Paterson v Batrouney & anor

[2000] VSC 313

SUPREME COURT OF VICTORIA
PRACTICE COURT	Not Restricted

No. 5791 of 2000

JANET PATERSON	Plaintiff
v.
VICTOR BATROUNEY AND ANOTHER	Defendants

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JUDGE:	BEACH, J.
WHERE HELD:	MELBOURNE
DATE OF HEARING:	4 AUGUST 2000
DATE OF JUDGMENT:	17 AUGUST 2000
CASE MAY BE CITED AS:	PATERSON v. BATROUNEY AND ANOR.
MEDIUM NEUTRAL CITATION:	[2000] VSC 313

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CATCHWORDS: Sale of land – Contract – Vendors section 32 statement - Purchaser's statutory right to avoid contract – Whether vendor acted reasonably – Sale of Land Act 1962 (No. 6975), ss.32(5) and 32(7).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	P. Cawthorn	Coadys
For the Defendants	R.C. Wells	John D. Crump

HIS HONOUR:

1. The defendants Victor Batrouney and Muriel Elsie Batrouney are the owners of a property at 30-34 Whitecliffes Road, Rye on the Mornington Peninsula (the property).

1. The property is 4,000 square metres in area.  Erected upon it is a six bedroom dwelling constructed of cement sheeting and bricks.

1. In 1998 the defendants instructed their solicitor John Crump to act on their behalf in relation to the proposed sale of the property. In the course of so acting Mr. Crump prepared an appropriate vendors statement in accordance with the provisions of s.32 of the Sale of Land Act 1962 (the Act). To enable him to do so he obtained a planning certificate which showed that at that time the property was zoned "Highdunes Residential" under the Flinders Planning Scheme. That information was duly set out in the vendors statement.

1. No sale of the property was effected in 1998.

1. In early 1999 segments of five municipalities on the Mornington Peninsula were amalgamated to form the new Mornington Peninsula Shire.  The property was located in one such segment and as from 5 May 1999 became covered by the Mornington Peninsula Planning Scheme.  Under that scheme the property is zoned "Residential 1".

1. In December 1999 the defendants engaged K. & M. Norris Real Estate Pty. Ltd. (K. & M. Norris) as their real estate agent to effect a sale of the property.

1. Shortly before Christmas 1999 Mr. Crump was instructed by the defendants, who are quite elderly people, to forward urgently to K. & M. Norris a section 32 statement as they were again offering the property for sale on the market, and hoped to effect a sale of it over the Christmas break.

1. Having regard to the urgency with which Mr. Crump was asked to prepared the vendors statement neither he nor his staff checked to see whether there had been any change in the planning scheme but relied on the planning certificates received in 1998 and prepared the new section 32 statement specifying in it that the property was zoned "Highdunes Residential" pursuant to the Flinders Planning Scheme.

1. By a contract note dated 4 April 2000 the defendants agreed to sell the property to the plaintiff Janet Paterson for the sum of $295,500 with settlement of the sale to be effected on 31 May 2000.

1. On or about 8 May 2000 the plaintiff's solicitors obtained a planning certificate from the Mornington Peninsula Shire Council in respect of the property.  The certificate contained the correct information namely that the property was zoned "Residential 1" under the Mornington Peninsula Planning Scheme.

1. By letter of 26 May 2000 from the plaintiff's solicitors to the defendants' solicitors the plaintiff purported to rescind the contract and sought the return of the deposit of $29,550 she had paid to the defendants' agents.

1. Her action in that regard was taken pursuant to the provisions of s.32(5) of the Sale of Land Act which reads:

"(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 to be supplied in the statements or certificates required to be given by this section –

the purchaser may rescind any contract for the sale of the 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."

1. The defendants deny that the plaintiff has any entitlement to withdraw from the contract relying in that regard upon the provisions of s.32(7) of the Act which reads:

"(7)Notwithstanding sub-section (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."

1. By an originating motion filed in the Court by the plaintiff on 16 June 2000 the plaintiff seeks answers to the following questions:

1.Have the defendants supplied to the plaintiff false information in the statements or certificates supplied by them pursuant to s.32(2)(c) of the Act in relation to the contract of sale?

2.Is the plaintiff entitled to rescind the contract of sale pursuant to s.32(5) of the Act? and

3.Is the plaintiff entitled to a refund of the deposit paid by her to the defendants in relation to the contract of sale?

1. In a statement of facts filed in the Court by the parties, the parties have agreed that:

1.The information contained in the vendors statement (provided by the defendants to the plaintiff) as it relates to planning matters is false.

2.        The defendants acted honestly.

3.The plaintiff is entitled to rescind the contract unless it is established:

(a)that the defendants acted reasonably and ought fairly be excused for the contravention;  and

(b)that the plaintiff is substantially in as good a position as if the section had been complied with.

1. The requirements of s.32(7) of the Act were considered by the Court of Appeal in Fifty-Eighth Highwire Pty. Ltd. v. Cohen and Another (1996) 2 V.R. 64.

1. In their joint judgment Charles and Callaway, JJ.A. said at p.77:

"Turning to subs.(7):

(a)the first three requirements focus exclusively, or almost exclusively, on the position of the vendor;

(b)they import a subjective inquiry (whether the vendor has acted honestly), an objective inquiry (whether the vendor has acted reasonably) and an exercise of judicial discretion (whether the vendor ought fairly to be excused);

(c)     the fourth requirement focuses on the purchaser;  and

(d)it imports an inquiry whether he or she is substantially in as good a position as if s.32 had been complied with.

When we say that the first inquiry is subjective we do not, of course, mean that the standard of honesty is set by the vendor.

Whilst guidance may be obtained from decisions on s.14(1), s.28(2), s.32(7) and s.33(4) and similar provisions in the legislation relating to trustees and officers of corporations, it is desirable that the relatively simple words of the first three requirements should not become unduly encrusted with authority. Moreover, as the High Court said in Partridge v Equity Trustees Executors and Agency Co Ltd (1947) 75 CLR 149 at 165, each case must be decided on its own facts.

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 Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees' Union (1979) 42 FLR 331 at 348; 27 ALR 367 at 382. 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 been mentioned earlier to the vendor or to third parties.

Where they surface for the first time after the non-compliance with s.32 is discovered, it will be a matter for the tribunal of fact whether or not it accepts the purchaser's assertions.

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. "

1. It is agreed by the parties that the defendants acted honestly in the matter.  The question therefore is, did they act reasonably?

1. The evidence establishes that both Mr. Crump and K. & M. Norris carry on their practices on the Mornington Peninsula, Mr. Crump at Mount Eliza and K. & M. Norris at Rosebud.

1. In my opinion it is inconceivable that they and their respective staff were unaware of the amalgamation of segments of five of the original shires on the Mornington Peninsula to form the new Mornington Peninsula Shire.

1. Whilst it is not disputed that Mr. Crump was asked shortly before Christmas to prepare a vendors statement and forward it to K. & M. Norris as a matter of urgency, the fact of the matter is that the statement was not signed by the defendants and given to the plaintiff until 29 March 2000, that is more than three months later.

1. Further the planning certificate which Mr. Crump had received in 1998 was dated 21 April 1998.

1. It follows from those facts of course that a period of almost two years had elapsed between the date of issue of the planning certificate upon which Mr. Crump and K. & M. Norris relied and the date of the sale of the property.

1. As the defendants' own building and industrial designer, Brendan Maurice Hoban, has sworn in his affidavit of 10 July 2000 and I quote:

"10.As is the case with all Planning Schemes and controls, they are always subject to ongoing amendments and modification and indeed, within the last week, the State Government has gazetted amendments to the Mornington Peninsula Planning Scheme."

1. It is notorious that that is the case in the State of Victoria.

1. In my opinion in that situation it cannot be said that Mr. Crump and K. & M. Norris acted reasonably in relying upon a planning certificate which was almost two years old rather than apply for a new certificate.

1. At the least I consider that it was incumbent upon them to communicate with the Mornington Peninsula Shire, even if only by phone, to ascertain the identity of the planning scheme affecting the property.  If a simple inquiry of that nature had been made, in all probability the person making the call would have been told that it was the Mornington Peninsula Planning Scheme.  That person would have then been alerted to the change and would then have been able to obtain a new certificate setting out the current situation.

1. But can it be said that the defendants acted unreasonably in the matter.  In other words should the negligence of Mr. Crump and K. & M. Norris be visited upon them?

1. In Fifty-Eighth Highwire (supra) Charles and Callaway JJ.A. did not finally determine that question but said that "it will usually be inappropriate to visit the negligence of a solicitor on his or her client".

1. Brooking J.A. who was the third member of the Court in Fifty-Eighth Highwire does not appear to have expressed any view in relation to the matter.

1. In my opinion the complete protection given to a purchaser by the fourth requirement of s.s.(7) does mean that so long as a vendor acts reasonably in relation to the preparation of an appropriate section 32 statement he or she will not be held vicariously liable for the negligence of his or her solicitor or real estate agent.

1. In the present case the defendants are aged in their eighties.  To effect a sale of their home they placed the matter in the hands of K. & M. Norris and Mr. Crump.  In my opinion they acted quite reasonably in doing so and should not be vicariously liable for any negligence on its or his part.

1. In other words where one is dealing with the question as to whether a vendor has acted reasonably in relation to the preparation of a vendors statement one considers the conduct of the vendor personally.

1. I turn next to the question as to whether the plaintiff is in as good a position as if all the relevant provisions of s.32 had been complied with.

1. There is no question but that the two planning schemes are different and that if the plaintiff had purchased the property intending to subdivide it into two allotments she may have encountered far more difficulty under the Mornington Peninsula Planning Scheme than under the Flinders Planning Scheme.  In that  regard see paragraph 3 of the Agreed Statement of Experts.

1. But there is no evidence to suggest that that ever was the plaintiff's intention, nor is there any evidence that the plaintiff sought to be released from the contract by reason of the change in planning requirements.

1. Indeed the clear inference to be drawn from the agreed statement of facts is that after the plaintiff executed the contract note she simply changed her mind about the purchase of the property (see paragraphs 25 and 26).

1. But perhaps of more significance in this regard is the fact that there is a covenant on the title to the property to the effect that only one dwelling house with outhouses and garage may be built on the property.

1. That fact must have been known to the plaintiff at the time she signed the contract note.  It is unlikely therefore that she would have agreed to buy the property had she intended to subdivide it.

1. In those circumstances I find that the plaintiff is substantially in as good a position as if all the relevant provisions of s.32 had been complied with.

1. Finally I consider that in the circumstances of this case the defendants ought fairly to be excused for the contravention and in that regard I exercise my discretion in their favour.

1. The following are the answers to the questions posed:

1.        Yes.

2.        No.

3.        No.

1. I order that the plaintiff pay the defendants' costs of the proceeding including any reserved costs.

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