Putt v Perfect Builders Pty Ltd
[2013] VSC 442
•22 August 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. SCI 03250 of 2013
In the matter of section 49 of the Property Law Act 1958
In the matter of a contract of sale of real estate for 203/449 Hawthorn Road, Caulfield South
| GREGORY MAURICE PUTT LEE STACEY WALKER | Plaintiffs |
| v | |
| PERFECT BUILDERS PTY LTD (ACN 004 384 678) | Defendant |
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JUDGE: | WILLIAMS J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 15 August 2013 | |
DATE OF JUDGMENT: | 22 August 2013 | |
CASE MAY BE CITED AS: | Putt & Anor v Perfect Builders Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 442 | |
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VENDOR AND PURCHASER – Sale of land – Summary procedure under s 49 Property Law Act 1958 – Contract for sale of apartment conditional on loan of specified amount being obtained from designated lender – Right to terminate contract conditional on purchasers’ immediate application for loan – Right to terminate conditional upon purchasers doing everything reasonably required to obtain loan approval – No evidence of circumstances justifying return of deposit in exercise of discretion under s 49(2) Property Law Act 1958
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr A Klotz | Hentys Lawyers |
| For the Defendant | Mr D P Lloyd | Rudstein Kron Lawyers |
HER HONOUR:
The application
This is an application under the summary procedure provided by s 49 of the Property Law Act 1958 for the determination of a question relating to a contract of sale of land.
The plaintiffs seek the refund of the deposit of $59,500 which they paid to the defendant in relation to the purchase of Apartment 203, 449 Hawthorn Road, Caulfield South (‘the property’) on signing a contract of sale dated 27 May 2013 (‘the contract’). The deposit has not been released to the defendant vendor and is presently held by its agent .
Section 49 Property Law Act 1958
Section 49 of the Property Law Act is in these terms:
Applications to the Court by vendor and purchaser
(1)A vendor or purchaser of any interest in land, or their representatives respectively, may apply to the Court, in respect of any requisitions or objections, or any claim for compensation, or any other question arising out of or connected with the contract (not being a question affecting the existence or validity of the contract), and the Court may make such order upon the application as to the Court may appear just, and may order how and by whom all or any of the costs of and incident to the application are to be borne and paid.
(2)Where the Court refuses to grant specific performance of a contract, or in any action for the return of a deposit, the Court may, if it thinks fit, order the repayment of any deposit.
(3)This section shall apply to a contract for the sale or exchange of any interest in land.
The plaintiffs say that, on its proper construction, general condition 14 of the contract entitles them to have the deposit returned. In the alternative, they seek an order for the repayment of the deposit under s 49(2), in the exercise of the Court’s discretion.
The evidence
The evidence in support of the application is given by an affidavit sworn by the second plaintiff, Ms Walker, on 25 June 2013. The defendant responds by the affidavit of Mr Steven Soldatos, affirmed on 13 August 2013.
The whole of the contract is exhibited to Mr Soldatos’ affidavit. General condition 14 upon which the plaintiffs rely for the return of their deposit is in these terms:
14. LOAN
14.1If the particulars of sale specify that this contract is subject to a loan being approved, this contract is subject to the lender approving the loan on the security of the property by the approval date or any later date allowed by the vendor.
14.2The purchaser may end the contract if the loan is not approved by the approval date, but only if the purchaser:
(a)immediately applied for the loan; and
(b)did everything reasonably required to obtain approval of the loan; and
(c)serves written notice ending the contract on the vendor within 2 clear business days after the approval date or any later date allowed by the vendor; and
(d)is not in default under any other condition of this contract when the notice is given.
14.3All money must be immediately refunded to the purchaser if the contract is ended.
The particulars of sale in the contract include these:
LOAN (general condition 14)
The following details apply if this contract is subject to a loan being approved.
Lender: AFG Home Loans
Loan amount: $475,000 Approval date: 4th June 2013
Ms Walker deposes that she and Mr Putt applied for the loan to which the contract refers by a written application to AFG Home Loans for a loan in the sum of $476,000, dated 28 May 2013. The application form exhibited to her affidavit states the purpose of the loan as ‘O/Occ’ and the ‘Purpose Amount’ as $631,000, made up of a ‘Requested Loan Amount’ of $476,000 and $155,000 of the plaintiffs’ ‘Own Funds’. The application notes that the plaintiffs seek approval for ‘an 80% LVR facility of $476,000 to enable them to purchase an owner occupied property to the value of $595,000’.
Ms Walker states that the plaintiffs’ solicitors informed the defendant’s solicitors, before 4.00pm on 14 June 2013, that their application for finance had been declined and requested that the defendant’s agent issue a cheque for the refund of the deposit ready for collection on or after 3.30pm on that day. She exhibits correspondence between the parties’ solicitors, between 31 May and 14 June 2013, dealing with what she describes as ‘the matters that our lender needed clarified before deciding whether or not to approve Greg’s and my application for finance.’
The contract was for the sale of an apartment ‘off the plan’. Settlement was due on the later of 23 August 2013 or 14 days after the vendor gave notice in writing to the purchaser of the registration of the plan of subdivision. The plan of subdivision was registered by the Land Titles Office on 23 July 2013 and that the plaintiffs’ solicitors were notified of the registration on 2 August 2013.
The letters exhibited to Ms Walker’s affidavit show the plaintiffs’ solicitors raising a number of issues relating to the contract, the vendor’s statement provided under s 32 of the Sale of Land Act 1962 and the plan of subdivision. The plaintiffs’ solicitors state on 5 June 2013 that:
There are a number of Contractual and disclosure inconsistencies or inaccuracies or deficiencies, that if they remain unsatisfied and unresolved may impact on our clients’ purchase proceeding.
After referring to the matters raised, their letter continues as follows:
Our clients’ finance…remains in jeopardy if we are unable to advise the lender on a number of matters as raised in this correspondence and in the Vendor’s control but outside the Purchasers (sic) control.
The defendant provided a copy of a fourth version of the plan of subdivision under cover of its solicitors’ letter in response, dated 11 June 2013. It took issue with assertions made by the plaintiffs.
The plaintiffs’ solicitors wrote again to the defendant’s solicitors on 12 June 2013, raising further issues, in these terms:
Notwithstanding our clients’ bona fides and desire to speedily resolve outstanding matters, we are instructed to disagree factually on a number of the matters detailed in your correspondence. Further, we remain unsatisfied as to your insufficiently detailed response to the matters raised in our letter of the 5th June 2013. The newly disclosed and current Plan of Subdivision as signed by the Land Surveyor is dated 31st May 2013 being after the exchange of Contract of Sale.
You have not advised as to the open space contribution payment (if paid) nor have you provided further and better particulars of what remains to be done from the Vendor’s perspective to enable registration to proceed. The Section 173 Agreement that you raised as the reason for the Plan of Subdivision not having been lodged for registration has not been elaborated upon. An indication as to when the Vendor or its Land Surveyor is expected to resolve this issue has not been provided.
The future expiration of the defects liability period in May 2014 is a date that continued to be effectively eroded as does the 3 month defective material and faulty workmanship warranty under special condition 12(b)(iv) both issues being to the potential detriment of any purchasers, not just our clients.
Our clients’ finance remains uncertain, noting finance approval or rejection is due 14 June 2013. We are still unable to advise the lender on a number of matters as raised in this correspondence and in our 5 June correspondence. These are all matters outside the Purchasers’ control.
We seek your urgent attention to the matters raised.
Only two days later, on 14 June 2013, the plaintiffs’ solicitors faxed and emailed a letter to the defendant’s solicitors in these terms:
We refer to the abovementioned matter and confirm that our Clients have been unsuccessful in obtaining finance. Please see attached letter from AFG Home Loans confirming same.
Please have the selling agent as a matter of urgency, issue a trust cheque for refund of our clients (sic) deposit ($59,500) to be ready for collection by one of the 2 purchasers on or after 3.30pm today (Friday 14 June 2013).
Attached to the letter was a document directed to Mr Robert Amos (who is described as the ‘Loan Agent’ in the plaintiffs’ loan application). The document is relevantly in these terms:
Application Declined
To: Robert Amos
From: Rebecca Hine
Date: 13 June 2013
Client Name(s): Ms L Walker and Mr G Putt
Loan Amount: 476,000.00
…
This loan has failed to meet all the necessary requirements for approval. It has therefore been declined. The reason(s) are as follows:
Valuation confirms the property is unacceptable for AFG to consider.
Submissions
The plaintiffs’ principal submission is that they have terminated the contract under general condition 14, which made their performance conditional upon them obtaining a loan of $475,00 from AFG Home Loans. They argue that they should be regarded as having applied for a loan of that amount because they made an application for an amount only $1000 greater. They say that there was no need for strict compliance with the contract and the commercial reality was that they had done everything reasonably necessary and had failed to obtain approval of a loan in the specified sum of $475,000. Had the amount applied for been much greater than $475,000, the situation would have been different. They say that there is no evidence that an application for the sum of $475,000 would have succeeded.
The plaintiffs maintain that they should be taken to have given the requisite written notice of their ending of the contract under general condition 14.2(c) by their solicitors’ letter of 14 June 2013 requesting the return of the deposit.
In the alternative, the plaintiffs seek an order under s 49(2) of the Property Law Act, arguing that the Court should exercise its discretion to order the deposit be returned, in all the circumstances. They dispute the defendant’s contention that, whilst the subsection might be applicable when the deposit had been forfeited by a vendor, it would not apply in this case.
The defendant maintains that strict compliance with the contract was required and that it did not suffice for the plaintiffs to apply for a loan of $476,000 and to fail to have it approved. The defendant cites the High Court’s decision in Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd[1] and that of the Queensland Court of Appeal in Highmist Pty Ltd v Tricare Ltd[2] as examples of cases in which that view was taken in two different fact situations.
[1](1938) 61 CLR 286, 303 (Latham CJ).
[2][2005] QCA 357, [41] (Keane JA).
As to the alternative claim, the defendant argues that s 49(2)of the Property Law Act is inapplicable because it has not yet forfeited the deposit. It maintains that the deposit is with the defendant’s agent and is held on trust for the plaintiffs by virtue of s 9AA of the Sale of Land Act 1962. In any event, it asserts, the requisite exceptional circumstances justifying the favourable exercise of the Court’s discretion under s 49(2) would not have been established in this case if the Court were to find against the plaintiffs in relation to the termination of the contract.
Discussion and conclusions
I am not persuaded by the limited evidence before the Court that the plaintiffs have satisfied the stipulated pre-conditions for their entitlement to end the contract under general condition 14.2, triggering the defendant’s obligation to refund the deposit under general condition 14.3.[3]
[3]I note that the defendant does not argue that the Court lacked power to determine the issue because of the effect of the words of exception in s 49(1), ‘not being a question affecting the existence or validity of the contract’. See ReSneesby & Ades & Bowes’ Contract [1919] VLR 497, 504 (Cussen J); Nowak v Linton [1960] WAR 2, 3 (Virtue J).
First of all, there is insufficient evidence to persuade me that the plaintiffs applied for a loan of the amount of $475,000 specified in the contract.
Even if that is not correct and the plaintiffs should, logically, be regarded as having applied for a loan of $475,000 by asking for the higher amount, I am not satisfied by the evidence that they would have fulfilled their obligation under general condition 14.2(b) to do everything reasonably required to obtain approval of such a loan.
There is insufficient evidence of any dealings between the plaintiffs and AFG Home Loans to indicate what the prospective lender did require and what was done by the plaintiffs to satisfy those requirements. Such correspondence as is exhibited to Ms Walker’s affidavit suggests that there were requirements by the lender, but does not show how or when there were relevant issues or how or when the plaintiffs attempted to address them. The succinct statement of the reason for the refusal of the loan does not assist, raising as it does questions as to what was meant by saying that the valuation indicated that the property was ‘unacceptable for AFG to consider’. There was no evidence as to the nature or content of any valuation.
It follows that I am not satisfied, on the basis of the only material before the Court, that the plaintiffs fulfilled the pre-conditions for the termination of the contract, even if their solicitors’ letter of 14 June 2013 (sent on, rather than after the approval date) would have conveyed that they were electing to end it.[4] As a result, they have not persuaded me that they are entitled to the refund of the deposit under general condition 14.3.
[4]See Umbers v Kelsen [2010] VSCA 227.
Nor am I persuaded by the limited material before me that this would, nevertheless, be an appropriate case for the exercise of the Court’s discretion under s 49(2) of the Property Law Act, even if the subsection were applicable when the deposit remains with the defendant’s agent and has not been forfeited.
The discretion under s 49(2) allows the Court to do justice between the parties. Gillard J in Poort v Development Underwriting (Victoria) Pty Ltd (No 2)[5] held that exceptional circumstances must be shown to justify such an outcome where the contract provides for the forfeiture of the deposit and the purchaser must establish that an innocent party would not be hurt by the exercise of the discretion.[6] There is no evidence of any circumstances which would justify the description ‘exceptional’ or, indeed, indicate that fairness demands that the deposit be refunded to do justice between the parties in this case. I note, in this regard, in particular, the absence of evidence as to the dealings between the plaintiffs and AFG Home Loans. Further, there is no evidence to indicate that the defendant would not be an innocent entity affected adversely by such a determination, in all the circumstances.
[5][1976] VR 779, 786.
[6]See Kadissi v Jankovic [1987] VR 255, 259 (Crockett J).
The application should be refused.
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