Sutherland and MacKinnon v Di Paolo
[2015] VSC 590
•27 October 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S ECI 2015 000148
IN THE MATTER OF ALITALIA CONCRETE PTY LTD (ACN 004 881 707) AND ALITALIA CONSTRUCTIONS PTY LTD (ACN 074 780 206) AND DI PAOLA PTY LTD (ACN 074 499 344) AND ALITALIA GROUP PTY LTD (ACN 096 118 535)
BETWEEN
| KEITH LAURENCE SUTHERLAND AND HAMISH ALAN MACKINNON (IN THEIR CAPACITIES AS THE TRUSTEE OF THE ALITALIA GROUP TRUST) | Plaintiffs |
| and | |
| DANIEL MARCO DI PAOLO AND MARCO RENATO DI PAOLO | Defendants |
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JUDGE: | SIFRIS J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 19 October 2015 |
DATE OF JUDGMENT: | 27 October 2015 |
CASE MAY BE CITED AS: | Sutherland & MacKinnon v Di Paolo & Anor |
MEDIUM NEUTRAL CITATION: | [2015] VSC 590 |
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TRUSTEES – Application for judicial advice as to disclosure of reports relating to the condition of premises prior to completion of tender process – Order 54 of Supreme Court (General Civil Procedure) Rules.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J L Evans | Madgwicks |
| For the First Defendant | Mr N Witherow | Lennon Mazzeo |
HIS HONOUR:
Introduction
The applicants are trustees of various trusts including the Di Paolo Property Trust (DPPT) and the Di Paolo Investment Trust (DPIT) (the Trustees). They were appointed as trustees by the Court in substitution for a previous trustee.
The respondents are the two beneficiaries of the trust: Marco Di Paolo (Marco) and Daniel Di Paolo (Daniel). They are brothers and the directors of the former trustee. The appointment of the present Trustees was made in this proceeding arising from a dispute between the brothers.
The Trustees are taking steps to liquidate the trust’s assets, including a property at 25 Bridge Street, Eltham (the Bunnings Property) and a property at 40 Montefiore Street, Fairfield (the Montefiore Property). They have taken the usual steps, namely, engaging agents, obtaining a valuation, obtaining advice as to how best to sell the assets.
A dispute arose between the beneficiaries as to the manner in which another property should be sold, and the Court gave judicial advice after a contested hearing.[1] I will assume familiarity with Judgment 1.
[1]Sutherland & MacKinnon v Di Paolo & Anor [2015] VSC 552 (Judgment 1).
By summons filed 10 October 2015 the Trustees seek judicial advice from the Court under Order 54 of the Supreme Court (General Civil Procedure) Rules.
The summons poses certain questions and is in the following terms —
QUESTIONS FOR THE COURT
1.Whether it would be proper for the trustees of the DPPT to provide to potential purchasers of the Bunnings Property who have specifically requested copies of the tender documents, copies of the following reports in their possession:
(1) Bunnings report;
(2)Report from Marcon Tedesco O’Neill Pty Ltd to the trustees dated 22 September 2015;
(3)Letter dated 15 October 2015 from TGM Group Pty Ltd to Daniel Di Paolo.
2.Whether it would be proper for the trustees of the DPPT to provide to persons who had requested copies of any reports in respect of the Bunnings Property in the possession of the trustees, copies of the following reports in their possession:
(1) Bunnings report;
(2)Report from Marcon Tedesco O’Neill Pty Ltd to the trustees dated 22 September 2015;
(3)Letter dated 15 October 2015 from TGM Group Pty Ltd to Daniel Di Paolo.
3.Whether it would be proper for the trustees of the DPIT to provide to potential purchasers of the Montefiore Property copies of the following reports in their possession:
(1)Report from Marcon Tedesco O’Neill Pty Ltd to the trustees dated 13 October 2015.
(2)The Letter dated 22 July 2015 from TGM Group Pty Ltd to Daniel Di Paolo.
At the hearing of the application the Court was advised that the Trustees did not press question 3 at this stage.
The Bunnings Property
The assets of the DPPT include the freehold title to the Bunnings Property which is a warehouse-style store leased to Bunnings, hardware retailers.
The Trustees engaged Sutherland Farrelly Pty Ltd, real estate agents and valuers, to assist with the sale of the Bunnings Property and subsequently on or around 20 August 2015, engaged CBRE to conduct a tender campaign in respect of the sale.
The Trustees were informed by Mr Paul Sutherland (Sutherland) that on or around 7 October 2015, he received an email from Justin Dowers (Dowers) of CBRE enquiring as to whether there were any ‘Environmental or Physical Reports available on the property’.
The Trustees were further informed by Sutherland that he received a subsequent email from Dowers on 9 October 2015 noting that BWP had also commented on the cracks in the concrete floor. Sutherland recalled that this was discussed at the start of the campaign. Dowers also enquired whether any consultants had provided anything formal on this. Sutherland responded, advising that he would seek instructions and revert back.
The Trustees were further informed by Sutherland that he received a subsequent email from Dowers on 12 October 2015 again requesting if any reports were available.
Due to the uncertainty in respect of the position regarding the provision of the reports,[2] on 14 October 2015 the Trustees instructed their solicitors, Madgwicks Lawyers, to write to CBRE and request that the tender process be extended for a further two weeks.
[2]The reports comprise a report from Bruce Young Partners dated 6 August 2015, a report from Marcon Tedesco O’Neill Pty Ltd dated 22 September 2015 and a letter dated 15 October 2015 from TGM Group Pty Ltd to Daniel Di Paolo (The Reports).
The Contentions
Daniel Di Paolo consents to the release of the Reports, other than the Marcon Tedesco O’Neill report, to the Trustees dated 22 September 2015.
Marco Di Paolo has not responded.
The Trustees are unsure as to their obligations to potential purchasers or others who have requested copies. Given the context and nature of the dispute between the beneficiaries, they are concerned that, as Trustees, they are protected from claims in relation to their conduct. The application is entirely appropriate and I refer to paras [11]-[12] of Judgment 1 which sets out the relevant principles.
The Trustees consider that the disclosure of the Reports in respect of the Bunnings Property to potential purchasers and other interested parties may cause such purchasers to reduce the amount which they may be willing to offer for the purchase of the property. The Trustees have been advised by James Christodoulakis at Madgwicks that it is uncertain, as a matter of law, whether the Trustees are obliged to disclose the Reports to potential purchasers, both in the event of a specific request as to their existence, and also absent such a request.
In light of this uncertainty, the likely effect of disclosure of the Reports on offers for the properties, the attitude of Daniel Di Paolo, the silence from Marco Di Paolo, and the fact that the appointment of the Trustees occurred in the context of a dispute between Messrs Di Paolo, they request that the Court provide directions as to the matters set out in the Summons.
Consideration
The law in relation to the obligation, on the part of the Trustees, to provide the Reports in the circumstances referred to is not altogether clear.
The Reports do not relate to the Title and probably do not relate to matters that are specifically required to be disclosed in the absence of a request. They relate to the condition of the Bunnings Property.
However, if the Trustees are specifically asked for the Reports, or whether such reports exist, or if the context of any discussion with any interested party suggests or implies that such reports are available, they must respond accordingly and provide the Reports.[3] It follows that they may not make positive assertions that are contradicted by the Reports. These discussions invariably arise in practice and extreme caution is required.
[3]The principles relating to whether and to what extent silence may amount to misleading or deceptive conduct are set out in Steven Vouzas v Bleake House Pty Ltd & Ors [2013] VSC 534.
In Kadissi & Anor v Jankovic,[4] Crockett J said in relation to disclosure obligations of matters that did not go to title as follows —
It would seem, therefore, that the applicants' contention that mere innocent non-disclosure of a defect in the quality of the subject matter will permit a purchaser’s rescission of the contract must rest on the obiter dictum of Joyce J in Carlish’s Case. Whilst it is true that this view is supported in Sugden, Vendor and Purchaser, 14th ed., p. 333 and Dart, Vendor and Purchaser, 8th ed., p. 87, it is pointed out in Voumard’s Sale of Land, 3rd ed., p. 193, that the decision has been criticized on the ground ‘that it is not borne out by the authorities cited and is in conflict with other authorities not cited’. The learned author then expresses the opinion that ‘in the present state of the authorities it appears to be clear that in the absence of fraudulent concealment or of misrepresentation or of an express agreement, a vendor of real estate is not liable to a purchaser for defects in a building or land rendering it dangerous or unfit for occupation, even if the vendor has created the defects himself or is aware of their existence. As to such matters the maxim caveat emptor is applicable. It follows that a purchaser will not be entitled to rescind a contract on the ground of non-disclosure by the vendor of matters relating to the physical condition of the property’.
I accept and act upon this citation as a correct statement of the law. It follows that I consider that the applicants were without grounds to avoid the contract. Their refusal to complete amounted to a repudiation which the respondent has chosen to accept and, although electing not to sue for damages has - lawfully in my view - rendered the deposit subject to forfeit. This view of the matter makes it unnecessary to consider the other submissions upon which the respondent relied in relation to the issue of avoidance.[5]
[4][1987] VR 255.
[5]Ibid, 258.
Although the doctrine of caveat emptor is well established and part of Australian common law, its precise ambit is unclear, particularly in relation to property transactions. Further, the doctrine is subject to and must be considered in the light of numerous statutory obligations and norms of behaviour applicable to vendors and their agents. Most cases fall into this category and the favourable position (to the vendor) at common law is far less relevant.
In the circumstances, given the nature and value of the property, the inevitable discussions and dealings with and between numerous parties and their representatives on structural and quality issues, the best and safest course is for the Trustees to provide the Reports. Indeed, Daniel is largely in agreement with this course and Marco has not opposed it. It is desirable and the Court has given advice accordingly.
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