORATION YOU SHOULD SEEK EXPERT ADVICE.”

5          The questions for the Court are:

(a)	was the failure to include the s.151 Certificate in the s.32 Notice “reasonable” within the meaning of s.32(7) of the Sale of Land Act?
(b)	is the plaintiff as purchaser “substantially in as good a position as if all relevant provisions (specifically s.32(5)) of the Sale of Land Act had been complied with”?

6 Section 32 of the Sale of Land Act requires the vendor, under a contract for the sale of land, to give a vendor’s statement signed by the vendor to the purchaser before he signs the contract of sale. Section 32(2) lists matters that the vendor’s statement must contain. Section 32(3) provides that certain documents must be attached to the vendor’s statement.

7 Section 32(3A) and (5) of the Sale of Land Act state:

“(3A)

If the land is affected by an owners corporation within the meaning of the Owners Corporations Act 2006, the vendor must attach to the statement required by subsection (1)(a) and to the contract—

(a)	a copy of the current owners corporation certificate issued in respect of the land under the Owners Corporations Act 2006; and
(b)	a copy of the documents required to accompany the owners corporation certificate under section 151(4)(b) of the Owners Corporations Act 2006.

. . .

(5)

Where a vendor –

(a) supplies false information to the purchaser in the statements or certificates required to be given by this section; or

(b) fails to supply all the information required be supplied in the
statement or certificates required to be given by this section –

the purchaser may rescind any contract for the sale of land which has been entered into on the basis of that information at any time before he accepts title and becomes entitled to possession or to the receipt of rents and profits.”

8 The vendor relies on the provisions of s.32(7) of the Sale of Land Act, which provides:

“(7) Notwithstanding subsection (5) the purchaser may not rescind the contract if the court is satisfied that the vendor has acted honestly and reasonably and ought fairly to be excused for the contravention and that the purchaser is substantially in as good a position as if all the relevant provisions of this section had been complied with.”

9          Section 151(4) of the Owners Corporation Act provides that an owners corporation certificate must contain prescribed information. That information is substantially set out above in the Agreed Statement of Facts and I will not repeat it. The certificate must be accompanied by:

“(i) a copy of the rules, or if the rules have been amended the consolidated rules of the owners corporation as recorded on the Register; and

(ii)     a statement in the prescribed form providing advice and information to prospective purchasers and lot owners; and

(iii) a copy of all resolutions made at the last annual general meeting of

the owners corporation; and

(iv)    any other documents of a prescribed kind; and

(v)     a statement advising that further information on prescribed matters can be obtained by the inspection of the owners corporation register.”

10        The Vendor’s Statement contained a paragraph numbered 8 in the following terms:

“The Vendor provides the following information:

….

8. OWNERS CORPORATION If the land is affected by an owners

corporation within the meaning of the Owners Corporation Act 2006

(a)	a copy of the current owners corporation certificate issued in respect of the land under Owners Corporation Act.
(b)	a copy of the documents required to accompany the owners corporation certificate under section 151(4)(b) of the Owners Corporation Act 2006.

Not applicable – no common ground.”

11        On the next page of the bundle of documents, apparently forming part of the vendor’s statement, was a Title Search. That document, under the heading “Owners Corporation”, stated that “the land in this folio was affected by Owners Corporation Plan No PS3449999T”. A copy of that Plan was then attached, showing on its second page the creation of three lots. Then, again as part of the bundle of documents, was an Owners Corporation Search Report, which stated that “the land in PS34999T is affected by 1 Owners Corporation(s)”. That document stated under the heading “Rules”:

“Model Rules apply unless a matter is provided for in Owners Corporation

Rules. See Section 139(3) Owners Corporation Act 2006.”

12        Both parties filed short affidavits and were not cross-examined on them. The purchaser stated that the question of whether the property was affected by an owners corporation was important to her. She currently resided in a property that was so affected and had found that being a member of an owners corporation has caused her worry, anxiety and distress. She had been recently diagnosed with a most serious illness and the additional strain associated with the issues concerning an owners corporation has had a deleterious effect on her health. When looking for a new property closer to her place of employment, she was very concerned that it would not be affected by an owners corporation. She was attracted to the present unit because the advertising brochure specifically stated that the property was not subject to a body corporate, the common phrase for owners corporation, and that fact was confirmed by the answer she received to a question that she asked of the vendor’s agent.

13        The advertising brochure under the address of the property and the words “Stylish & Stand Alone” stated:

“Say good-bye to the body corporate, say hello to independent living in

classic style”.

14        The vendor swore an affidavit stating that she honestly believed that the property was not affected by an owners corporation for ten reasons. These were that since purchasing the property in January 1996:

(i)	there had never been a meeting of an owner’s corporation;
(ii)	no fees and charges were imposed or proposed for the unit;
(iii)	there was no insurance;
(iv)	all three unit owners did their own repairs and maintenance;
(v)	no funds were held by an owners corporation;
(vi)	the liability and contingent liability, including legal expenses, had never been raised between the owners;
(vii)	there are no contracts, leases, licences or agreements affecting common property;

(viii) there are no services provided to the unit owners;

(ix)	there are no legal proceedings with an owners corporation; and
(x)	there is no manager of the owners corporation.

15 The parties accepted that the Court had to be affirmatively satisfied of each of the matters contained in s.32(7) of the Sale of Land Act.[2] That provision contains four matters that must be established. Two were in issue and were the subject of the questions.

The First Question

[2]             Fifty- Eighth Highwire Pty Ltd v Cohen [1996] 2 VR 64 at 72 per Brooking JA

16 The first issue to determine is whether the failure to include the s.151 owners corporation certificate in the s.32 Notice was “reasonable” within the meaning of s.32(7) of the Sale of Land Act.

17        In respect of the meaning of the term “reasonable”, in Payne v Morrison,[3] O’Bryan J stated:

“The next question is whether the defendant acted reasonably. The requirements of s.s.(7) to act reasonably involves an objective test, in my opinion. Curtain v Aparo (1988) A. & N.Z. Conveyancing Reports 508. The requirement of s.s(7) to act reasonably is one of acting with due care and attention or without negligence. I am not satisfied that Bongiorno Real Estate Pty Ltd acted with due care and attention in the transaction and ought not be excused for the contravention of s.32(2)(b). For the lack of care and attention displayed by Bongiorno the defendant is vicariously liable.”

[3] [1991] V ConvR 54-428

18        There is a debate, which appears to be unresolved, as to whether a vendor is vicariously liable for the omissions of its agent. In Fifty-Eighth Highwire Pty Ltd v Cohen,[4] Charles and Callaway JJA stated:

“The complete protection that the fourth requirement affords the purchaser probably means that the first three requirements are concerned with the vendor personally, so that it will usually be inappropriate to visit the negligence of a solicitor on his or her client; but that need not be decided in the present case, where the alter ego of the appellant himself failed to act reasonably.”

[4] [1996] 2 VR 64 at 77

19        In Paterson v Batrouney,[5] Beach J considered that vendors, aged in their eighties, who had placed the sale of their home in the hands of a solicitor and an estate agent, acted quite reasonably in doing so and should not be vicariously liable for negligence of their agents. His Honour referred to the decision in Fifty-Eighth Highwire, and stated:

“In my opinion the complete protection given to a purchaser by the fourth requirement of subs (7) does mean that so long as the vendor acts reasonably in relation to the preparation of an appropriate s32 statement he or she will not be held vicariously liable for the negligence of his or her solicitor or real estate agent.”[6]

[5] [2000] VSC 313 at [31]-[32]

[6]             (supra)

The Submissions of the Parties

20        The purchaser submitted that the vendor had failed to establish reasonableness. This was in part because of the inconsistent information given in the vendor’s statement, which the vendor should have read, and that the purchaser had been pressing for an assurance, concerning whether the property was affected by an owners corporation.

21        The vendor relied on the matters set out in her affidavit to indicate the basis on which she did not consider that her property was affected by an owners corporation.

Conclusion on First Question

22        The Contract of Sale bears the name of a conveyancing business. The vendor’s affidavit does not seek to establish a case that she relied on its advice as to whether an owners corporation affected the property. Rather, the vendor’s affidavit seeks to explain the view that she had formed because of matters within her own knowledge. She does so by addressing matters, some of which would have been the subject of information in the owners corporation certificate, that she was required to provide.

23        The vendor does not suggest that she sought professional advice on whether the property was subject to an owners corporation or, considered what a title search would reveal. She does not state whether she had read the vendor’s statement before she signed it. Many vendors will expect their lawyers or conveyancers to attend to the legal requirements of the purchase.

24         However the vendor’s affidavit explains the basis on which she personally formed the view that the property was not affected by an owners corporation. The matters to which she refers all provide some basis for her conclusion, but they lack reference to the one step that would have answered the question quickly and definitely – referring to the title search, which had been obtained by the conveyancer. The property was one of three units. Considering whether it was subject to an owners corporation was an obvious step, even when the matters referred to in the vendor’s affidavit are taken into account.

25 I consider that the vendor has not shown, that in failing to attach to the vendor’s statement copies of the current owners corporation certificate, as required by s.32(3A) of the Sale of Land Act, that she acted reasonably. Information was readily available to her and to her advisors, even in the documents forming part of the vendor’s statement, suggesting that the property was affected by an owners corporation. Either the vendor did not have regard to those documents, or, did not appreciate their significance.

26        The answer to the first question is “No”.

The Second Question

27 The second question is whether the purchaser was “substantially in as good a position as if all relevant provisions (specifically s.32(5)) of the Sale of Land Act had been complied with?” This question focuses on a further element in s.32(7) of the Sale of Land Act. Although reference is made in the question to s.32 (5), the argument of the parties focused on the terms of s.32(3A) and (7). That distinction makes no difference to the conclusion that I have reached concerning this question.

28 The meaning of this element in s.32(7) of the Sale of Land Act was considered by the Court of Appeal in Fifty-Eighth Highwire Pty Ltd v Cohen,[7] where Charles and Callaway JJA stated:

“The fourth requirement involves asking whether the difference between the purchaser's actual and hypothetical positions is ‘real or of substance as distinct from ephemeral or nominal’ Compare Tillmans Butcheries Pty Ltd v Australasian Meat Industry Employees Union. It will usually be sufficient to consider that question objectively. The market value of the land is one, but only one, of the factors that will then be taken into account. We leave for consideration in an appropriate case whether subjective factors may not sometimes be relevant too, for example where the purchaser wishes to put the land to a particular use. In some cases such factors will not be affected by opportunism or hindsight. They may have mentioned earlier to the vendor or to third parties. Where they surface for the first time after the non-compliance with s32 is discovered, it will be a matter for the tribunal of fact whether or not it accepts the purchaser's assertions.”[8]

[7]             op cit

[8]             at [77]

Submissions of the Parties

29        The vendor submitted that the evidence disclosed that the purchaser had been misled by the brochure and the statement of the agent, and not by the vendor’s statement. It was argued that the purchaser’s case was really based on a claim for misrepresentation. Allied to this submission, was the proposition that I should only be concerned with whether or not the vendor’s statement had influenced the purchaser.

30        The vendor argued that owners corporation was dormant and there was nothing for the purchaser to fear from its activities. There would have been no surprises for the purchaser if all the requisite information about it had been provided. There was a clear indication of an owners corporation in the vendor’s statement.

31        The purchaser submitted that the required additional information about the owners corporation should have been included in the vendor’s statement and that the owners corporation may not always remain dormant. The interest of the purchaser in not acquiring a property, that was subject to an owners corporation, had to be considered. The vendor’s statement was not clear and unequivocal.

Conclusion on the Second Question

32 In my opinion, it has not been established that the purchaser was in substantially as good a position as if all relevant provisions of s.32 had been complied with.

33 Section 32(3A) requires a considerable amount of information to be included in the vendor’s statement in the case of a property affected by an owners corporation. Some information was contained in the vendor’s statement that might have alerted the purchaser to the existence of an owners corporation affecting the land. However, if all of the relevant information about the owners corporation required by s.32(3A) of the Sale of Land Act had been included in the vendor’s statement, the purchaser would have been in a better position to make an informed choice about whether to enter into the contract.

34        The fact that the owners corporation had been dormant does not alter my conclusion. I consider that the purchaser’s affidavit enables the inference that if she had known of the existence of an owners corporation affecting the property, whether active or dormant, she would not have entered into the contract. Despite this, I have to determine the issue the subject of the second question objectively, although “the possible reaction of potential purchasers to the burden” may be relevant.[9]

[9]             Fifty- Eighth Highwire v Cohen (op cit) at 76, per Brooking JA

35 I have taken into account the vendor’s submission that the purchaser appears not to have been misled by the vendor’s statement, but rather by the real estate agent’s brochure and statement. However, in addressing s.32(7), the issue is whether the position of the purchaser was as substantially as good as if the relevant provisions of s.32 had been complied with. Her position was not – she was not provided with a considerable amount of relevant information and therefore the opportunity, whether or not she took advantage of it, to learn details of the owners corporation, that affected the property. The information not provided was information that Parliament intended a purchaser to receive. It may have influenced the decision of any purchaser, whether to enter the contract. That the owners corporation has been “dormant” to date is no answer. The existence of the owners corporation is a significant matter affecting the property, which might ultimately affect each member, e.g. if financial contributions had to be made to the owners corporation in the future. Viewing the matter objectively, a purchaser would be better informed about matters that may affect her decision whether to enter into the contract, if he or she received the information required under s.32(3A). Without that information, the purchaser is not in substantially as good a position to make an informed choice about whether to enter into the contract, as she would have been if the information had been provided.

36 As a consequence, it has not been established under s.32(7) of the Sale of Land Act that the purchaser was substantially in as good a position as if all the relevant provisions of s.32 had been complied with.

37        The answer to the second question is “No”.

Answers to Questions

38          I therefore answer the questions:

(1) Was the failure to include the s.151 Certificate in the Section 32 Notice
“reasonable” within the meaning of s.32(7) of the Sale of Land Act?

Answer: No.

(2)	Is the plaintiff, as purchaser “substantially in as good a position as if all relevant provisions (specifically s.32(5)) of the Sale of Land Act had been complied with?
Answer: No.

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