Pan Urban Watergate Pty Ltd v Graham
[2005] VSC 505
•22 December 2005
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
No. 2001 of 2005
F5766
| PAN URBAN WATERGATE PTY LTD (ACN 090 967 614) | Plaintiff |
| v | |
| WILLIAM GRAHAM | First Defendant |
| and | |
| PETER GRAHAM | Second Defendant |
| AND BETWEEN | |
| WILLIAM GRAHAM | Plaintiffs by Counterclaim |
| and | |
| PETER GRAHAM | |
| v | |
| PAN URBAN WATERGATE PTY LTD (ACN 090 967 614) | Defendant by Counterclaim |
| v | |
| COLLIERS INTERNATIONAL (VICTORIA) PTY LTD (ACN 005 032 940) | Third Party by Counterclaim |
---
JUDGE: | WHELAN J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 16-17, 21, 23 and 28-30 November 2005 | |
DATE OF JUDGMENT: | 22 December 2005 | |
CASE MAY BE CITED AS: | Pan Urban Watergate v Graham | |
MEDIUM NEUTRAL CITATION: | [2005] VSC 505 | |
---
CONTRACTS – Failure to settle “off the plan” contract of sale – Claim for specific performance – Counterclaim alleging uncertainty, contravention of the Domestic Building Contracts Act 1995, and a contractual right to terminate the contract – Contract not uncertain – Contract falls outside the Domestic Building Contracts Act 1995 – No contractual right to terminate the contract on the facts.
TRADE PRACTICES – Misleading and deceptive conduct – Alleged representations by the plaintiff’s agent – Section 52 of the Trade Practices Act 1974 (Cth) and s 9 of the Fair Trading Act 1999 – Representations as alleged not established.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R C Macaw QC and Mr M R Pearce SC | Norton Gledhill |
| For the Second Defendant | Mr A J Laird | Jerrard & Stuk |
| For the Third Party by Counterclaim | Mr R B C Wilson | Phillips Fox |
HIS HONOUR:
Introduction
On 12 December 2001, the secondnamed defendant, Mr Graham, entered into a contract of sale with the plaintiff (“Pan Urban”). The subject matter of the contract was an apartment in a development named Watergate in the Docklands area of Melbourne. At the time the contract was signed the development had not been built. The purchase was of a type sometimes referred to as “off the plan”.
In late 2004, Pan Urban advised that settlement under the contract would take place in early February 2005. In early 2005, Mr Graham’s solicitors, Jerrard & Stuk, asserted that the contract of sale had been terminated. Pan Urban’s solicitors, Norton Gledhill, gave a notice of default on 16 February 2005. Pan Urban then issued this proceeding seeking specific performance.
Mr Graham resists the claim for specific performance and counterclaims against Pan Urban, alleging, in substance, that:
(a)representations were made to him by Pan Urban’s agent, Mr Justin Bahen, that were misleading and deceptive in contravention of s 52 of the Trade Practices Act 1974 (Cth) and s 9 of the Fair Trading Act 1999, and which entitle him to relief, including orders under s 87 of the Trade Practices Act 1974 (Cth) and s 158 of the Fair Trading Act 1999, and damages;
(b) the contract contravened the Domestic Building Contracts Act 1995, entitling him to avoid it;
(c)the apartment as constructed differs, in respects that are material and detrimental to him, from that required by the contract, entitling him to a notice pursuant to the contract giving him an election to terminate; and
(d) the contract is so uncertain as to be unenforceable.
The matters relied upon by Mr Graham raise a number of legal issues and two areas of factual enquiry.
The first area of factual enquiry concerns the alleged representations. The most significant area of controversy in this respect is as to what representations, if any, were made. Issues are also raised as to whether all of the alleged representations, if made, were misleading and deceptive, and as to whether the alleged representations, in so far as they were made, were relied upon.
The second area of factual enquiry concerns the plans for the area of the development containing the relevant apartment. The apartment in question is apartment 1802 in the north tower of the development. The contract of sale contains a schedule of plans. One of the plans on the schedule is of level 18 in the north tower. By amendments introduced to the defence and counterclaim during the trial, an issue was raised as to the identification of this incorporated plan. This factual issue is relevant both to Mr Graham’s defence concerning his entitlement to a notice on the basis that the apartment as constructed differs from that contracted for, and to the principal basis upon which his case of uncertainty is founded, as put in the final submissions on his behalf.
Mr Graham’s dealings with Mr Bahen concerned not only the apartment he was proposing to purchase, but also an apartment that one of his cousins, Mr William Graham, was proposing to purchase. Mr William Graham is the firstnamed defendant in this proceeding. The proceeding in so far as it involved him was settled prior to trial. Third party proceedings brought by Pan Urban on Mr Graham’s counterclaim were settled during the trial.
Sequence of events
Watergate is a development comprising two 19 storey apartment buildings situated on the corner of Bourke Street and the street which in 2001 was named Footscray Road and which is now named Watergate Place. The site is in the area of Melbourne known as Docklands.
Marketing of the apartments in the development, or what was then the proposed development, began in 2001. The real estate agents for the north tower were Colliers International (Victoria) Pty Ltd (“Colliers”). In addition to staff of Colliers, other persons were engaged in the task of marketing and attempting to sell apartments in the proposed development. These persons were referred to as “introducers”. One of the introducers was Mr Justin Bahen.
As I have indicated, there was, until a point early in the trial, third party proceedings on the counterclaim. These proceedings were between Pan Urban and Colliers. The principal issue there was whether or not Mr Bahen, as the person who allegedly made the representations upon which Mr Graham relies, was an agent of Colliers. Once those third party proceedings were resolved, that issue played no further part in the proceeding before me. It was common ground that Mr Bahen was Pan Urban’s agent for the purposes of his dealings with Mr Graham.
In 2001, both Mr Graham and Mr Bahen were working for entities in a group referred to as the Terrain Group.
Mr Graham in his witness statement describes himself as a stockbroker and says he has worked in the corporate sector for the majority of his working life, primarily in institutional sharebroking and commodities trading. In 2001, he was working in the securities division of Terrain Australia Limited. In his oral evidence, Mr Graham portrayed himself as an experienced, knowledgeable and sophisticated investor.
Mr Bahen is currently self-employed. In 2001, he was employed at Terrain Group as General Manager, Terrain Home Loans.
Mr Bahen and Mr Graham had known each other through their work in the securities industry for some years before 2001.
Mr Bahen earned commission on sales of apartments in the Watergate development. Whilst Mr Graham complains about many things he was told by Mr Bahen, he does not suggest that Mr Bahen kept from him the fact that he was acting on behalf of the vendor, Pan Urban, and that he was earning commission in promoting and selling the apartments.
According to Mr Graham, in mid 2001 he was working in his office when Mr Bahen dropped in. His witness statement describes what happened as follows:
“(a) Justin Bahen told me that:
(i)he was selling apartments in a development known as Pan Urban Watergate in Docklands (“Watergate”) off the plan for the vendor;
(ii)Watergate would be on the best site in Docklands, was being designed by a leading architect and would be completed in approximately 18 months to 2 years time;
(iii)he was in a position to sell apartments in Watergate at a rate of $4500 to $5000 per square meter;
(iv)he was able to sell apartments at this price because the first 30% of sales in Watergate were to be made “at cost” in order to satisfy a condition in the vendor’s financing facility; and
(v)if I took an apartment in Watergate I would be able to sell it before settlement without any difficulty at a profit of approximately 20%.
(b)I told Justin Bahen that if I was to buy into Watergate I wanted a penthouse on the water with bay views; and
(c)Justin Bahen said that all of the sites in Docklands were right on the water with bay views and that Watergate was the best of the sites.”
According to Mr Graham, over the next week he spoke to Mr Bahen on a number of occasions and the matters which I have quoted above were repeated. According to Mr Graham, the representations were also repeated in various emails between the two of them. Mr Graham was unable to produce any of these emails. He said that this is a result of the sale of Terrain’s finance division and the placing into administration of its securities division. He said that he made attempts to recover the emails unsuccessfully. In this regard he referred to an email he sent on 4 October 2005.
Mr Graham’s evidence in his witness statement was that he was interested in the proposition because of his knowledge of the eventual success of urban renewal projects on the waterfront such as Canary Wharf in London, and because of enquiries he made with associates of his who were developers of apartments in Toorak, which led him to form the view that a price of $4500 to $5000 per square metre was attractive.
Mr Bahen in his evidence denied all of the representations that Mr Graham says were made by him. His account of the conversations during which the proposition was introduced to Mr Graham was very different from Mr Graham’s account. According to Mr Bahen, he told Mr Graham that prices for the apartments ranged from about $300,000 in the lower levels to above $1,000,000 for the penthouse apartments, and he told Mr Graham that he should take into account what happens in the market because if he signed a contract he would have to settle. Mr Bahen specifically denied the representations which Mr Graham says he made and also denied ever exchanging emails with Mr Graham about Watergate. Mr Bahen’s evidence was that he gave Mr Graham a brochure entitled “Watergate Living”. An original of the brochure is in evidence. Mr Graham denied this. The brochure’s contents are not of relevance, save for the fact that on the rear of the brochure is a coloured map showing the position of Watergate within Docklands. The map shows the location of the development and displays the fact that the development is not immediately adjacent to any waterway or harbour.
By a cheque dated 17 August 2001, a company controlled by Mr Graham paid a sum of $5000 to Colliers. Mr Graham characterises this as a “preliminary deposit”. The documents in evidence do not support this characterisation of the payment. A form completed by Mr Graham and dated 8 August 2001, to which the cheque of 17 August 2001 was attached, expresses itself to be a request that his interest in purchasing a property “be registered”. The form contains a statement that no assurance was given that the person completing the form would be able to purchase any particular lot or property pre-released for sale. Whilst Colliers’ receipt describes the $5000 payment as a “holding deposit”, its covering letter refers to “your registration of $5000”.
Agents, and introducers such as Mr Bahen, were provided with materials to assist them in marketing the development. One set of materials that selling agents and introducers had as at the latter part of 2001 was identified in evidence by Mr Schwartz, the sole director of Pan Urban. These particular materials included diagrams of the apartments on the various floors current as at October 2001, site plans of the proposed development, and price lists. In that respect two matters are noteworthy. First, on the basis of the configuration of apartment 1802 as it then stood, according to one of the tables in these materials the area described as “Living Areas” was 143.4 square metres, the area described as “Balcony/Terrace” was 17.2 square metres, and the “Sale Price” was $1,200,000. This table also set out the “$-sqm” for apartment 1802 of the north tower, under its then configuration. The figure given as the price per square metre was $8368. It is apparent that this figure was arrived at by dividing the sale price of $1,200,000 by what was referred to as the “Living Area” of 143.4 square metres. The same table reveals prices per square metre as low as $4420 at level 1, and prices below $5000 per square metre for some apartments up to and including level 4. It was not suggested that these materials were ever given to Mr Graham.
Whilst it is clear that eventually Mr Bahen and Mr Graham understood that Mr Graham would be purchasing a penthouse apartment in the north tower and that it would be apartment 1802, the evidence does not reveal when it was determined that this would be Mr Graham’s apartment. In Mr Bahen’s first witness statement, he said that after initially speaking to Mr Graham he contacted Colliers and requested that two penthouses be reserved on the 18th floor of the north tower.
Mr Graham signed the contract of sale on 12 December 2001. According to Mr Graham’s evidence, between the time when the $5000 was paid in August and the time when he signed the contract, he continued to “work very long hours” and had “very little time available to do other things such as following up on the details of what was happening in relation to Watergate.” Mr Graham’s evidence was that he asked Mr Bahen for details of the exact location of Watergate and for a floor plan of the apartment he was to purchase on a number of occasions, and that Mr Bahen told him, in substance, that the details were not yet available. Mr Graham also said that Mr Bahen repeated the substance of the earlier representations that had been made.
Mr Graham’s evidence was that during this period an important further representation was made. He said Mr Bahen told him that “while the plans for Watergate were still being finalised, he had allocated me the penthouse known as Apartment 1802 … at a price of $4900 per square meter…”.
In his witness statement Mr Graham said that he rang Colliers and also tried to contact the “Baracon Group”. Mr Graham said that he understood that the Baracon Group was the builder. In fact, Baracon Group Pty Ltd (“Baracon”) was the development manager of Watergate. In his witness statement, and in evidence-in-chief given orally, Mr Graham indicated that his attempts to contact Baracon occurred prior to signing the contract. In cross-examination he suggested that that was a mistake and that he did not think he made attempts to contact them prior to signing the contract. Mr Graham said in his witness statement that he did recall receiving some “draft contract documents however they did not include any actual site or floor plans”.
In his cross-examination Mr Graham placed great emphasis on the representation that the price he was paying for apartment 1802 was $4900 per square metre. He stated on a number of occasions that 90% of his decision to purchase the apartment was based upon reliance on the representations concerning the price per square metre.
Mr Bahen made two witness statements, each of which were tendered. The second was prepared as a response to Mr Graham’s witness statement. In neither witness statement did Mr Bahen say that he gave Mr Graham a floor plan of apartment 1802 prior to him signing the contract. As a result of the amendments raising the issue of identification of the applicable plan, Mr Bahen gave additional evidence-in-chief. In that additional evidence he swore that he gave Mr Graham a floor plan prior to him signing the contract. The floor plan Mr Bahen says he gave him was referred to at times in the evidence and in submissions by reference to its court book page reference, being CB 235.
Mr Graham in his witness statement referred to a draft contract. He made discovery of an unsigned contract for apartment 1802 dated 6 December 2001. There are two aspects of this unsigned contract that are important. First, notwithstanding the suggestion made in Mr Graham’s witness statement to the contrary, the draft contract did contain a plan which shows the development situated on the corner of Bourke Street and Footscray Road. Secondly, the draft contract provided for a purchase price of $1,205,000.
Mr Graham was asked some questions about the draft contract, and the plan it contained, in his cross-examination. No other witness gave evidence in relation to this draft contract. In particular, no explanation was given by any witness for the price, $1,205,000, which is different from the price in the contract executed on 12 December 2001.
On 12 December 2001, Mr Bahen forwarded a memorandum to Mr Brett Griffith at Colliers. The memorandum relevantly reads as follows:
“Further to our discussion please find attached amended floor plans for apartments 1802 & 1806.
I have also spoken to Morry about the price amendments.
·Apartment 1802 is now priced at $8403.07 per sqm x 127.0 sqm = $1,067,189.68. To be in the name of: Peter Graham (Graham Family Trust) PO Box 148, Toorak VIC. Could you round up the prices for the new contracts.
…
I need these two contracts delivered to Level 1, 500 Collins Street Melbourne, marked attention Peter Graham. If you could hand deliver them and wait while they are signed it would make a lot of sense to do so.”
The reference in the memorandum to amended floor plans is a matter to which I will refer in dealing with the issue concerning identification of the incorporated plan. The reference to “Morry” is a reference to Mr Schwarz, the sole director of Pan Urban. The purchase price in the executed contract is $1,065,000. It seems the price was “rounded down” rather than “rounded up”, as suggested in the memorandum.
In Mr Bahen’s first witness statement he said that he could not recall the discussions that led to this memorandum.
Notwithstanding the absence of evidence on the point, there is an important conclusion to be drawn from the purchase prices respectively provided for in the executed contract and in the draft.
As the memorandum of 12 December 2001 makes clear, the purchase price in the executed contract was calculated by multiplying $8403.07 by 127 square metres. The floor plan at CB 235 (the one Mr Bahen says he gave Mr Graham) has a notation on it as follows:
“Internal Area 127.0sqm Terrace Area 13.6sqm.”
Thus, the price on the executed contract was calculated by multiplying $8403.07 by the internal area as measured by Pan Urban and set out on the floor plan at CB 235.
Earlier I referred to the fact that the agents’ selling materials had listed apartment 1802 as having a “Living Area” of 143.4 square metres. In another table in the same materials, apartment 1802 is recorded as having an “Internal Area” of 143.4 square metres. If one multiplies $8403.07 by 143.4 square metres, one arrives at $1,205,000.20, almost exactly the price in the draft contract.
The conclusion that seems to me to be inescapable is that the price in the draft contract was also calculated by multiplying $8403.07 by the internal area as measured by Pan Urban, and that the price was reduced because the internal area was reduced from 143.4 square metres to 127 square metres. This reduction is itself explained by alterations to plans for level 18 in early December 2001, to which I will refer below.
There is a separate issue raised by Mr Graham concerning the dimensions of the “internal area” which I will deal with subsequently.
Mr Graham’s witness statement said that at the time he executed the contract he was “still extremely busy”. He summarised his state of mind at that time as follows:
“Essentially all I knew about Apartment 1802 at the time that I signed the contract of sale on 12 December 2001 was what Justin Bahen had told me. This boiled down to the fact that I was buying an architect designed penthouse apartment with bay views on the waterfront at Docklands in a prestigious development at a cost [sic] $4900 per square meter, which was under market value and represented a very attractive investment.”
Under the executed contract of sale, a deposit of $106,500 was payable on the day of sale, with the balance to be paid on the later to occur of two circumstances, one of which is “10 Business Days from the day on which an occupancy permit is issued for the Apartment.” The obligation to settle is conditional on registration of the plan of subdivision and on “construction of the Apartment under a Major Domestic Building Contract generally in accordance with the Plans and Specifications before the end of the Construction Period” (special condition 2.1(b)).
The “Apartment” is defined in the contract to mean “the apartment generally described in the Plans and Specifications” (clause 1.1). The “Plans and Specifications” are defined as “the building plans, floor plans and indicative specifications described in the Schedule of Plans in Annexure ‘A’ to which the Builder will be required to build the Apartment and the Building.” Annexure ‘A’ refers to a list of building plans and indicative specifications attached and states:
“Copies of the building plans can be inspected at the offices of Baracon Group, Level 7, 350 Collins Street, Melbourne.”
The list of plans attached to Annexure A includes an item “North Penthouse Apartment: Level 18 Plan”, with the designated number “DD-A288”.
It will be necessary to consider other terms of this contract in the context of the defence raised under the Domestic Building Contracts Act 1995. For present purposes, however, it is only necessary to note the provisions governing alterations or variations to the plans. The contract includes the following special conditions:
“7.3The Purchaser acknowledges and agrees that the Plans and Specifications may be varied or altered by the Vendor or the Builder from time to time in any manner the Vendor or the Builder (as the case may be) considers necessary or desirable;
…
7.4The Vendor will notify the Purchaser within a reasonable time of any variation or alteration to the Plans and Specifications which materially and detrimentally affects the Purchaser.
7.5The Purchaser may terminate this Contract by written notice to the Vendor within 21 days of notification under special condition 7.4.”
Mr Graham made arrangements for payment of the deposit partly in cash and partly by the provision of a deposit bond. Mr Graham was advised of amendments to the plan of subdivision in March 2002, and from time to time was sent standard letters by Pan Urban.
In February 2003, Baracon moved offices to 112 Balmain Street, Richmond. Evidence was led to the effect that signs were placed on the entry door of the former offices at 350 Collins Street advising of the relocation. Mr Graham said in the course of his oral evidence that, in his endeavours to see plans, at one point he attended city offices but they were vacant. Mr Graham’s evidence was not consistent as to when this attempted visit occurred.
By a letter of 16 August 2004, Mr Graham was advised by Pan Urban that an extension of his deposit bond was required. In his witness statement, Mr Graham said that at this stage he had “still not received a floor plan for Apartment 1802 despite the enquiries that I made”. By a facsimile of 23 August 2004, Mr Graham was forwarded floor plans for apartments 1802 and 1806 (his cousin’s apartment). Both the fax itself and the enclosed floor plans advised that the overall dimensions of apartment 1802 were “127 m2 internal 13.6 external balcony area”. The floor plan in this fax (CB 1449) is the same as floor plan CB 235 to which I have referred earlier.
In his witness statement Mr Graham said that he “eventually” obtained a floor plan under cover of the 23 August 2004 fax. He said that when he read the letter and floor plan he noted the discrepancy between the rate per square metre that Mr Bahen had told him he would be paying and the actual number of square metres, and that “from that point on I decided that I wanted to avoid the contract prior to settlement if I had lawful grounds for doing so”.
His witness statement went on to say that his life was in such “turmoil” at that stage because of the collapse of a project he was involved in called “Media World” that he “put the matter to one side”.
By a letter of 16 September 2004, Pan Urban advised Mr Graham that his apartment was due to settle at the end of November 2004. The letter said that a “certified sworn valuation” of the apartment was enclosed, but what was actually enclosed was an indicative valuation by Fitzroys. The indicative valuation for apartment 1802 was $1,050,000.
An email of 13 December 2004 from an employee of Pan Urban named Ms Samantha Firestone to Mr Graham refers to a discussion with Mr Graham that day and advises that apartments 1802 and 1806 were scheduled for settlement in the last week of January/first week of February 2005. There was no evidence led concerning this discussion. By a letter of 24 December 2004, the solicitors for Pan Urban, Norton Gledhill, forwarded to Mr Graham a copy of an occupancy permit that had been issued on 26 December 2004 and advised that settlement was to take place in early February 2005. A further letter of 13 January 2005 from Norton Gledhill to Mr Graham stated that settlement was to take place on 3 February 2005.
On 14 January 2005 (incorrectly dated 2004), Mr Graham’s solicitors, Jerrard & Stuk, asserted that misrepresentations had been made which were said to “amount to a repudiation of the contract” which Mr Graham accepted. The letter was written on behalf of both defendants, Mr Graham and his cousin. Mr Graham’s dealings with Mr Bahen were on his cousin’s behalf as well as his own. It is necessary to set out precisely what the misrepresentations were then alleged to have been. The letter in this respect reads as follows:
“Our clients instruct us that Mr Bahen made the following representations in procuring the contracts of sale:
1. Capital Appreciation
Mr Bahen represented that our clients’ apartments would increase in value by approximately 20 per cent in the first year of construction.
2.On Selling
Mr Bahen represented that our clients would not have any difficulty selling the apartments prior to settlement.
In fact, the apartments have depreciated significantly and will be unable to on sell prior to settlement.
3.Pricing
Mr Bahen represented to our clients that their contracts were in the 30% of apartments sold and as such, they were receiving a discounted price as first 30% would be sold ‘at cost’ (ie without margin).”
When compared to the representations now alleged, the letter of 14 January 2005 omitted reference to the alleged misrepresentation concerning the development being right on the water and the best site in Docklands, and, more significantly, omitted reference to representations concerning the price per square metre, and, in particular, the representation that the purchase price for apartment 1802 was $4900 per square metre.
Norton Gledhill replied to Jerrard & Stuk denying their allegations, and by a letter of 21 January 2005 (still misdated 2004), Jerrard & Stuk advised that “[o]ur client reiterates the contents of its correspondence at 14 January 2005.”
Norton Gledhill forwarded to Mr Graham, c/o Jerrard & Stuk, a notice of default by a letter of 16 February 2005. By a letter of 25 February 2005, Jerrard & Stuk, on behalf of Mr Graham, asserted an entitlement to avoid the contract pursuant to s 11 of the Domestic Building Contracts Act 1995.
Factual issues: the alleged misrepresentations
General considerations
The representations relied upon by Mr Graham are alleged to have been partly oral and partly in writing. In so far as they were oral, it is alleged that they were made to Mr Graham by Mr Bahen between mid 2001 and 12 December 2001. In so far as they were in writing, it is alleged that they were contained in emails sent by Mr Bahen to Mr Graham in mid 2001. None of these emails have been produced. Mr Graham has given an explanation for that circumstance, which relates to the cessation of business by the Terrain Group. Mr Bahen in his evidence denied that any such emails were ever sent. Accordingly, the only direct evidence concerning the making of the representations alleged is the oral evidence of Mr Graham and Mr Bahen.
Each of Mr Bahen and Mr Graham were giving evidence about conversations they had had more than four years ago without any contemporaneous record to assist them. Each of them at times in their evidence adopted an approach that seemed to me to constitute something close to arguing a case as opposed to recalling events. There were other aspects of the evidence of each of them that undermined their reliability.
Mr Bahen’s evidence was primarily negative, in the sense that much of it was directed towards what he did not say. His evidence as to what he did say suggests that his attempts to sell these apartments were quite remarkably restrained. He does not seem to have found it necessary to emphasise the advantages of purchasing an apartment. In cross-examination he repeatedly asserted that he was not marketing, promoting or “selling” the apartments at all. The submission by counsel for Mr Graham that Mr Bahen’s portrayal of his activities in this respect is improbable seems to me to be well founded. His characterisation of his approach is not consistent with the submission that he and an associate of his, Mr Mark Burgio, had put to Colliers or to Mr Schwartz (it is unclear which – his witness statement suggested Colliers and his oral evidence suggested Mr Schwarz) for the purpose of obtaining an engagement as “introducers”. Amongst other things, that proposal included the following statements:
“Over the last fortnight we have been able to create extreme excitement within our client base about the the [sic] benefit of purchasing property in Docklands. As a result of this marketing we anticipate that our registered acceptance for the proposed development will be overwhelming.
Our proposal upon your approval would be to arrange an evening to register the interests of our client base by way of a $5000 expression of interest on a first come first serve basis. This approach being taken in order to be both fair to all parties and to create an urgency.
…
Again on your acceptance, our aim is to hold the seminar by the end of the month as we do not want the hype we have created to subside.”
In his cross-examination, Mr Bahen said, in relation to the use of the term “hype”, that the wrong word was used.
Whilst his witness statement did not refer to providing Mr Graham with a floor plan, in his evidence-in-chief given orally he was adamant that he did so and that the floor plan he provided was the one at CB 235. If that is so, that floor plan must have been provided to Mr Graham very shortly prior to his execution of the contract on 12 December 2001. Indeed, given my conclusion as to the explanation for the price difference, that plan must have been provided between 6 December 2001 when the draft contract was dated and 12 December 2001 when the final contract was signed. Whilst Mr Bahen’s evidence on this issue was given in most emphatic terms, it was difficult to tell from his evidence whether his expressed confidence was based upon actual recollection or upon his usual practice. It is significant in this respect that Mr Schwartz required all of the agents and introducers, including Mr Bahen, to sign a letter confirming a number of matters, one of which was that each purchaser had been given a copy of the floor plan of their apartment. Mr Bahen’s absence of any recollection of the discussion of the amendment referred to in his memorandum of 12 December 2001 (referred to above) stands in marked contrast to the adamant manner in which he gave evidence about providing Mr Graham with the floor plan.
In my view, Mr Bahen’s evidence was an account of what he believes he would have done, would have said, and would not have said, based upon the requirements of Pan Urban, upon his recollection of his general practice, and upon some recollection of his discussions with Mr Graham. It is impossible for me to separate these components.
The factors undermining the credibility of Mr Graham’s account were more significant.
Like Mr Bahen, Mr Graham was giving an account of conversations more than 4 years ago of which there is no written record, or none that now exists.
Throughout his evidence, particularly in his witness statement, he was most concerned to emphasise how busy and preoccupied he was with other matters during the entire relevant period. I have already referred to some of these statements. When addressing the period prior to Mr Bahen’s initial approach, his evidence in his witness statement was that he was working “extremely hard over long hours” and that he “normally did little more than work, eat and sleep”. When addressing the representations made to him before he signed the contract in December 2001, his witness statement said that during the relevant period he “continued to work very long hours at Terrain … which meant that I had very little time available to do other things such as following up on the details of what was happening in relation to Watergate”. When addressing the occasion when he was sent the floor plan in August 2004, his witness statement stated that at that point his life was in “turmoil” and that he was “almost completely preoccupied with the fallout from the Media World collapse.”
There were a number of significant inconsistencies in Mr Graham’s account of events. Most importantly, there were significant inconsistencies in the account given by him, or on his behalf, of what the alleged misrepresentations were. The sequence of events is as follows:
(a)By the letter of 14 January 2005, Mr Graham’s solicitors set out the misrepresentations then alleged. They concerned an alleged misrepresentation that the apartments would increase in value by approximately 20% “in the first year of construction”, that there would be no difficulty selling prior to settlement, and that the first 30% of apartments were being sold “at cost”, which was said to mean “ie without margin”. As I have already noted, no allegation was made concerning representations as to the property’s location, and no allegation was made concerning representations as to the price per square metre at which the property was to be sold. Reliance on this letter was reiterated shortly afterwards.
(b)The original defence and counterclaim filed on 1 March 2005 alleged misrepresentations that were consistent with the representations alleged in the letter of 14 January 2005, save that a further representation was added, being that “the properties were ‘right on the water’ and with views out over the bay” (paragraph 43). On my reading of the pleading it was not alleged (despite some ambiguity by use of the defined expression “the Representations”) that this new representation was untrue (see paragraph 51).
(c)In the amended defence and counterclaim filed on 10 March 2005, the alleged representations and the allegation of their misleading and deceptive character remained substantially unchanged.
(d)In his evidence before me, Mr Graham maintained that by far the most significant representations upon which he relied were the representations concerning the price per square metre. According to Mr Graham, there was at the outset a representation referring to $4500 to $5000 per square metre which was then made specific as being $4900 per square metre for apartment 1802. There is no evidence or record of this representation being alleged by Mr Graham prior to the service and filing of Mr Graham’s witness statement on 8 November 2005. In other words, this allegation was, so far as the Court record and evidence are concerned, first made approximately four years after the representations were allegedly made, in circumstances where Mr Graham’s solicitors had previously set out the alleged misrepresentations and had reiterated reliance on them, and where two versions of Mr Graham’s pleading had been filed and served, none of which referred to any such representation. The first introduction of these alleged representations into Mr Graham’s pleadings was in proposed amendments circulated shortly prior to and on the first day of the trial. The allegations were then included in a further amended defence and counterclaim amended on 21 November 2005 pursuant to an order I made on that day. This further amended defence and counterclaim also alleged for the first time that not only was it represented that Watergate was right on the water with bay views, but also that it was “the best of the sites in Docklands”, and it was alleged for the first time that the representation concerning location was false.
(e)A second further amended defence and counterclaim was filed on 29 November 2005 pursuant to leave which I gave that day. It did not alter these allegations.
Mr Graham’s explanation for these changes in position concerning the representations was unsatisfactory. In substance, he asserted that he had told his solicitors of the representations which he says were made to him, as set out in his witness statement, but that they had ignored his instructions. He was inconsistent in his evidence as to whether he accepted that situation or complained about it. On the account of events which he gave in his evidence, the representations concerning price per square metre were absolutely critical. He says price per square metre was 90% of the reason why he invested. I cannot accept that he told his solicitors of this representation, that they simply ignored it or overlooked it, and that he did not insist upon correction, or that they again ignored him if he did.
There were other inconsistencies in Mr Graham’s evidence. In this respect I refer to the following:
(a)His evidence in cross-examination on the issue of the visit to Baracon’s offices was inconsistent with his witness statement and his oral evidence-in-chief.[1]
(b)His evidence in cross-examination on the issue of when he discovered the internal area of apartment 1802 was 127 square metres was inconsistent with his witness statement.[2]
(c)His evidence concerning the alleged representation that the price was “at cost” was inconsistent with his solicitors’ letter of 14 January 2005 (“without margin”) and with his pleaded allegations.[3]
(d)His evidence concerning the Village Docklands letter was confused and at times inconsistent with his witness statement.[4]
(e)His evidence in cross-examination concerning the asserted 20% appreciation was inconsistent with his pleaded allegations and with his witness statement.[5]
[1]Witness statement of Mr Peter Graham, paragraph 11; transcript 282-283, 328-329.
[2]Witness statement of Mr Peter Graham, paragraph 23; transcript 299, 305, 319.
[3]Transcript 301-302, 349-350, 352, 355.
[4]Witness statement of Mr Peter Graham, paragraph 20; transcript 349, 356-358.
[5]Witness statement of Mr Peter Graham, paragraph 5; transcript 362-364.
My conclusion in relation to Mr Graham is that he has little reliable recollection of what he was told. He was preoccupied at the time. On the critical issue of what representations were made, the accounts given by him or on his behalf are riddled with inconsistencies.
I turn then to the specific representations now relied on, which are alleged to have been misleading, and which are alleged to have been relied upon by Mr Graham in entering into the contract.
Representation as to location
The representation now alleged concerning location is:
“Watergate was right on the water with bay views and was the best of the sites in Docklands.”
As previously indicated, this representation was not relied upon in the letter from Mr Graham’s solicitors in January 2005, and an earlier pleaded version of the alleged representation, which was confined to a representation that Watergate was right on the water with bay views, was not alleged to have been false and misleading.
Watergate is not “right on the water”, although it is in the vicinity of Victoria Harbour. A map of the site was in Mr Graham’s possession from at least 6 December 2001, although he may not have noticed it. Notwithstanding his characterisation of the $5000 payment as a “deposit”, Mr Graham was under no legal obligation before 12 December 2001.
Mr Graham was probably told something positive about Watergate’s location. It is impossible for me to conclude what that was. I certainly cannot conclude that what he was told was misleading and deceptive, or that he relied upon it in entering into the contract.
Price per square metre
There are two representations alleged concerning the price per square metre. The first is that Mr Bahen said:
“he was in a position to sell apartments in Watergate at a rate of $4500 to $5000 per square meter.”
The second is:
“he was able to sell the Defendant a Penthouse apartment in Watergate identified as Apartment 1802 … for a price of $4900 per square meter.”
I have already referred to the absence of any allegation concerning these representations prior to the filing and service of Mr Graham’s witness statement in November of this year, and to Mr Graham’s evidence that these were by far the most important of the representations upon which he says he relied.
Mr Graham’s evidence suggested that the representation as to $4500–$5000 may have been made prior to his advising Mr Bahen that what he wanted was a penthouse.[6] The express terms of this alleged representation concern “apartments”, not penthouses. Mr Bahen said in cross-examination that there were no apartments available at the rate of $4500 to $5000 per square metre. The materials in the possession of selling agents in the latter part of 2001 suggest the contrary, however. As I indicated earlier, the tables of prices and related information in that material indicate that apartments at the lower levels were available for purchase at the rate of $4500 to $5000 per square metre. Mr Bahen denies making any such representation.
[6]Witness statement of Mr Peter Graham, paragraph 5; transcript 333.
On the evidence I cannot make a finding that a representation was made to Mr Graham that apartments were available at the rate of $4500 to $5000 per square metre, but even if that representation had been made in the terms alleged, on the evidence before me I cannot conclude that it was misleading or deceptive. In any event, if made and if misleading it was not relied upon, as Mr Graham’s evidence made it clear that the alleged subsequent specific representation concerning $4900 per square metre for apartment 1802 was, according to him, the operative representation when he bound himself by signing the contract on 12 December 2001.
The representation concerning $4900 per square metre for apartment 1802 was, if made, clearly false.
In the circumstances, Mr Bahen would have been very audacious in making such a misrepresentation. This is because it was almost certain that the falseness of the representation would be discovered, as Mr Graham himself conceded.
If made at all, the $4900 square metre representation must have been made at some time after apartment 1802 was designated as the apartment that Mr Graham was to purchase. The representation, if made, was still operative and uncorrected at the time Mr Graham signed the contract, according to his evidence. On that very day Mr Bahen wrote to Colliers referring to the fact that apartment 1802 was “now priced at $8403.07 per sqm”.
According to Mr Graham, he became aware that this representation was false when he received the floor plan, which in his witness statement he said was August 2004, although in his oral evidence he said it was earlier, perhaps some time in 2003.[7] Whenever it was, it was then apparent to him that the price was not $4900 per square metre. Yet, according to Mr Graham’s evidence, he did not raise this with anyone or complain to anyone at that time. In his witness statement he explained this as being a result of the “turmoil” in his life and his preoccupation with the “fallout” from the Media World collapse. Even if one accepted this explanation, it is incredible that when Mr Graham did eventually make complaints through his solicitors, and made complaints about representations which were alleged to have been made to him and to have been false, this representation was not mentioned.
[7]Transcript 299, 305, 319.
Mr Bahen also bought an apartment in Watergate. His apartment is on a lower level and the evidence is that he was given a discounted price. It was revealed in cross-examination that in the course of preparation for the purpose of this trial, Mr Graham was told by his counsel that the price paid per square metre by Mr Bahen was $4900.[8] It was put to Mr Graham that this discovery was the explanation for the late introduction of the alleged misrepresentation concerning $4900 per square metre for apartment 1802.[9] Mr Graham denied this. This circumstance compounds my concerns arising out of Mr Graham’s failure to refer to the alleged misrepresentation earlier and his unsatisfactory explanation for this failure.
[8]Transcript 333-345.
[9]Transcript 345.
In all the circumstances I cannot accept Mr Graham’s evidence that the representation concerning a price of $4900 per square metre was made to him. If it was made, it is clear that it was false and that Mr Bahen would have known it to be false.
First 30% of sales “at cost”
In his evidence Mr Graham sought to bolster his position in relation to this representation by referring to his own experience in financing arrangements for resource projects in which he had been involved by referring to representations made to him by Mr Bahen concerning another Docklands development, and by referring to a general real estate marketing strategy put in place by the Terrain Group employing Mr Bahen.
Whilst in his pleading and his witness statement Mr Graham maintained that the representation made to him was that the apartment was being sold “at cost”, in his oral evidence it seems to me that he departed from this position, suggesting that the representation made, or his understanding of what he was being told, was that the margin was very small, not more than 10%.[10] I found his evidence in relation to this representation vague and confusing. The letter concerning the other project does not suggest that apartments were being sold “at cost”, rather, it suggests a very small margin of profit.
[10]Transcript 301-302, 350, 352, 355.
According to a valuer called on behalf of Mr Graham, Mr Bassett-Smith, Docklands was experiencing boom conditions in 2001. Mr Schwartz’s evidence was that no “first 30% at cost” approach was ever countenanced by Pan Urban. Mr Bahen’s evidence was that he had no knowledge of Pan Urban’s profit margins or finance arrangements. He denied making any such representation.
In his evidence Mr Graham related this “at cost” representation to his own knowledge of project financing, especially in the resources sector. In final submissions, Pan Urban suggested that this representation was entirely a reconstruction based upon this experience.
I cannot find that the representation alleged was made.
Re-sell without difficulty at a profit of 20%
The allegations concerning this representation have also altered over time. Initially the allegation was that the apartment could be sold with a profit of 20% “in the first year of construction”. The allegation now pleaded is that it could be sold without difficulty at a profit of approximately 20% “before settlement”. This may not be a significant difference.
What is significant, however, is that in his cross-examination Mr Graham retracted the suggestion that Mr Bahen had represented that the appreciation would be 20% and suggested instead that this had been his own calculation.[11]
[11]Transcript 362.
If Mr Graham was told anything specific about re-sale, and I am not able to find on the evidence that he was, I do not consider that he relied upon it. His evidence was that he was buying for the long term, with a 10 year view. At one point the following interchange took place with senior counsel for Pan Urban:[12]
“When Mr Bahen said to you that you’d be able to sell an apartment before settlement without any difficulty at a profit of approximately 20 per cent what did you say to him? --- I wasn’t really interested.
You weren’t interested because he never said any such thing, did he? --- No, at that point in time I was going to hold the property.”
[12]Transcript 365.
Finally, Mr Graham knew perfectly well that predictions about movements in markets are inherently unreliable.[13]
[13]Transcript 288, 330, 351.
Factual issues: identification of plan DD-A288
The contract of sale identifies the “Apartment” by reference to a plan numbered DD-A288 and to the specifications in Annexure A. I have set out the relevant provisions above. Prior to the amendment to the defence and counterclaim made on 21 November 2005, there was no issue in the proceeding as to the identification of the plan. A witness statement had been signed and filed by one Stefanie Sawers, a development manager at Baracon, the development manager for Watergate Place. That statement was dated 10 November 2005 and was filed on 11 November 2005. It is exhibit P9. That statement produced a set of plans which Baracon had received from the architects, Elenberg Fraser, on or about 15 November 2001, and a set of plans which Baracon had received from the architects on or about 12 February 2002. Both sets of plans are versions of DD-A288.
Apartment 1802 as described in the 12 February 2002 plan varies in material respects from apartment 1802 as described in the 15 November 2001 plan. The area of the apartment is smaller and there are alterations to the floor plan that make the apartment less attractive. Most obviously, one of the bathrooms has been moved and contracted into a powder room.
By the amendment made on 21 November 2005, Mr Graham introduced the allegation (para 37A) that these alterations entitled him to a notice in accordance with special condition 7.4 of the contract, which, if given, would entitle him to terminate the contract.
The proceeding had to be stood down for approximately one week whilst Pan Urban had the opportunity to address these new allegations. Pan Urban then filed a series of further witness statements, the substance of which were that there had been a further version of plan DD-A288 after 15 November 2001, and before the contract was signed on 12 December 2001, which depicted apartment 1802 in a manner consistent with its as constructed configuration. In response to this further material, Mr Graham further amended his defence and counterclaim pursuant to leave which I granted on 29 November 2005 so as to allege, as an alternative, that even if what was referred to as “the second plan” was the current plan as at 12 December 2001, differences between that plan and the as constructed apartment also entitle Mr Graham to a notice under special condition 7.4.
The issue of identification of the applicable plan is also relevant to Mr Graham’s defence of uncertainty.
Ms Sawers produced a further witness statement (exhibit P8) which explained the searches she had undertaken for her first witness statement, and then set out further searches she had undertaken as a result of instructions received consequent upon the amendment. I have no doubts as to Ms Sawers’ veracity. She was frank and open in cross-examination.
Witness statements were also filed and evidence was given on this issue by the managing director of Baracon, Mr Brett Andrew Rogers, by another development manager at Baracon at the relevant time, Mr Christopher Sean Roche, by the architect on the project, Mr Callum Fraser, and by the land surveyor on the project, Mr Allan David Norman from Reeds Consulting Pty Ltd (“Reeds”).
This additional evidence relevantly revealed the following:
(a)On 28 November 2001, Mr Fraser, the architect, sent two versions of a new floor plan for apartment 1802 to the director of Pan Urban, Mr Schwarz, with a copy to Baracon (Fraser: paragraph 9; Rogers: paragraph 13; Roche: paragraph 11.) Shortly thereafter, Mr Schwarz approved the floor plan, which became the final floor plan and which is the same as the floor plan at CB 235 (Fraser: paragraph 9). On 29 November 2001, Mr Norman at Reeds received that amended floor plan (Norman: paragraph 6).
(b)Consequent upon the approval of the amended floor plan, Mr Fraser updated the design drawing (Fraser: paragraph 9), and the revised drawing was then saved on a Win Zip file on Elenberg Fraser’s computer system (Fraser: paragraphs 9 and 11). This probably occurred at approximately 9.30 am on 3 December 2001 (Fraser: paragraph 12). That revised drawing, which was saved on the architect’s computer system, is the drawing at CB 2440 (Fraser: paragraph 11).
(c)Later on 3 December 2001, Elenberg Fraser sent the revised drawing for level 18 to Baracon and to Reeds by email (Fraser: paragraph 13). This drawing is the drawing at CB 2331, and, according to Mr Fraser, it is identical to the drawing at CB 2440 (Fraser: paragraph 15).
(d)Baracon received the email from Elenberg Fraser (Roche: paragraph 12) and saved the new drawing onto its own system (Rogers: paragraph 15; Roche: paragraph 12). The level 18 drawing as saved by Baracon is the drawing at CB 2031. According to Mr Fraser, it is identical to the drawing saved by Elenberg Fraser at CB 2440 and that attached to the email of 3 December at CB 2331 (Fraser: paragraph 15).
(e)Baracon’s system required that the revised drawing be printed and placed on a “stick”, where the current plans were available for purchasers or intending purchasers to inspect (Rogers: paragraph 15). Mr Roche in his witness statement said that he printed the document and replaced the existing level 18 north tower drawing with the revised drawing on the stick. It became clear during his cross-examination that he did not independently recall doing this, but instead had concluded that he did do it based upon Baracon’s records and the system that was in place (see transcript 218-219).
(f)The email received by Baracon on 3 December 2001, referred to in sub-paragraph (d) above, was also received by Reeds at approximately the same time (Norman: paragraph 7).
(g)Due to what Mr Fraser described as an “oversight”, the revised plan DD-A288 issued on 3 December 2001 did not have a new date entered upon it, so that it did not have any date or other designation distinguishing it from the earlier 15 November 2001 version (Fraser: paragraph 14).
Counsel for Mr Graham attacked this evidence as to the revision of the plan for level 18 on a number of bases. He submitted that all of the witnesses called on this issue were in a business relationship with Pan Urban and yet were “disinclined” to acknowledge under cross-examination that they were concerned to assist their client. He submitted that on the evidence there were a number of versions of DD-A288 in the offices of Baracon on 12 December 2001 and that none of the witnesses were able to say from their own recollection what plan was on display on that date. He submitted that the evidence of all of the witnesses was essentially a reconstruction following the review of documents, and that the documentary procedures had been revealed to be unreliable in a number of respects. In this regard he relied upon Ms Sawers’ first witness statement, the absence of any reliable system of date stamping, the error in relation to the failure to put a new date on the revised plan, and the failure to mark plans as “superseded” once they had been removed from display.
The various witnesses on this issue are, or were, in a business relationship of one kind or another with Pan Urban. The strength of their evidence, however, is to be found not so much in what they recall as in the contemporaneous records which they have produced and explained. Ms Sawers’ first statement was, in my view, adequately explained by her second statement, particularly given that at the time of her first statement this issue was not one raised on the pleadings. The absence of a revised date is probably the source of much, if not all, of the uncertainty which has surrounded this issue, and which has necessitated the detailed review of the various relevant emails and the dates upon which versions of the drawing were saved on the relevant databases so as to demonstrate what the current plan was as at 12 December 2001. In my view, Pan Urban’s evidence has demonstrated that the current plan as at that date was the one depicting the apartment as it was constructed and not the earlier version. Whilst it is true that no person has an independent recollection of replacing the plan on display, it would be very surprising if they did so, given that this issue was never raised as a matter of controversy until during the course of the trial, some four years after the event in question. Mr Roche did have some actual recollection of receiving the relevant emails, and in the circumstances I found his explanation for that circumstance credible.[14]
[14]Transcript 211 – the word was probably “penultimate”.
The conclusions which I draw on the balance of probabilities are as follows:
1.The plan for level 18 was revised on 3 December 2001 and the revised plan at CB 2031, 2331 and 2440 was the current plan “DD-A288”as from 3 December 2001.
2.That current plan was on display at Baracon’s offices from 3 December 2001 up to and including 12 December 2001 when the contract was executed.
3.This revision to the plan is the amendment which is referred to in Mr Bahen’s memorandum of 12 December 2001, and is the explanation for the reduction in purchase price between the draft contract dated 6 December 2001 and the final executed contract dated 12 December 2001, to which I have referred above.
Counterclaim relying upon special condition 7.4
The claim relying upon an alleged entitlement to a notice under special condition 7.4 as a result of material and detrimental variations to the plans has two aspects. One is based upon the proposition that the current plan as at 12 December 2001 was the plan which had been current on 15 November 2001. The other is based on the proposition that the plan revised on 3 December 2001 is the applicable plan. For present purposes I will refer to these as the first and the second plan.
If the first plan was the current plan at 12 December 2001, then there is no doubt that material and detrimental variations have occurred which would entitle Mr Graham to a notice under special condition 7.4. Counsel for Pan Urban accepted that. However, the conclusions I have reached concerning the identification of plan DD-A288 as it was on 12 December 2001 are fatal to this aspect of Mr Graham’s defence based upon special condition 7.4. I have found that the first plan was not the current plan at the time Mr Graham executed the contract, and, indeed, that his contract had been amended and the purchase price reduced because of the variation that was embodied in the second plan.
Mr Graham’s alternative claim relying on special condition 7.4, assuming that the second plan was the current plan, is essentially founded upon the dimensions set out on the floor plan at CB 235. The floor plan at CB 235 contains a notation indicating that the internal area is 127 square metres.
Expert evidence was led on behalf of both parties as to the internal measurements of the apartment. The expert called on behalf of Mr Graham, Mr Martin, gave evidence that the internal area was 119.852 square metres.[15] Pan Urban called evidence from the surveyor, Mr Norman, who gave evidence that it was 126.8 square metres.[16] The difference between the two is in large measure a product of a difference between them as to how internal measurements should be taken, and, in particular, as to whether the width of internal walls should be included.
[15]Exhibit D3, paragraph 4.3.3.
[16]Exhibit P14.
This alternative claim is untenable for two reasons.
First, the contract document is DD-A288. The dimensions relied upon do not appear in that document, they appear in CB 235, which is not a contractual document. There is no claim made in this connection of misrepresentation. Mr Graham contends that he never received any floor plan prior to executing the contract.
Secondly, the difference between the experts does not relate to any difference between what is depicted on CB 235 and what has been built. The difference between them is as to how one measures it.
The plan DD-A288, as varied on 3 December 2001, is consistent with the floor plan at CB 235 and with the floor plan provided to Mr Graham in August 2004. It depicts the “Apartment” as it was constructed.
Counterclaim relying upon uncertainty
The claim based on uncertainty has two aspects. The first is the suggestion that there is insufficient certainty as to the incorporation of the plan. The second is that there is insufficient certainty as to the detail of the apartment to be built and the identification of the goods and services which are the subject matter of the contract. Whilst the second aspect was not expressly abandoned, the final submissions on behalf of Mr Graham focused on the first aspect.
An issue was also raised on the pleading concerning an alleged inadequate description of the property in the contract. No submission was made in support of that proposition and I reject it.[17]
[17]Evidence was led on behalf of Pan Urban by an expert conveyancer, Mr Lou Faranotti, without objection, in relation to a number of aspects of the contract. Amongst other things, Mr Faranotti’s evidence was that the only way which a property being sold “off the plan” can be described and identified at the point in time when this contract was executed is the manner in which it was in fact done here: expert report of Mr Lou Faranotti (exhibit P10), paragraph 5.1.
It is true that the contractual arrangements here are not ideal. The means of identification of the plan had the potential to cause confusion, and for a time it in fact did so. The confusion was compounded by the fact that the revised plan did not have a revised date. As matters have transpired, however, Pan Urban has established that the plan which was “DD-A288” as at 12 December 2001 was the plan revised on 3 December 2001. For the reasons which I have given, I find the contract of 12 December 2001 incorporates that revised plan.
In relation to the other aspect of the uncertainty claim, I observed in the course of argument that the decision in Ipex Software Services Pty Ltd v Hosking,[18] and the authorities referred to there by the Court of Appeal, may be applicable. No submission to the contrary was put on Mr Graham’s behalf. My conclusion is that there is no relevant uncertainty, notwithstanding the generality of the plans and specifications.
Counterclaim relying upon the Domestic Building Contracts Act 1995
Relevant provisions of the Domestic Building Contracts Act 1995
[18][2000] VSCA 239.
Section 11 of the Domestic Building Contracts Act 1995 (“DBC Act”) provides that a builder must not demand or receive a deposit under a domestic building contract of more than 5% of any contract price that is $20,000 or more. A “builder” is defined by s 3 as a person who carries out domestic building work, who manages or arranges the carrying out of domestic building work, or who intends to carry out or to manage or arrange the carrying out of domestic building work. A “domestic building contract” is defined to mean a contract to carry out or to arrange or manage the carrying out of domestic building work. The DBC Act provides for a definition of “domestic building work” in s 3 which in turn refers to ss 5 and 6, the consequence of which is that the Act applies to “domestic building work” which includes “the erection or construction of a home”.
Pursuant to s 11(3) of the DBC Act, if a builder does not comply with the restriction in relation to deposits “the building owner may avoid the contract at any time before it is completed”.
If s 11 of the DBC Act applies to the contract signed by Mr Graham, then Pan Urban has both demanded and received a deposit of more than 5% of the contract price and Mr Graham is entitled to avoid the contract, as his solicitors purported to do by their letter of 25 February 2005.
In Mirvac (Docklands) Pty Ltd v Philp,[19] Byrne J held in relation to a contract relevantly the same as the contract in issue here that s 11 did apply, that there had been a failure to comply, and that the purchaser was accordingly entitled to avoid the contract. This decision was referred to on an interlocutory application by Hollingworth J in Shaw v Yarranova Pty Ltd.[20]
[19][2004] VSC 301.
[20][2005] VSC 94.
The DBC Act was amended by the Domestic Building Contracts (Amendment) Act 2004 (“the amending Act”). The amending Act inserted into s 3 of the DBC Act new sub-ss 4 and 5 in the following terms:
“(4)A contract for the sale of land on which a home is being constructed or is to be constructed that provides or contemplates that the construction of the home will be completed before the completion of the contract is not, and is not to be taken to form part of, a domestic building contract within the meaning of this Act if –
(a)the home is being constructed under a separate contract that is a major domestic building contract; or
(b)the contract of sale provides that the home is to be constructed under a separate contract that is a major domestic building contract.
(5)Sub-section (4) does not apply to a contract for the sale of land that is the subject of proceedings commenced in a court or tribunal before 16 March 2004 but not completed before that date in which it was alleged, before that date, that the contract was, or formed part of, a domestic building contract.”
The amending Act did not apply to the contracts in issue in either Mirvac (Docklands) Pty Ltd v Philp[21] or Shaw v Yarranova Pty Ltd.[22]
[21][2004] VSC 301, [16].
[22][2005] VSC 94, [61].
If the DBC Act otherwise applies to the contract in issue here, the “home” in question was being constructed under a separate contract that was a major domestic building contract.
It was submitted on behalf of Pan Urban that the decision in Mirvac (Docklands) Pty Ltd v Philp was incorrect and ought not to be followed. Before considering that submission, it is necessary to consider whether the provisions introduced by the amending Act apply, because if they do the issue will then be decided pursuant to those provisions.
The relevant issue as to the application of the provisions introduced by the amending Act is whether the contract “provides or contemplates that the construction of the home will be completed before the completion of the contract.”
Relevant provisions of the contract
The contract provides for payment of a deposit of 10%, being $106,500, and for payment of the balance, being $958,500, in the following circumstance:
“On the later to occur of:
(a)10 Business Days from the day the stage of the Plan of Subdivision which includes the Property sold under this Contract is registered by the Registrar of Titles; and
(b)10 Business Days from the day on which an occupancy permit is issued for the Apartment.”
The contract provides that the settlement date:
“is the date on which vacant possession of the property and chattels (if any) must be provided, namely, upon acceptance of title and payment of the consideration then due to the Vendor under this Contract.”
Special condition 2 of the contract contains the following provisions:
“2.1 Settlement of this Contract is conditional on:
…
(b)construction of the Apartment under a Major Domestic Building Contract generally in accordance with the Plans and Specifications before the end of the Construction Period.
…
2.3If the Apartment is not constructed before the end of the construction period, either the Vendor or the Purchaser may, but before construction of the Apartment is completed, terminate this contract by written notice served on the other.”
Special condition 7 contains the following relevant provisions:
“7.2 The Vendor represents to and the Purchaser acknowledges that:
(a)the Apartment will be constructed by the Builder under a Major Domestic Building Contract
…
(b)subject to special condition 7.3, the Apartment will be completed generally in accordance with the Plans and Specifications by the Settlement Date.”
I have previously set out the provisions of clause 7.3, and the related provisions of clauses 7.4 and 7.5.
Special condition 19 relevantly provides:
“19.1 The Purchaser acknowledges and agrees that:
…
(e)there will be continuing surveying, engineering and construction works on the land in the Plan of Subdivision and the balance of the Precinct (“Ongoing Works”) and the Builder may need access to the Building and the common property on the Plan of Subdivision to carry out the Ongoing Works after Settlement; and
(f)the builder may be obliged to carry out rectification and repair works after the Settlement Date (“Repair Works”) and may need to access the Apartment, the Building and the common property on the Plan of Subdivision to carry out those works.”
Counsel for Mr Graham submitted that the contract did not contemplate completion of construction before completion of the contract. In this respect he relied in particular upon the provision concerning payment of the balance of the purchase price, pursuant to which payment is to occur on the later of 10 business days from registration of the plan of subdivision or 10 business days from the day on which an occupancy permit is issued. Evidence was led that the provision of an occupancy permit meant that the building was suitable for occupation and not that the building had been completed in the manner required by the contract. Counsel for Mr Graham submitted that completion of construction ought to be construed in the provisions introduced by the amending Act in the same way in which the concept was employed in s 42 of the DBC Act concerning the circumstances in which a builder must not demand final payment. Under that provision, a builder must not demand final payment until “the work carried out under the contract has been completed in accordance with the plans and specifications set out in the contract”. Counsel for Mr Graham also relied on the provisions concerning amendments to the plans, the provisions referring to construction being “generally” in accordance with the plans and specifications, and the provisions of special condition 19, envisaging, so it was submitted, the continuation of building work after settlement.
Counsel for Pan Urban submitted that the contract provides for or contemplates that the construction of the home will be completed before completion of the contract. In this respect they relied upon special conditions 2.1(b), 2.3, 2.5 and 7.2(b). They submitted that the vendor under the contract cannot compel settlement until the “Apartment” is completed, notwithstanding the issuing of a certificate of occupancy.
In my view, this contract does contemplate that construction of the apartment will be completed before settlement. Whilst it is true that one provision of the contract is to the effect that the balance of the purchase price is payable 10 business days from the issuing of an occupancy permit, and that an occupancy permit does not necessarily mean construction is completed, the contract provides, in special condition 2.1(b), that settlement is conditional on completion of construction. The contract thus contemplates that the construction of the home will be completed before completion of the contract. This contemplation is also evident in special conditions 2.3 and 7.2(b).
The provisions of clause 19.1(e) and (f) relied upon by counsel for Mr Graham seem to me to also support a conclusion that the contract contemplates completion of construction before completion of the contract. These provisions envisage ongoing construction work outside the apartment after settlement (pursuant to 19.l(e)) and only rectification and repair works inside the apartment after settlement (pursuant to 19.1(f)).
The contract contains a provision, special condition 7.l, pursuant to which the purchaser purports to acknowledge and agree that the contract is not a “major domestic building contract” within the meaning of the DBC Act. I accept the submission put by counsel for Mr Graham that if the contract had otherwise fallen under the Act, such a provision could not save it.
As I have concluded that the amending Act takes this contract outside the DBC Act, it is unnecessary to decide the question of whether the Act would otherwise operate so as to entitle the purchaser to avoid in these circumstances.
Conclusions
Mr Graham’s defence (apart from mere denials) is that by reason of the matters in his counterclaim, he was entitled to bring the contract to an end.
Mr Graham’s counterclaim, based upon representations allegedly made to him by Mr Bahen, fails because:
(a) I cannot find that the alleged representation concerning location was made.
(b) I cannot find that the representation concerning apartments being available for $4500-$5000 per square metre was made. Even if made, I could not find that it was misleading or deceptive, nor could I find that it was relied upon. As to the alleged representation concerning $4900 per square metre for apartment 1802, on the evidence I cannot find that that representation was made.
(c) I cannot find that the representation alleged concerning sales “at cost” was made.
(d) I cannot find that the representation alleged concerning re-sale was made. Even if made, this alleged representation was not relied upon.
Mr Graham’s counterclaim concerning disparity between the apartment as contracted for and the apartment as built fails because Pan Urban has established that the version of plan DD-A288 current as at 12 December 2001 is the one depicting the apartment as built. This is established by the evidence of those responsible for the production and display of the plans, and is reflected in the reduction in the price between the draft contract and the executed contract.
Mr Graham’s counterclaim based on uncertainty fails as a result of my conclusion concerning the applicable plan and otherwise fails, as, whilst the contract is very general in its terms on certain issues, it is sufficiently certain to be enforced.
Mr Graham’s counterclaim relying on contravention of s 11 of the Domestic Building Contracts Act 1995 fails as the amending Act applies.
The plaintiff has otherwise established its entitlement to specific performance.
I will hear the parties on the orders necessary to give effect to these reasons and on the issue of costs.
---
2
0