Petan Pty Ltd v Schult

[2015] TASFC 10

[2015] TASFC 10

COURT:        SUPREME COURT OF TASMANIA (FULL COURT)

CITATION:                  Petan Pty Ltd v Schult [2015] TASFC 10

PARTIES:  PETAN PTY LTD
  v
  SCHULT, Martin Bruce

FILE NO:  791/2014
JUDGMENT

APPEALED FROM:  Schult v Petan Pty Ltd [2014] TASSC 47

DELIVERED ON:  11 August 2015
DELIVERED AT:  Hobart
HEARING DATE:  21 April 2015
JUDGMENT OF:  Blow CJ, Porter and Wood JJ

CATCHWORDS:

Conveyancing – The contract and conditions of sale – Other particular conditions – Other cases – Condition precedent to settlement that at the contract date no legal restriction on use for a residential dwelling – Property listed on Heritage Register – Requirement for approval of works which may result in a change to the nature or appearance of the fabric – Condition not confined to habitable state of the property at the contract date – Additional costs of routine maintenance and repair may amount to a restriction if those works involve a change in the fabric of the building.

Aust Dig Conveyancing [1051]

REPRESENTATION:

Counsel:
             Appellant:  B R McTaggart SC
             Respondent:  A C Wood and A Khan
Solicitors:
             Appellant:  McCulloch & Associates
             Respondent:  Tierney Law

Judgment Number:  [2015] TASFC 10
Number of paragraphs:  43

Serial No 10/2015

File No 791/2014

PETAN PTY LIMITED v MARTIN BRUCE SCHULT

REASONS FOR JUDGMENT  FULL COURT

BLOW CJ
PORTER J
WOOD J
11 August 2015

Orders of the Court

Appeal dismissed.

Serial No 10/2015

File No 791/2014

PETAN PTY LIMITED v MARTIN BRUCE SCHULT

REASONS FOR JUDGMENT  FULL COURT

BLOW CJ

11 August 2015

1. I agree with Porter J.  This appeal should be dismissed, for the reasons stated by him.

   File No 791/2014

PETAN PTY LIMITED v MARTIN BRUCE SCHULT

REASONS FOR JUDGMENT  FULL COURT

PORTER J
11 August 2015

Introduction

1. This is an appeal from a decision of Holt AsJ: Schult v Petan Pty Limited [2014] TASSC 47. His Honour had before him a 'vendor and purchaser summons' under s 39 of the Conveyancing and Law of Property Act 1884, taken out by the respondent. That section relevantly provides that a vendor or purchaser of real estate may apply in a summary way to a judge in respect of any question arising out of the contract.

2. The question related to a contract entered into on 11 February 2014 between the appellant as vendor and the respondent as purchaser, of a residential property in Lincoln Street, Sandy Bay.  At the time of the contract the building contained three apartments. 

3. As a "condition precedent to the Purchaser's obligation to complete this Contract", cl 4.1 provided that, "at the Contract Date, there are no legal restrictions on the use of the Property that may hinder or prevent the Purchaser from using the Property for the Property Use". The contract elsewhere specified "Property Use" as "a residential dwelling".  I will avoid that tautology, and simply refer to use as "a residence".

4. The question posed in the respondent's application was:

   "Does the permanent entry of the property at 1 Lincoln Street, Sandy Bay, in the State of Tasmania on the Tasmanian Heritage Register under s21 of the Historic Cultural Heritage Act 1995 give rise to any legal restriction that may hinder the Applicant from using it as a residential dwelling within the meaning of a contract for sale of that property entered into between the Applicant as purchaser and the Respondent as vendor and dated 11 February 2014?"

5. The Associate Judge answered the question in the affirmative.  The appellant has appealed from that determination and asks this Court to answer the question in the negative.  For the reasons which follow, I would dismiss the appeal.

Background

1. In 2005, under s 21 of the Historic Cultural Heritage Act 1995 (the Act), the property at 1 Lincoln Street (the property) was entered in the Heritage Register on a permanent basis. The Register includes the following notes in relation to the property:

   "The place is important in demonstrating the principal characteristics of a class of place in Tasmania's history. 

   The house and barn are of cultural heritage significance because they demonstrate the principal characteristics of weatherboard Victorian Georgian farm buildings.  These characteristics are found in the external form, construction methods and the detailing, both externally and internally.

   The place has a strong or special association with a particular community …

   This place has strong meaning for the community because it demonstrates aspects of Victorian society and contributes, in conjunction with its neighbours, to a relatively intact late nineteenth and early twentieth century streetscape."

The legislation

1. Relevant provisions of the Act were substantially amended with effect from 1 March 2014. For the purposes of this appeal, it is unnecessary to examine the changes in any detailed way. Before it was amended, s 32 of the Act provided that a person must not carry out any works in relation to a registered place "which may affect the historic cultural heritage significance of the place" unless the works were approved by the Heritage Council. Section 32(2) provided that a person may apply for approval to carry out works by lodging an application to the appropriate planning authority. The following definitions in s 3 as it stood are also relevant:

   ·     Works included any development, and any physical intervention, excavation or action which may result in a change to the nature or appearance of the fabric of a place.

   ·     Development included the construction, exterior alteration or exterior decoration of a building, and its demolition or removal.

   ·     Cultural Heritage Significance in relation to a place, meant significance to any group or community in relation to the archaeological, architectural, cultural, historical, scientific, social or technical value of the place.

2. As to the amendments, it only needs to be noted that approval is still required for "heritage works".  Section 35 now provides that a person must not carry out any heritage works unless those works have heritage approval.  That approval can be given by an exemption certificate or by discretionary permit under the Land Use Planning and Approvals Act 1993. "Heritage works" has the same meaning as did "works" before the amendments, but there is an added requirement in the definition that the works be carried out to or in relation to a registered place.

3. It follows that at the date of the contract, an owner of the property was required to obtain approval before changes to the nature, appearance or fabric of the place, or for any exterior alteration or exterior decoration.  The appellant does not assert that the entry of a place in the Heritage Register would not amount to a legal restriction as such.  The debate is about to what point in time, and in respect of what use, the operation of the clause is directed.

The Associate Judge's decision

1. His Honour's written reasons are edited reasons for judgment delivered orally.  In par [6], his Honour said that the effect of registration is that changes to the fabric of the building require a permit under the Act.  At par [7], his Honour noted that the purchaser did not suggest that the use of the property for residential purposes was directly impacted by the registration.  The contention was that things which might ordinarily be done without a permit in the course of maintenance and repair, such as repainting, re-roofing and re-fencing, would at the time of the contract, have required approval because of the operation of the Act.  The substantive part of his Honour's reasons is relatively brief and can be set out in its entirety.

   "9     Routine maintenance and repair is a necessary incident of the use of a building and is usually not subject to legal restriction. Examples might be the replacement of a leaky slate or terracotta tile roof with a cheaper tin or colorbond roof. The cladding of a dilapidated timber wall. Replacing old light fittings with modern and more efficient lighting. Replacing rotten timber decking with modern more weather resistant materials. Replacing defective doors or windows with perhaps less detailed doors or windows at a cheaper cost than repairing the original or replacing doors or windows to  original specifications.

   10    In O'Brien v Reeve [1985] TASSC 110 Cosgrove J held at par[6] that requirements which increase costs are requirements which hinder. Counsel for the respondent did not challenge the correctness of this decision. It was submitted, however, that the case is distinguishable because it was concerned with a restriction on building a house on a building allotment whereas the present case is concerned with the use of an existing building. In O'Brien the reasoning that extra cost amounted to a hindrance was not affected by the distinction identified by counsel. Accordingly, I reject the submission that the case should be distinguished. 

   11    Counsel for the respondent referred to Gairsay Pty Ltd v Berkley Farm Pty Ltd (2002) 11 Tas R 267 where Blow J (as he then was) said at par[18] that a clause, such as the present, would apply to any restriction prohibiting or significantly limiting the use specified in the contract.

   12    Plainly, non-material restrictions or hindrances could not have been intended by the parties to attract the operation of the clause. Counsel for the respondent submitted that the need to seek approval from the Heritage Council for works is not a significant limitation.  However, the effect of the registration of the property goes beyond a mere requirement to obtain a permit.  It carries with it a real prospect that routine maintenance and repair work will have to be undertaken in a way which would not be as cost efficient as merely replacing existing materials with cheaper materials.  This, in my view, amounts to a significant limitation.

   13    Counsel for the respondent made some further submissions which I can deal with briefly.

   14    Reliance was placed on the principle of caveat emptor or let the buyer beware.  It was submitted that the purchaser could have ascertained, prior to signing the contract, that the property was heritage listed.  I accept that this may be so, but in my view it has no impact on the construction of the clause under consideration.

   15    It was noted that the contract contained a condition that it was subject to the purchaser confirming that the three dwelling units had Council approval.  It was submitted that this indicates that the restriction, under the clause which I am being asked to consider, is a restriction which must exist at the date of the contract.  This is clearly so, it being self-evident from the clause which on its face links the legal restriction to the date of the contract.  However, the words in the clause 'may hinder' are plainly a reference to post-contractual possibilities.

   16    For these reasons I conclude that the registration of the property on the Heritage Register constitutes a legal restriction existing at the contract date on the property which may hinder the purchaser's use of the property for residential purposes."

The appeal

1. Originally, there were seven grounds of appeal.  Grounds 1 and 3 were abandoned, and counsel for the appellant accepts that ground 5 simply asserts that the ultimate determination was wrong.  It is only grounds 2, 4, 6 and 7 which need to be considered.  The relevant grounds assert that his Honour erred as follows:

   "2   Erred in construing 'use' in the condition precedent as including routine maintenance and repair.

   4 Erred in failing to find that at the time of the contract the 'works' which may affect the historic cultural heritage significance of the place within s 32 of the Historic Cultural Heritage Act 1995 and which therefore required a permit did not include 'use', nor routine maintenance or repair.

   5    Erred in construing the condition precedent as including the registration of the property on the Heritage Register.

   6    Erred in finding that routine maintenance and repair is not usually subject to legal restriction.

   7    Erred in finding that the heritage listing amounted to 'a significant limitation' in respect of routine maintenance and repair work."

2. The appellant addressed the grounds in the order of 2, 6, 4 and 7.  During the appellant's argument on ground 2, and more so on ground 6, there emerged what appeared to be an overarching point as to the appeal generally.  The appellant accepts that the word "may" in the phrase "may hinder or prevent", simply connotes a possibility. The appellant argues however, that the condition only relates to legal restrictions on use in existence at the date of the contract which, at that time, may hinder or prevent the specified use. 

3. It argues that the condition relates to legal restrictions which possibly hinder or prevent the use of the property for a residence in the unimproved condition in which it was at the time of the contract.  Otherwise, it is said, the clause would provide a basis for purchasers to refuse to complete based on subjective intentions regarding future work they may wish to carry out on the property if there is any legal restriction on doing so, and assuming the activity amounts to use of the property as a residence.

4. Clause 4.1 is a printed condition in the standard form contract for sale of real estate in Tasmania as published by the Law Society.  That notwithstanding, its construction is to be determined objectively, considering the understanding and belief of reasonable people in the position of the parties which, in turn, requires consideration of the text, the surrounding circumstances known to the parties, and the purpose and object of the transaction: Pacific Carriers Limited v BNP Paribas (2004) 218 CLR 451 at 461-462 [22]; Electricity Corporation v Woodside Energy (2014) 251 CLR 640 at 656-657 [35].

5. The condition is a condition precedent to performance, not a condition precedent to formation.  By its terms, the clause focuses on the existence on the contract date of legal restrictions on use that "may hinder or prevent [etc]", and does not tie the effect of any legal restriction to the completion date.  Whatever the answer to the question posed, if on the day of the contract there were any legal restrictions on use having the particular effect, the purchaser was not obliged to complete. The question is whether consideration of the effect of any legal restrictions on use is confined to the state of the property on the contract date. 

6. Even on the appellant's own argument, there would be room for taking the view that the clause refers to legal restrictions which exist at the time of making the contract, but that their effect needs to be assessed as at the date of completion.  That is simply because the question of any hindrance or prevention must relate to the purchaser's use of the property. 

7. The respondent argues that the legal restriction referred to in the clause has an object on which it is to operate.  That is the use of the property.  There is a required effect, in that the legal restriction on the use has to operate in such a way as to hinder or prevent the property being used as a residence.  Counsel for the respondent succinctly put the proposition as follows: "So the sense is present restriction, future effect.  Is there a legal restriction? Is it upon the use?  May it have the future effect?"

8. The respondent submits that if "may hinder or prevent" is confined to the time at which the contract was entered into, the provision would be highly uncertain in its operation.  The respondent says that if the expression has the meaning as contended for by the appellant, it would have been worded so as to convey the meaning of "does hinder".  That is, the phrase would have been worded in the present tense; "hinders or prevents".

9. In my view, the respondent's position is that which should be preferred.  Whilst there is some force in the observation that a purchaser may refuse to complete because of a contemplated future use, the clause requires there to be an existing legal restriction on use, which has the effect of giving rise to that future hindrance or prevention.  The words which the parties used, "may hinder or prevent", are significantly more supportive of the respondent's argument.  The clause contemplates an existing legal restriction which controls the use of the property as a residence at the time of the contract and into the future, and enables the purchaser to refuse to complete if that control might involve hindrance or prevention. 

Ground 2

1. Leaving aside the temporal aspect which I have just dealt with, the appellant argues that the question to be determined was whether the legal restriction on use gave rise to hindrance or prevention of use of the property as a residence, in the sense of being able to live in the dwelling.  It submits that the reference to the use of the property as a residence does not extend to activities such as maintenance or repair of the property.  The appellant submits that the word "use" when used in conjunction with legal restriction, is of wider import than "use as a residential dwelling"; the latter expression does not extend to incidents of use as a residence which would include such things as maintenance and repair.

2. The appellant referred to a dictionary definition of "use" as including "bringing into service" or "to avail oneself of".  However, the relevant expression in the clause is a compendious one.  What needs to be considered is what is intended in the expression "prevent the purchaser from using the property as a residential dwelling".  The appellant embraces the proposition that a residence could be used as such if it was legally capable of being occupied. 

3. In Ch 10 of Voumard: The Sale of Land, 6^th ed, 2009, the author discusses the investigation of title. At [10.520] it is said that in addition to making requisitions, the purchaser should procure a number of certificates.  Amongst the obvious ones, it is noted that under the Historic Buildings Act 1981 (Vic), a building or the land can be registered in the register of historic buildings "which imposes severe restrictions on the owner's right to remove, demolish or to subdivide the building or land without the requisite consent". In Victoria, registration seems to be noted on the title, but the author warns that it would be prudent for a purchaser to inspect the register to see the extent of any restriction on use the listing might entail.  That suggests that the ordinary meaning of "use" in this context is generally understood as being wider than mere habitation.

4. In my view, reasonable people in the position of the parties would contemplate that use of the property as a residence would extend to things beyond merely being able to live in it.  I conclude that the relevant concept of use extends to such things which might ordinarily be done to at least maintain the dwelling as fit for residential purposes.  Use as a residential dwelling would extend to altering the nature of the accommodation and renovations to make the place more "liveable" in conformity with contemporary standards, if I can put it that way.  I see no reason why the concept of use as a residence should not extend to repairs or maintenance, but the clause operates on any legal restriction which may hinder or prevent use in that way.

Ground 6

1. Again leaving aside the temporal aspect, the appellant says:

   ·     there was no evidence to support the finding that routine maintenance and repair were not usually subject to legal restriction;

   ·     many forms of maintenance and repair are subject to legal restriction; for example, all building work requires a building permit if it is of $5,000 or more in value;

   ·     the effect of the registration and the need for Heritage Council approval is no different in character to other statutory approvals, such as planning approval.

2. This ground is without merit.  The comment under scrutiny does not seem to have formed any integral part of the decision. Whether or not routine maintenance and repair is something which is usually subject to legal restriction does not seem to me to matter much. The real question is whether the listing is a legal restriction on use which may hinder or prevent use as a residence.  I have already expressed my view that routine maintenance and repair would fall within the ordinary concept of using the building as a residence.  The examples which his Honour gave in par [9] of the reasons are true examples of things which might arise as falling within the relevant concept of use.

1. I would have thought that if it were critical, there would be no need for evidence to make such a finding as is challenged. To the extent that the issue involves matters of law, proof is not required: s 143 of the Evidence Act 2001. To the extent that questions of fact are involved, it would be a matter of knowledge that was not reasonably open to question and was common knowledge in this locality: s 144 of the Evidence Act.  Further, as the respondent submits, the need for Heritage Council approval is different in character to other statutory approvals such as planning approval, or a requirement for a building permit.  The difference is that the need for approval arises from the listing which is specific to the subject property, and uniquely applies in respect of it.  The approval is to be determined on the basis of the heritage values in respect of the particular property. 

Ground 4

1. This ground focuses on par [12] of the reasons.  For the sake of convenience, I will repeat the relevant part:

   "[T]he effect of the registration of the property goes beyond a mere requirement to obtain a permit.  It carries with it a real prospect that routine maintenance and repair work will have to be undertaken in a way which would not be as cost efficient as merely replacing existing materials with cheaper materials. This, in my view, amounts to a significant limitation."

2. The appellant submits that the associate judge "in effect found that routine maintenance and repair work required a permit".  The suggested error is in failing to find that it was "works" within the meaning of the Act which required a permit, and that "did not include 'use' nor repair".  It is more correct to refer to "approval' rather than "permit", but nothing turns on that.  The appellant argues that relevant works are only those that changed the nature or appearance of the fabric of the place, or the exterior alteration or decoration of the building.

3. First, I am not persuaded that his Honour did find or observe that routine maintenance and repair work required approval.  Such a suggestion is not at all clear from the words his Honour used.  In any event, even if that were so, I do not see that the error was one of a material nature so as to vitiate the decision.  His Honour prefaced the relevant discussion by noting, in par [6], that the effect of the registration was that changes to the fabric of the building required a permit.  As I said in relation to the last ground, routine maintenance and repair may require approval, if it fits within the definition of "works".  That point is uncontentious.  The ground must fail.

Ground 7

1. This ground also focuses on par [12] of the Associate Judge's reasons, and his Honour's earlier references to O'Brien v Reeve B50/1985, [1985] TASSC 110, and Gairsay Pty Ltd v Berkley Farm Pty Ltd (2002) 11 Tas R 267. The complaint is of error in finding that the heritage listing amounted to "a significant limitation" in respect of routine maintenance and repair work. Here again, I am not persuaded that the finding or observation was to the effect alleged. What his Honour said was that the listing carried with it a real prospect that routine maintenance and repair work would have to be undertaken, and that that may involve additional cost. Rather than making a finding as suggested, his Honour was averting to the real chance that routine maintenance and repair may constitute "works" within the definition, and that such work may have to be done at additional cost to comply with the permit.

2. The next point which the appellant takes, is that there was no evidence that such work may be less cost efficient as merely replacing materials with cheaper materials.  On this point, I would suggest that common sense could be applied, and no evidence to that effect was needed.

3. It seems to me that what is at the heart of this ground is a quarrel with the proposition that where routine maintenance and repair amounts to "works" so as to require approval, any additional cost amounted to a significant limitation.  It is to be borne in mind that his Honour's observations about a significant limitation was in the context of a submission by the appellant to his Honour, that the need to seek approval for works was not a significant limitation.  His Honour had previously referred to O'Brien v Reeve for the proposition that, in relation to a similar clause, it was held that requirements which increased costs are requirements which hinder.

4. The appellant says that this case is of no assistance.  The facts were that the vendor and purchaser entered into an agreement for the sale of a lot of a proposed subdivision.  At the time of the contract the vendor/developer was in discussions with the local council about water supply, and approval for the subdivision had not been given. Agreement was reached that the vendor would provide bulk storage of water within the subdivision at a minimum capacity, but that each dwelling erected on any lot would have a minimum storage of a specified quantity.  The council arranged for a covenant to be placed on each title which prevented the building of "any structure for the purpose of dwelling [sic] on the said lot unless the lot is equipped with a storage tank having a minimum capacity of 22,500 litres".

5. The contract for sale which had been entered into contained a condition precedent "to any right to specific performance or of or other claim under this contract" in the following terms:

   "… that at the date of acceptance by the Recorder of Titles of a plan of subdivision of the Vendor's land there shall be no restriction on the use of the said allotment … which shall hinder or prevent the Purchaser from using or enjoying the said allotment for the purpose of erecting thereon a residence …".

6. In short, the purchasers ultimately brought proceedings against the vendor seeking specific performance of the contract by transfer of title of the land free from the covenant, along with other covenants to which objection had been taken and which are not relevant for present purposes.  The vendor took the position that the requirement relating to the construction of the water tank was a restriction which hindered the purchaser from using the lot for the purposes of erecting a residence; accordingly, the condition precedent to bringing an action was not fulfilled and no action could lie against him.

7. At page 6 ([5]-[6]), Cosgrove J said:

   "Counsel for the plaintiffs argued that although it might have been a restriction on the use of the land it was not one which hindered the purchaser, ie, the plaintiffs, from using the allotment for the purpose of erecting a residence. Alternatively, it was argued that if it was a hindrance it was encompassed within the phrase 'all other relevant legal requirements.

   In my opinion the condition imposed by the Council was a hindrance upon the use of the allotment for the purpose of erecting a residence. The male plaintiff himself said that it would be more costly. The words 'hinder' and 'hindrance' as defined in the Oxford English Dictionary include 'disadvantage'; 'being an obstacle or impediment'. The additional cost is clearly a disadvantage and an obstacle. …".

8. Whilst not binding on this Court, I accept that Cosgrove J's observations as to the word "hinder" should be applied to the clause in this case.  Additional costs carrying out works which would require approval, may amount to a hindrance. 

9. The appellant relies on comments on Blow J (as he then was) in Gairsay Pty Ltd v Berkley Farm Pty Ltd.  In that case, his Honour dealt with contracts for the sale of farming properties, each of which contained a condition precedent to completion, "that there were no restrictions on the use of the property at the date of the contract which may hinder or prevent the purchaser from using the property for the purpose of farming unless disclosed in the agreement".  One issue was whether defects in the quality of the land hindered its use for farming.  At [18], his Honour said:

   "The wording of cl 4.1(a) is common in Tasmanian contracts for the sale of land. However there does not appear to be any case law, reported or unreported, in Tasmania or elsewhere, as to what does or does not constitute a restriction on the use of a property which may hinder or prevent its use for a particular purpose, within the meaning of such a clause. No doubt the clause would apply to any restriction prohibiting or significantly limiting farming activities imposed by or resulting from a restrictive covenant running with the land, the zoning of the land, or the lack of any requisite planning permission from a local government authority." [Emphasis added]

10. His Honour went on to observe that it would be unusual to characterise a defect like poor soil quality as a "restriction on the use" of a property, and held that the clause was intended by the parties to relate only to restrictions of a legal or administrative nature affecting the use of the property, not defects in the quality of the property limiting its use. 

11. The first thing to be said about Gairsay is that the clause did not refer to legal restrictions, but merely to "a restriction on the use of the property".  Blow J was required to determine what type of restriction on farming activities was envisaged.  It was in that setting that his Honour observed that the clause would apply to any restriction "significantly limiting" farming activities.  I do not think that what his Honour said can be sensibly applied to what the parties intended "hinder" to mean in the clause in this case.  In my view "hinder" should be given its ordinary meaning of "to impede, deter, obstruct or prevent": Shorter Oxford English Dictionary, 3^rd ed.  This ground also fails.

Outcome

1. The evidence showed that the particular property was a painted weatherboard residence then containing three self-contained flats separated by internal timber walls.  It had original sash timber windows.  The fencing was of timber panels and in need of repair.  The side fence was not painted, whilst the front fence was painted but in poor condition.  The building required repairs to the roofing, perimeter timber decking and plumbing, with the decking needing painting.  Having regard to the noted heritage values, and to the meaning of the clause I have ascribed to it, the question posed was rightly answered in the affirmative.  The appeal should be dismissed.

   File No 791/2014

PETAN PTY LIMITED v MARTIN BRUCE SCHULT

REASONS FOR JUDGMENT  FULL COURT

WOOD J
11 August 2015

1. I agree with the reasons for judgment of Porter J.  The appeal should be dismissed.