Vassiliadis v WAG Developments Pty Ltd
[2016] VCC 795
•15 June 2016
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-15-02578
| CHRIS VASSILIADIS | Plaintiff |
| v | |
| WAG DEVELOPMENTS PTY LTD (ACN 103 180 436) | First Defendant |
| and | |
| MELBOURNE SR (TOORAK) PTY LTD (t/as MELBOURNE SOTHEBY'S INTERNATIONAL REALTY) | Second Defendant |
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JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 5 – 8, 11, 12 April 2016 | |
DATE OF JUDGMENT: | 15 June 2016 | |
CASE MAY BE CITED AS: | Vassiliadis v WAG Developments Pty Ltd & Anor | |
MEDIUM NEUTRAL CITATION: | [2016] VCC 795 | |
REASONS FOR JUDGMENT
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Subject:CONVEYANCING; REAL PROPERTY; CONTRACT; PRACTICE AND PROCEDURE
Catchwords: CONVEYANCING – Vendor and purchaser — Sale of land — Whether work was completed in a proper and workmanlike manner —
CONTRACT — Condition or warranty — Whether special condition was a breach of condition — Purchaser entitled to terminate
CONTRACT – Repudiation of contract – whether vendor evinced intention to no longer be bound by contract or fulfil it in a manner substantially inconsistent with its obligations – purchaser accepted repudiation
REAL PROPERTY – whether and which party entitled to return of deposit – no exceptional circumstances – whether vendor entitled to damages
PRACTICE AND PROCEDURE – admissibility of evidence — requirements of O 44 of the County Court Civil Procedure Rules 2008 (Vic) – whether compliance with Rule 44.03
Legislation Cited: Domestic Building Contracts Act 1995 (Vic); Estate Agents (Contracts) Regulations 2008 (Vic); Rule 44.03 of the County Court Civil Procedure Rules 2008 (Vic); Fatal Accidents Act (UK) 1976; Property Law Act 1958 (Vic); Sale of Land Act 1962 (Vic).
Cases Cited:Alphater Consulting Engineers Pty Ltd v Rozman [2016] VSCA 111; Aussie Invest Corporation Pty Ltd v Pulcesia (2005) 13 VR 168; Barton v Stiff [2006] VSC 307; Bensons Fund Management v IMMS Financial Services Limited [2008] VCC 858; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; Dero-Wall International SA v Practitioners in Marketing Ltd [1971] 1 WLR 361,380; Electricity Generation Corporation v Woodside Energy Limited (2014) 251 CLR 640; Jeppesons Road Pty Ltd v Di Domenico [2005] QCA 391; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; Lockwood v PSP Investments Pty Ltd [2013] VSC 10; Matthews v SPI Electricity Pty Ltd & Ors (No 9) [2012] VSC 340; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 325 ALR 188; Nelson v Bellamy [2000] NSWSC 182; O’Reilly v Western Sussex NHS Trust (No 2) [2013] NSWSC 1659; Phillips v Scotdale Pty Ltd [2008] QCA 127; Poort v Development Underwriting (Victoria) Pty Ltd [1976] VR 779; Stojanovski v Australian Dream Homes Pty Ltd [2015] VSC 404; Putt v Perfect Builders Pty Ltd [2013] VSC 442; Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms A Folie | Gadens Lawyers |
| For the First Defendant | Mr D Hyde | Ascot Solicitors Pty Ltd |
| For the Second Defendant | Mr M Black | Simon Parsons & Co |
HIS HONOUR:
Summary
1 This case concerns a dispute between the purchaser, Chris Vassiliadis (“Vassiliadis”) and the vendor, WAG Developments Pty Ltd (“WAG”) about the sale of a property at 2505 Nepean Highway, Rye (“the property”). The purchaser contends that WAG failed to perform its obligations under the Contract of Sale (“the contract”) between the parties and he is thereby entitled either to terminate the contract in accordance with its terms or accept WAG’s repudiation of the contract. In either event, Vassiliadis claims he is entitled to the return of $182,000, being the deposit monies which he paid and which are still held by the vendor’s agent, the second defendant, Melbourne SR (Toorak) Pty Ltd, trading as Melbourne Sotheby’s International Realty (“Sotheby’s”).
2 WAG says that because Vassiliadis failed to complete the contract at settlement and thereafter failed to comply with the requirements of its Notice of Rescission, WAG is entitled to accept Vassiliadis’ repudiation, rescind the contract and obtain the deposit monies.
Background
3 Vassiliadis signed the contract on 15 December 2014. Judy Gatt, the director of WAG, signed the contract on behalf of the vendor on 17 December 2014. The contract provided that all fixed floor coverings, light fittings, window furnishings and fixtures and fittings of a permanent nature were sold with the land. The purchase price was $1,820,000. The deposit of $182,000 was to be paid by 15 December 2014 and the balance was payable at settlement on 27 March 2015 (or earlier by agreement). The contract included a number of special conditions, the material ones being as follows:
“3.1 This contract of sale is subject to and conditional on the Purchaser obtaining a building inspection report (‘the report’), satisfactory to the Purchaser, from Archicentre on or before the expiration of 10 days from the date of this contract.
3.2The Vendor must provide access to the property on receiving 24 hours’ notice from the Purchaser for the property to be inspected for the report to be prepared.
3.3If the report is not obtained through no fault of the Purchaser, or it is not satisfactory to the Purchaser, the Purchaser may terminate this contract of sale by giving written notice to the Vendor and thereupon all moneys paid by the Purchaser must be refunded to the Purchaser without any deduction whatsoever.
3.4This special condition is for the benefit of the Purchaser only and may only be waived by the Purchaser.
4.The Vendor must on or before settlement in a proper and workmanlike manner at the Vendor’s expense and to the Purchaser’s satisfaction rectify the cause of the leaking at the rear back balcony veranda and under the rear of the outdoor pool area.”
4 Special conditions 3.1 – 3.4 were added at the request of Vassiliadis’ solicitor, Chris Ludescher (“Ludescher”) of Gadens. He set out the terms of the special conditions in an email addressed to Robert Curtain (“Curtain”), a sales director of Sotheby’s on 12 December 2014. It appears that Ludescher spoke to Curtain on 17 December 2014 requesting the insertion of special condition 4. By an email sent at 2.27pm that day, Ludescher set out the precise terms of the special condition which he wanted Curtain to incorporate in the contract.[1]
[1]CB-179.
5 On 18 or 19 December 2014, Vassiliadis paid the deposit of $182,000 to Sotheby’s. The real estate agent, as stakeholder, continues to hold the deposit monies.
6 By email sent on 18 December 2014 at 10.45am, Curtain advised Vassiliadis that he had added a special condition with regard to the leaking balcony at the rear of the property. Curtain advised that at 8.30am that day, he had provided access to Roger McAleer (“McAleer”) of Archicentre Pty Ltd (“Archicentre”) to conduct his inspection of the property and, at 8.00am the previous day, had opened the property for Alldry Damp Control (“Alldry”) to identify the source of the balcony leak. Curtain advised that WAG was aware of the source of the leak and would be dealing with the issue in the New Year. He said that to address the problem would require capping to be manufactured and installed.[2]
[2]CB-126.
7 On 18 December 2014, McAleer, attended at the property and prepared a report (“the McAleer report”). The report was a visual assessment of the condition of the reasonably accessible areas of the property at the time of inspection. In his summary, McAleer said that the house overall was in very good condition, although there were some defects. Two significant defects were a water leak in the rear upstairs balcony floor and possible problems with a window lintel or head structure at the upstairs front of the house. He said that both of these matters should be explored to determine the cause of the defect and both should be rectified as soon as possible. He also noted that the steel lintel over the main bedroom opening did not span the entire opening. He said that assurances and evidence should be sought from the owner about additional measures being in place with respect to that structure.
8 McAleer set out in the report a list of maintenance items and minor defects which he found. These items were defined in the report as:
“Any items of repair which are common to well-maintained properties of similar age or type of construction and as described in the Property Maintenance Guide, including decorative features and finishes.”
9 The main items relied upon by Vassiliadis from the list provided by McAleer and set out in his report are as follows:
“7 The window head at the north facing upper balcony has what appears to be some rust stains and some distortion of the render finish; it appears that the upper level structure is lightweight so it is unknown what may be rusting. It is recommended that the cause of the rust and distortion be established and rectified.
9 The rear balcony is or has been leaking water through to the soffit of the outdoor room downstairs. The cause of this is not immediately discernable but investigation and rectification is urgently needed.
11 There are at least two apertures in the ceiling of the rear balcony at the light fittings; it appears that birds are nesting either in the ceiling/roof space or in the “bird nest” light fittings. After checking that the space is free of vermin, the openings should be closed to prevent further incursion.
16 The timber gate to the plant area requires repairs and re-hanging.
21 See above regarding leaks in upper rear balcony through to ceiling of Alfresco area; urgent action required to ascertain reasons and remedy problem.
22 There is water staining in the Alfresco area sink cupboard; check cause.”
10 By email sent at 10.35am on 19 December 2014, Ludescher sent a copy of McAleer’s report to Curtain. Ludescher noted that the report set out items numbered 2 to 28, which required attention. Ludescher asked Curtain to confirm that the vendor agreed to attend to all of the defects items to the satisfaction of Vassiliadis at least three weeks before settlement. He said that if this were not done, Vassiliadis would have no option other than to rely on special condition 3 and terminate the contract.
11 Later on 19 December 2014, Curtain emailed to inform Ludescher that he had sent his email to the vendor’s solicitor. Curtain said that he had spoken with the vendor who was prepared to attend to most of the items in the report in good faith. Curtain said that, apart from the balcony leak, he considered that the other defects were very minor. He said that the environment on the Peninsula was harsh on fittings and fixtures.[3]
[3]CB-128.
12 At about 12.31pm on 19 December 2014, Sotheby’s sent a copy of McAleer’s report to Ascot Solicitors, the solicitors for the vendor.[4]
[4]CB-137.
13 By email sent on 22 December 2014 at 9.25am, Cara Mahoney (“Mahoney”) of Ascot Solicitors emailed Ludescher to inform him that the vendor had confirmed the balcony would be fixed prior to settlement. She said that all other minor items would be looked at by the builder in good faith and assessed accordingly.[5]
[5]CB-136.
14 By a responding email sent at 10.00am, Ludescher advised Mahoney that he would get instructions and see what his client wanted to do. He would then report back to her.[6]
[6]CB-135.
15 By email sent on 23 December 2014 at 12.37pm,[7] Mahoney advised Ludescher that the vendor confirmed that it would attend to the following items to the best of its ability prior to settlement:
[7]CB-134.
·property exterior: Items 7, 8, 9, 10, 11, 12, 13, 14, 15 and 16
·property interior – living areas: Items, 20, 21 and 22
·property interior – bedroom areas: Item 25
·property interior – service (wet areas): Item 28.
The item numbers were taken from McAleer’s report. These comprised the Agreed Works
16 Mahoney also said that the vendor had instructed that the front fence would not be attended to and that the pool area decking shrinks and expands with the hot and cold weather, making the joints visible. She said that the decking would shrink back when the weather became cooler.
17 By an email sent at 2.18pm on 23 December 2014, Ludescher advised Mahoney that the purchaser agreed with the item numbers set out in her email. However, for the sake of clarity, he asked for confirmation that:[8]
“1. The item numbers relate to the ‘Maintenance Items and Minor Defects Found’ in the Archicentre inspection report (‘the report’) obtained by my client and attached to this email for identification;
2. In consideration of my client not exercising his rights under special condition 3 to terminate the contract of sale between our respective clients, the Vendor agrees and undertakes to carry out the work required to remedy the matters set out in the foregoing items in the Report at the Vendor’s expense, in a proper and workmanlike manner prior to settlement.”
[8]CB-134.
18 By email sent on 23 December 2014 at 4.55pm, Curtain advised Warren and Judy Gatt, who controlled WAG, that Vassiliadis had accepted the items nominated for rectification prior to settlement but sought clarification that this would be done in a proper and workmanlike manner before settlement and at the vendor’s expense. Curtain asked that they accept and acknowledge that they would rectify the items that Mahoney had specified in her email in a workmanlike manner before settlement and at their expense.[9]
[9]CB-132.
19 By email sent on 23 December 2014 at 5.12pm, Warren Gatt confirmed to Curtain (and the email was copied to both Judy Gatt and Ludescher) that he confirmed and accepted the contents of the email from the purchaser’s solicitor. This was an important email because, read with Ludescher’s email set out in paragraph 17, it constituted the vendor’s agreement to the variation of the contract.
20 On 15 March 2015, Vassiliadis inspected the property with Curtain, his father and his fiancée Stacey Stanic (“Stanic”). WAG had leased the property out to tenants over the summer holiday period. When he saw the state of the property, Vassiliadis was upset because its general condition had deteriorated in the period since December 2014. Vassiliadis took many photographs of both the inside and outside of the property during the course of this visit.
21 On 17 March 2015 at 2.30pm, the purchaser emailed Curtain to express his disappointment with the state of the property on the inspection and the vendor’s failure to properly maintain the property in the period since the sale. The purchaser listed the things he wanted done, and said he required a final inspection on 25 March 2015.
22 In his responding email[10] which was copied to Stanic and Ludescher, Curtain agreed that the property had suffered from the tenants. He said the vendor had assured him that items such as the damage to the main bedroom would be repaired. He said he was happy to make the house available for Archicentre to inspect. He indicated that the owner had repaired the rear balcony water leak and had receipts to support the claim. Curtain added that, in view of the work which was required to be done, he thought it likely that settlement would be delayed.
[10]CB-174.
23 By email sent on 17 March 2015 at 11.03am, Ludescher wrote to Mahoney, noting that he had not received a response from her to his email of 23 December 2014 but the defendant itself had accepted and acknowledged the contents of the email correspondence. Ludescher said that his client had inspected the property with the agent on the previous Sunday and found that no works had been done and that there were now more problems with the property that needed to be attended to. He attached copies of the photographs which Vassiliadis had taken at his recent inspection of the property. Ludescher asked Mahoney to confirm immediately that the vendor had arranged for all works to be done prior to settlement and that the items in the attached photographs would also be attended to. Ludescher said that the Transfer of Land form and nomination documents would be forwarded shortly. He reserved his client’s rights in relation to the works and to the additional items set out in the photographs.
24 Mahoney responded by email at 12.38pm the same day. She referred to 38 specific complaints made by Vassiliadis and indicated that most of them would be attended to. She said that the vendor was being generous in agreeing to address many of the complaints in circumstances where the house on the property was not brand new and had therefore been subject to some wear and tear.[11] Mahoney did not dispute Ludescher’s claim that the vendor had not commenced the Agreed Works.
[11]CB-179.
25 On 18 March 2015, Ludescher sent to Ascot Lawyers a Transfer of Land form executed by Vassiliadis, together with a nomination form and an unsigned copy of the statutory declaration. In the covering letter, Ludescher said that the Transfer of Land form was submitted on the basis that all Agreed Works would be completed on or before settlement and the property would otherwise be in the same condition as it was in on the day of sale. He said that the purchaser reserved its rights on those points.[12]
[12]CB-188.
26 By email sent on 19 March 2015 at 4.02pm, Vassiliadis’ solicitors sent to Mahoney a statement of adjustments, together with a copy of the land tax certificate and council and water rates certificate.[13]
[13]CB-209.
27 By letter dated 24 March 2015 to Ascot Lawyers, Ludescher advised Mahoney that Vassiliadis was arranging a further inspection of the property by Archicentre on Wednesday 25 March or Thursday 26 March 2015. Ludescher said that if the work set out and referred to in Mahoney’s email of 23 December 2014 had not been completed in a proper and workmanlike manner, Vassiliadis would not effect settlement on 27 March 2015 but would issue a rescission notice under the terms of the contract. He also said that if the works had been completed in a proper and workmanlike manner, but the property was not in the condition it was in on the day of sale, and the matters and works set out in the photographs forwarded to her by email on 17 March 2015 had not been rectified, Vassiliadis would claim compensation under general condition 24 in the contract.[14]
[14]CB-205.
28 By email to Ludescher on 24 March 2015 at 5.41pm, Mahoney advised that Vassiliadis had already conducted his final inspection and there was no special condition in the contract allowing for any additional inspections by Archicentre. She said that Vassiliadis had completed his final inspection before the workmen attended the property to complete all agreed repairs. She said that, since that inspection, “the workman has attended the property and all repairs have been made as per the agreement via email to your office on 23 December 2014”. She also stated that the property was in better condition now than it was at the day of sale because the vendor had attended to the repairs of some of the existing issues. She said that if the purchaser delayed settlement on the basis that no further final inspections were permitted, then the vendor would issue a default notice.[15]
[15]CB-206.
29 Also on 24 March 2015, there was an exchange of emails from Stanic and Curtain. At 2.28pm, Stanic suggested that because there appeared to be an issue with the settlement date, settlement should be rescheduled and then Stanic would arrange another inspection for a day or two before the new date. In response, at 2.39pm, Curtain advised that “according to our maintenance guy all works have been carried out as per report”. Curtain said he had not been told of the change to the settlement date. He asked Stanic if she was getting Archicentre to come through again and said she was free to come and inspect anytime.
30 By letter dated 25 March 2015, Ludescher advised Mahoney that his clients had inspected the property and general condition 22 gave the purchaser, or a person nominated by the purchaser, a right to inspect the property at any reasonable time during the seven days before and including the settlement day. Ludescher set out a number of reasons for his surprise at Mahoney’s assertion that the purchaser had no further right to inspect the property. In part of his letter, he said:[16]
[16]CB-212.
“As evidenced by the negotiations at the time of signing the contract, the condition of the property was of paramount importance to our clients, and had the contract not been amended to include the carrying out of the relevant works, which our clients regarded as an essential term, our clients would have exercised a right to terminate the contract under the special conditions.”
He also pointed out that if the works had been performed as Mahoney asserted, then the vendor should have no problem with allowing access for verification. Ludescher said that his clients were ready, willing and able to settle subject to the vendor having complied with its obligations under the terms of the contract. He expressed his opinion that the vendor’s refusal of a further inspection in those circumstances was all the more surprising and unreasonable.
31 After some squabbling and disagreement between the parties, Simon Tiller (“Tiller”) of Archicentre was permitted to access the property and conduct a further inspection. In his expert report dated 7 December 2015, Tiller, who met Stanic at the property, commented both on whether the matters itemised in McAleer’s report had been fixed and other matters he noted during the course of his March 2015 inspection. To the extent that the report dealt with matters other than the Agreed Works, it was not strictly relevant to the disputed issues in the case. In his evidence, Gatt said, and I accept, that although the vendor was not obliged to address these extra matters, the vendor in fact did repair or fix many of the matters listed.
32 By an email on 27 March 2015 at 1.06pm to Mahoney, Ludescher referred to their recent telephone conversation and confirmed that because the inspection by the Archicentre representative had been carried out so late and close to settlement, his clients had not yet received the report from Archicentre. He said that although the purchaser had the funds for settlement and was otherwise ready, willing and able to settle, he required the reassurance of the final report from Archicentre that all works had been completed and done in a proper and workmanlike manner. Ludescher said that settlement would have to be postponed and he would contact Mahoney when the report was to hand.
33 In a responding email sent at 1.14pm, Mahoney advised Ludescher that the vendor was prepared to allow one business day’s grace to complete settlement before issuing a default notice. She said that settlement was rescheduled to Monday 30 March 2015 at 3.00pm.
34 On 30 March 2015 at 9.17am, Mahoney emailed Ludescher to confirm that settlement was due that day, and that if the purchaser failed to settle, she had instructions to issue a default notice.
35 In his email to Mahoney sent at 9.53am, Ludescher advised that the Archicentre report, which did not come until late the previous Friday, confirmed that some of the Agreed Works had not been done or had not been done in a proper and workmanlike manner. He said that he would not be able to make the settlement deadline. He also said that because the Agreed Works had not been performed in a proper and workmanlike manner, or at all, the vendor was not in a position to issue a default notice.
36 By email sent at 10.20am, Mahoney advised that Ludescher that she was still waiting for a copy of the report and that settlement was still set to take place that day.
37 Soon after, Ludescher sent Mahoney a copy of Tiller’s report.
38 At 1.34pm on 30 March 2015, Mahoney confirmed that the vendor had considered the new report and she provided an itemised response to each of the matters identified in the report. This included matters within the Agreed Works and new matters not previously raised.
39 In an email to Mahoney sent at 2.50pm, Ludescher said that the numbered items on her list referred directly to the item numbers in the McAleer report. These were the matters which the vendor had agreed to remedy in a proper and workmanlike manner before settlement. He said that, on the basis of Tiller’s report, the numbered items referred to either had not been remedied or had not been remedied in a proper and workmanlike manner. He said that the purchaser was therefore not obliged to effect settlement and would not be so obliged until the vendor complied with its obligations in relation to the numbered items.
40 At 4.27pm on 30 March 2015, Mahoney informed Ludescher that the vendor had attended to all agreed repairs and would not be rectifying any of the new issues raised. She stated that the purchaser did not have the right to delay settlement further and attached a rescission notice. The rescission notice stated that the purchaser defaulted in the performance of his obligations under the contract by failing to pay the vendor the residue of purchase money and adjusted apportionable outgoings on the due date or at all. The notice further provided that, unless the purchaser remedied the default within 14 days of service of the rescission notice and paid legal costs of $770.00, together with interest in the amount due under the contract, at a rate of 12.5% per annum, the vendor would rescind the contract under general condition 28 of the contract of sale.[17]
[17]CB-241-242.
41 By letter dated 7 April 2015, Vassiliadis’ solicitors wrote to Mahoney summarising aspects of the history of the dealings between their respective clients. Ludescher noted that on 30 March 2015, the purchaser provided the vendor with a second report prepared by Archicentre[18] which stated both that some new defects had been identified in the property and that some of the Agreed Works had not been performed in a proper and workmanlike manner. The letter stated that in the circumstances, the purchaser terminated the contract with immediate effect on the basis that the vendor failed to satisfy a condition of the contract when it failed to rectify the Agreed Works in a proper and workmanlike manner prior to settlement. The purchaser asked for the return of the deposit by 4.00pm on 15 April 2015.
[18]This was Tiller’s report.
42 On 8 April 2015 at 11.33am, the purchaser’s solicitors emailed Curtain attaching a copy of the letter sent to Mahoney the previous day. The email asked Curtain to return the deposit moneys to the purchaser by electronic funds transfer by no later than 4.00pm on 15 April 2015.
43 On the same day, the vendor’s solicitors sent an email to Gadens, which was copied to Curtain, objecting to the release of the deposit monies and disputing the purchaser’s entitlement to rescind the contract of sale. The letter asserted the vendor’s contention that the property was in significantly better condition than it was at the time of sale. The letter advised that, if the purchaser failed to settle by 13 April 2015, the contract would be deemed at an end and the purchaser would lose its deposit of $182,000. In addition, the vendor advised that it would claim all costs associated with the default including resale costs, interest and any difference in the resale price, together with legal fees.
44 On 21 April 2015, Saul Rozenbes (“Rozenbes”), an architect, inspected the property at the request of the vendor and prepared a report in relation to the completion of the Agreed Works.
45 On 28 May 2015, the purchaser commenced this proceeding against the vendor.
46 On 1 September 2015, the vendor entered into a new contract of sale for the property with Frank Buontempo and/or nominee for a sale price of $1,840,000.00. Settlement of the sale was due on 16 November 2015.
47 On 6 November 2015, Tiller, an architect retained by the purchaser as an expert, further inspected the property and produced an expert report regarding the condition of the property at that time.
48 On 26 February 2016, Rozenbes produced a second report commenting upon aspects of Tiller’s report arising from his November inspection.
Credit
49 Vassiliadis and Gatt were two important witnesses in the case. Their evidence was significant in providing context and dealing with a number of the basic facts.
50 Gatt gave evidence over the course of two days during trial. Overall, I found aspects of his evidence confusing and inconsistent. Further, he was evasive and displayed a reluctance to directly address the questions asked of him.
51 There were various instances of Gatt giving inconsistent evidence. First, in relation to the leaking balcony which was Item 9 of the Agreed Works, Gatt said initially that Alldry inspected the leak on 17 December 2014, and two days later, being 19 December 2014 he engaged a plumber from the area to rectify the leaks. Gatt stated that they installed capping over a hob underneath the glass balustrade, and that this stopped the leak. This was, Gatt recalled, tested multiple times before handover of the property to the purchaser, and on several occasions when he had attended the property before sale, it had rained and not leaked. When he initially spoke of these matters, Gatt could not recall the name of the plumber, or the plumbing company that was commissioned to do the repairs. There was also no documentation evidencing these works.
52 However, during cross-examination, when confronted with an electrician’s invoice from 24 December 2014 showing there was still water damage to the area, Gatt changed his position, and said that he had not fixed any of the Agreed Works items before Christmas 2014. He said that he engaged the plumber (and possibly even the Alldry detection person) later. He said that it could have been “weeks after” Alldry identified the problem and not two days later that he engaged the plumber.
53 When Counsel put to Gatt that he had previously said he had commissioned the plumber to do works on 19 December 2014, Gatt stated:[19]
“Correct. Does it make a difference? I actually did do it. That's the main thing here. It has been done. So it's black and white, isn't it? It's been done before settlement, part of the agreed works, it's done. No matter when it got done, it got done.”
[19]T-252.
54 This response suggested that Gatt was unwilling or unable to focus on the questions asked and simply answer them.
55 Secondly, Gatt could not confirm when the property was tenanted over the summer period. Initially, he said he had tenants in the property up until two days before the inspection by the purchaser on 15 March 2015. He confirmed that works could be completed whilst the property was tenanted.
56 However, during cross-examination, when shown a document indicating that the property had been vacant for 14 days prior to the inspection, he said:[20]
“I did say a couple of days. You're asking me to go back 15 months ago - exactly 2 days, 7 days, 8 days. It has been done, so thank you.”
[20]T-266.
57 Later in his cross-examination, Gatt changed his evidence again, and stated that in fact his parents, rather than tenants, were the last people to be staying in the house before the 15 March inspection. He said that they had been staying at the house between 5 and10 March. He stated he did not want to disrupt their holiday by continuing with the Agreed Works.
58 Thirdly, Gatt was inconsistent with respect to his description of the 20% of the Agreed Works said to have been completed by the 15 March inspection. He also admitted that he included works in the alleged 20% which were not part of the Agreed Works.
59 When asked to identify the works comprising the 20% completed, Gatt initially pointed to the investigation done by Alldry, repairs to the gate, as well as emergency electrical work. Gatt later agreed that the electrical maintenance work did not actually assist in repairing Item 9 of the Agreed Works. Gatt subsequently said that the 20% completed comprised the gate, the electrical work, and the flick mixer.
60 Fourthly, Gatt’s evidence was also inconsistent in relation to Item 9. When discussing the order in which the membraning and capping took place, Gatt initially said he performed the membrane work first and then the capping work. He then said the work was done in the reverse order. After I commented that I was confused about the sequence in which the work was done, Gatt acknowledged that he also was confused. Ultimately, he said he could not remember which work was done first.
61 Fifthly, in relation to the Archicentre photos Gatt also gave evidence that, prior to the 15 March inspection he hand delivered the Archicentre report, including photos to Mick Case. However, photos were attached only to the Archicentre report written by Tiller, which was delivered after the 15 March inspection. When faced with this inconsistency, he admitted his error but seemed not to attribute any great significance to it.
62 In addition, reference will be made later in the judgment regarding the production of evidence about Andrew Maguire, the plumber who attended to the leaks in the balcony which were part of the Agreed Works.
63 It was only during cross-examination that Gatt said he could recall the plumber’s name and said he had an invoice and proof of payment of the plumber’s account. Gatt said he had not discovered these documents earlier because he believed they had been discovered. When he got the invoice on his phone during the trial, he realised it had not been produced earlier. Gatt said he first got the invoice about one week after Maguire did the work. In addition, Gatt referred to proof of payment of the invoice and email correspondence relating to the work, both of which documents Gatt had not discovered.
64 Gatt’s explanation was unsatisfactory and not convincing. Given the fairly narrow focus at trial on the major items within the Agreed Works, I find it hard to accept that Gatt (and possibly his solicitors) would not have directed their attention to any documents relevant to those main items.
65 Generally, having watched Gatt closely for an extended period in the witness box, I formed the view that he was not a particularly reliable witness. His attitude and answers reflected a somewhat casual attitude to the truth. He was emphatic about things he had done at the property but too casual in addressing details. His approach seemed to be that it was enough for him to be accurate about what he perceived to be the major points. While I do not consider that he intended to mislead the court, I find that his inconsistency and lack of attention to detail and to questions asked made his evidence less credible and less reliable.
66 By comparison, Vassiliadis gave evidence which was generally clear and consistent. He was sometimes a little obtuse in cross-examination giving answers like “no comment” or answering with a question. However, he usually grappled with the question asked and answered it directly. I find that Vassiliadis was generally a truthful and reliable witness.
67 To the extent of any specific conflict with Gatt, I preferred the evidence of Vassiliadis.
Issues
68 The issues to be determined in this case are as follows:
(a) What was the nature and effect of the variation to the contract made on 23 December 2014?
(b) Did the vendor complete the Agreed Works before settlement and, if so, in a proper and workmanlike manner?
(c) Did the vendor breach the varied contract in relation to the Agreed Works? If the answer is yes, was the purchaser entitled to terminate the contract or did it have to complete the sale and sue only for damages?
(d) Did the purchaser breach the varied contract by failing to settle in March 2015? If the answer is yes, was the vendor entitled to terminate the contract and claim damages?
(e) What should happen to the deposit?
(f) If the purchaser breached the varied contract, was it entitled to recover the deposit as relief against forfeiture pursuant to section 49(2) of the Property Law Act 1958 (Vic) (“Property Law Act”) or otherwise?
(a) What was the nature and effect of the variation to the contract made on 23 December 2014?
69 The parties entered the contract in December 2014. The special conditions were obviously important because the purchaser specifically sought their inclusion and WAG agreed to this. Also, their inclusion constituted a change to the standard form contract produced by the Estate Agents (Contracts) Regulations 2008 (Vic). Hence, viewed objectively, the special conditions were significant to the parties because they expressed their intention to form a special, not a standard, agreement between them in relation to the sale of the property.
70 Vassiliadis took advantage of special condition 3.1 in the contract to obtain the Archicentre report by McAleer. The vendor complied with special condition 3.2 by giving McAleer access to the property in order for him to produce his report. As Ludescher made clear in his correspondence with Mahoney, after the purchaser received McAleer’s report and realised that there was a list of items requiring repair or rectification, he had the option of terminating the contract. However, rather than do this, the purchaser struck a varied agreement with the vendor.
71 The emails exchanged on 23 December 2014 resulted in a variation of the contract (“the varied contract”) whereby in consideration of Vassiliadis not exercising his right to terminate the agreement under special condition 3, the vendor agreed and undertook to complete the Agreed Works in a proper and workmanlike manner prior to settlement and at its own expense.
72 I note that in its closing submissions,[21] WAG stated that the vendor and purchaser were agreed about what was to be done. WAG accepted that it was to rectify, remedy, repair or fix the matters identified by particular item numbers in the McAleer report.
[21]At paragraph 20(ff) of the defendant’s closing submissions.
73 However, WAG contended that, as a result of the variation, the purchaser and vendor agreed, inter alia, to:[22]
[22]At paragraph 25 of the defendant’s closing submissions.
(a) remove the purchaser’s unilateral right to terminate the contract of sale with no forfeiture in special condition 3.3;
(b) remove the specific repair obligations in special condition 4 which included the express phrase “to the purchaser’s satisfaction”;
(c) replace the special condition with the obligation on the vendor to carry out the Agreed Works at the vendor’s expense “in a proper and workmanlike manner” prior to settlement.
74 In my view, the vendor overstated the position in relation to special condition 4. Special condition 4 was different in nature from special conditions 3.1 – 3.4. It concerned a particular problem which the vendor had to address before settlement. The vendor, at its expense, had to rectify the cause of the leaking at the rear balcony veranda and under the rear of the outdoor pool area in a proper and workmanlike manner and to the purchaser’s satisfaction. As I understand it, the vendor contended that the special condition had to be disregarded because, as a matter of construction, it could not sit comfortably beside the obligation to remedy Item 9 under the Agreed Works.[23] Item 9 comprised the following:
[23]The contention was not developed in any detail in submissions and was put more as an assertion rather than a conclusion deriving from disclosed premises.
“9. The rear balcony is or has been leaking water through to the soffit of the outdoor room downstairs. The cause of this is not immediately discernible, but investigation and rectification is urgently needed.”
The vendor said that both obligations dealt with the same subject matter but they conferred different rights on the purchaser. According to the vendor, the purchaser could not enjoy both rights. Under the Agreed Works, the purchaser could expect the requisite work to be done in a proper and workmanlike manner at the vendor’s expense before settlement. Special condition 4 enabled the purchaser to terminate the contract even if the vendor performed the work agreed, but the purchaser remained unsatisfied. The vendor contended that this could operate unfairly against it and, therefore, it should not be permitted. Accordingly, it argued that the varied agreement should be construed as if special condition 4 no longer existed. The vendor also said that, as a matter of fact, the purchaser did not rely upon special condition 4 in terminating the agreement because it made no reference to this clause in its letter of termination.
75 The essence of the vendor’s complaint was that the vendor might do the rectification or repair work in compliance with the specified standard, at substantial expense, and the purchaser could nonetheless terminate the agreement. This was said to be unfair. I acknowledge that, depending upon the actions of the purchaser, the condition could operate to the vendor’s disadvantage. But it seems to me that the vendor had already agreed to just such an outcome by including the subjective component in the special conditions in the initial contract.[24] The special condition compelled the vendor to undertake rectification work to a particular standard and at its own expense but still required that the purchaser be satisfied with the work.
[24]To that extent, there was nothing new about the possibility that the purchaser might walk away from the contract even though the vendor had invested time and money in the agreement.
76 In my opinion, there was no contradiction between the varied contract and special condition 4. It was simply the case that the latter conferred upon the purchaser an additional benefit – namely, the right to abandon the contract if it were dissatisfied with the vendor’s work.
77 The other difference which is significant between the Agreed Works and special condition 4, was that special condition 4 also referred to leaking under the rear of the outdoor pool area. This was distinct from the rear balcony. To that extent, it is incorrect to suggest that the subject matter of the varied term and special condition 4 was the same. The vendor simply submitted that the whole of the special condition 4 should be excluded from the varied contract and appeared to ignore that it dealt with broader subject matter.
78 The vendor contended that the Agreed Works were merely a list of issues only some of which suggested repair work.[25] It argued that the court should pay careful attention to the variation because the true nature of the terms affected the available remedies.[26] WAG said that the 15 claims set out in the McAleer report comprising the Agreed Works did not describe or advise a required course of physical building and construction work to be carried out – “The items merely set out suggested actions”.[27] Because of this, the vendor submitted that:
[25]At paragraph 30 of the defendant’s closing submissions.
[26]At paragraph 27 of the defendant’s closing submissions.
[27]At paragraph 29 of the defendant’s closing submissions.
(a) the variation meant that it would address rather than ignore each of the 15 items;
(b) depending on the particular item, the vendor could legitimately attend to the item by, in some cases, doing repair work and in one case, leaving the described condition alone;
(c) the vendor was contractually obliged by the variation to positively undertake repair work if the term of the variation “expressly set out what physical work must be done”;
(d) the vendor could address or attend to the situation described “in a proper and workmanlike manner” without necessarily being obliged to go beyond a particular point in terms of physical construction work.
79 Before the variation was agreed, the vendor had received a copy of McAleer’s report. Of the matters listed, the vendor’s solicitor set out those items which the vendor agreed to fix and those it would not. The list of agreed items, as it appeared in McAleer’s report was as follows:
“7. The window head at the north-facing upper balcony has what appears to be some rust stains and some distortion of the render finish; it appears that the upper level structure is lightweight so it is unknown what may be rusting. It is recommended that the cause of the rust and distortion be established and rectified.
8.Part of the polystyrene backing to the upper level front balcony roof is exposed at the south west end; requires re-rendering to prevent further weather damage.
9.The rear balcony is or has been leaking water through to the soffit of the outdoor room downstairs. The cause of this is not immediately discernible but investigation and rectification is urgently needed.
10.There is what appears to be an electrical cable hanging from the central light fitting of the rear balcony; check that this is safe and remove or re-locate as necessary.
11.There are at least two apertures in the ceiling of the rear balcony at the light fittings; it appears that birds are nesting either in the ceiling/roof space or in the ‘bird-nest’ light fittings. After checking that the space is free of vermin the openings should be closed to prevent further incursion.
12.The laundry door appeared not to have a door sill sub-frame; recommend installing a cover section to remove an attraction for vermin.
13.The door hardware to the entry to the Pool House is corroding; recommend treatment to delay deterioration.
14.The store area on the east side of the Pool House was inaccessible and it could not be ascertained whether drainage was present.
15.The plant area on the west side of the Pool House required weeding to remove vegetation from the plant items including the A/C condenser.
16.The timber gate to the plant area requires repairs and re-hanging.
20.There is vegetation intruding through the entry area front wall from the retained garden immediately outside; recommend investigation to ascertain cause and remedial action taken to prevent recurrence.
21.See above regarding leaks in upper rear balcony through to ceiling of Alfresco area; urgent action required to ascertain reasons and remedy problem.
22.There is water staining in the Alfresco area sin cupboard; check cause.
25.Door hardware repairs required to Bed 2 entry door, Bed 5 entry door and Bed 5 WIR door.
28.The Main Bedroom ED basin’s drain plug does not operate correctly.”
80 From a fair reading of the items and their description the vendor agreed, under the varied contract, inter alia, to:
(a) establish the cause of rust and distortion on the north facing upper balcony and rectify the same (Item 7);
(b) urgently investigate the cause of the water leaking from the rear balcony to the soffit of the outdoor room downstairs and to rectify the same (Item 9);
(c) check that there were no birds or vermin in the apertures in the ceiling of the rear balcony in which the “‘bird-nest’ light fittings” were located and to ensure that the apertures were closed to prevent any further incursions by birds or vermin (Item 11);
(d) repair and re-hang the timber gate to the plant area (Item 16);
(e) take urgent action to ascertain the reasons for the water leaking from the upper rear balcony through to the ceiling of the alfresco area and to remedy the same (Item 21).
81 To the extent that the vendor’s submissions suggested that it was obligated to do anything less that perform the tasks set out in paragraphs 79-80 to fulfil its contractual obligations, it is wrong. I reject the vendor’s submissions on this point. Further, I do not accept the vendor’s unpleaded intimation in final address that the varied contract or its terms were uncertain. The terms of the varied contract are sufficiently clear. In any event, the trial was not conducted on the basis that uncertainty was an issue and, accordingly, the defendant cannot raise such an issue at the conclusion of the trial.
(b)Did the vendor perform the Agreed Works before settlement and, if so, in a proper and workmanlike manner?
82 Whether the vendor completed the Agreed Works before settlement and, if so, in a proper and workmanlike manner is an issue of central significance in the case.
83 Vassiliadis and Curtain both agreed that, when they inspected the property on 15 March 2015 after the property was vacated, the Agreed Works had not been done. At the time, settlement was still some days away, and Gatt planned to have the work done in the meantime. Curtain said that he spoke to Gatt about the failure to have completed the work. Curtain said that Gatt was annoyed that the inspection took place when it did, because he had not had an opportunity to fix those things which required work and clean the property properly after the departure of the tenants.
84 The vendor claims that it performed the Agreed Works in accordance with the varied contract. The vendor, apart from relying on Gatt, produced invoices which it said evidenced the performance of the Agreed Works. In his evidence, Gatt said that he started on the Agreed Works between December 2014 and March 2015, and invoices showed that work was done on the property before the inspection which the purchaser undertook on 15 March 2015. Gatt said that he had done about 20% of the works by that time, and had booked trades to work when the tenants vacated the property. He said that he had several meetings with the contractors and met them on site seven to eight times.
85 Also in his evidence, Gatt agreed that there were three invoices relating to the performance of the Agreed Works: Alldry sent an invoice for investigating and advising on the water leaks from the balcony in December 2014; Southern Peninsula Garage Doors, Gates and Automation invoiced Peninsula Holiday Rentals (the agency Gatt used to manage the leasing of the property) in February 2015 about repairs to a gate hinge and gate post; Mick Case sent an invoice for repair work done to prepare the property for settlement between 16 March and 25 March 2015.
86 Of these invoices, I accept that the Alldry invoice and the Case invoice related to the Agreed Works. The Alldry invoice concerned the investigation of the leak but did not relate to remedying the problem. Case’s invoice contained the general description “All repairs to prepare the property for settlement”. The invoice had no details about the nature of the work done or how it was done. Curtain described Case as a handyman and there seemed to be general acceptance from those who knew him that he was not a qualified plumber, electrician, painter or renderer. Case charged $87 for materials used in performing his work. For labour between 16 and 25 March, Case charged $1,450. Given the extent of the Agreed Works, the cost suggests that the time spent on repair work was quite limited. Because the vendor leased the property between December 2014 and March 2015 to up to five families on short-term tenancies, I consider it more likely that the invoice regarding the gate concerned a repair or maintenance item which arose primarily due to the tenants’ occupation of the property and not the Agreed Works. Gatt’s evidence on the point was not convincing, and the existence of other invoices such as those relating to the pool and a broken toilet suggest the more likely cause of the work was a request by a tenant rather than the Agreed Works.
87 The vendor also relied upon another invoice dated 16 February 2015 from Andrew Maguire to Gatt. The invoice referred to “the supply and installation of colourbond cappings to suit to cover leaking tiles over rear deck under hand rail on front/main house”. The cost was $1,171.50. The invoice was attached to an email from Maguire to Gatt dated 6 April 2016.
88 This invoice was produced to the court in unusual circumstances.
89 In his evidence Gatt said that two days after the visit by Alldry, he engaged a local plumber to install capping. This work successfully stopped the leak. Gatt said he knew this because he tested it and it rained at the house several times when he was there before handover and there was no water coming through.
90 Gatt did not identify the plumber in his evidence in chief and he did not refer to any documents passing between him and the plumber referring to the work done. Later, during his cross-examination, Gatt named the plumber, produced the invoice (sent from a Gmail address), as well as an email confirming the invoice was paid in full (sent from a Hotmail address). His explanation for not discovering the invoice in the usual way before trial was that he thought it was in the documents already produced. He said that when he realised that he had not produced the invoice, he arranged to have it sent to his phone.
91 Gatt was inconsistent and confusing about when the plumbing work was done. At one time he said work was done in December 2014 but later he agreed it was not done then. He said that he was not sure whether this repair work was done in mid-December or mid-February but he believed it was a couple of days or possibly 4-5 days after Alldry attended the property.
92 While the confusion is unhelpful and does not reflect well on Gatt’s credit or reliability, one unarguable point emerges. The vendor did not call, and gave no explanation for not calling, the only person who was allegedly present at the time the plumbing work was performed and actually carried out the work, namely, Maguire. In the absence of his sworn evidence, the court is left with the beliefs, conjecture and speculation of Gatt about precisely what was done and when. That being so, it is difficult for the court to have any assurance as to the performance of the work and whether it was done in a proper and workmanlike fashion.
93 The non-appearance of Maguire raises an issue which affects the whole of the evidence about the performance of the Agreed Works. It is this. The vendor did not call to give evidence any of the workers who actually performed the work allegedly done. Nor did the vendor explain why these witnesses were not called. The vendor relied largely upon the evidence of Gatt. He spoke of inspections which he undertook at the property, conversations and discussions he had with the workers and his beliefs about what was done and how and when. This evidence was in many respects second-hand and based upon hearsay, conjecture and assumption. To that extent it was not satisfactory or compelling. When added to the other concerns which I have about Gatt’s credit and reliability, it provided a weak foundation for the vendor’s case.
94 Although there were about 15 items listed in the McAleer report which comprised the Agreed Works, ultimately the purchaser focused its closing submissions only on Items 7, 9 and 21. In determining his attitude to settling the sale of the property, the purchaser was influenced by, and relied upon, the report produced by Tiller.
Item 7
95 In relation to Item 7, Tiller wrote in the Second Archicentre report:
“7(a) Bubbling render over styrene front facade panel, between the highlight window and the main front north upper window. Remove and fit full flashing during recladding of the bubbled area.
7(b) Moisture observed seeping from the soffit of the front balcony bulkhead, seeping moisture seen by way of active dripping & salts/.”
96 In response to this report, Mahoney wrote:
“This was painted with rust-proof paint to seal. This was the only agreed repair.”
97 On its face, Mahoney’s comments implied that the vendor did not perform all the work required on this item. The vendor took a narrower view of its obligations, and did not do all that it had agreed to and should have done. The only work done appears to be painting the rust-stained area with rustproof paint. There was no work done regarding the distortion. This position was confirmed in the report by Rozenbes, where he said:[28]
“The affected area had been repainted to protect the surface from rust.
The irregularities in the rendered finish to the window head had not been repaired as the owner advised that it was not practicable to repair the surface without adverse consequences for the appearance of the surrounding surfaces. (emphasis added)
As the affected area had been treated as far as was practicable, the works have been carried out in a proper and workmanlike manner.”
[28]CB-260.
98 Rozenbes apparently accepted what he was told by the vendor, namely, it was not practicable to repair the surface without some adverse consequences. So, although not all the Agreed Works relating to Item 7 on the McAleer list were performed, Rozenbes said that, because the affected area had been treated as far as practicable, the works had been carried out in a proper and workmanlike manner. This statement by Rozenbes is odd and I am not convinced that it is logical. In my view, it does not follow that because an affected area was treated as far as practicable, the works on that area had necessarily been carried out in a proper and workmanlike manner. Further, it appears that Rozenbes reached this conclusion without knowing precisely what was done to effect the repair. Alternatively, if Rozenbes had a basis for his conclusion grounded in his knowledge of the methodology adopted and an assessment of how well it was performed, it was not apparent from his report.
99 The admissions in the vendor’s evidence were supported by Tiller. He noted the distortion to the render around the time of settlement.[29]
[29]Rozenbes’ report of April 2015 agreed with Tiller regarding the existence of the distortion to the render.
100 Tiller considered the problem with the render was serious. He contemplated that to remedy the problem, the rust had to be removed, the area rendered properly and the façade sealed. Tiller said that in November 2015, some problems that he had seen in March that year had worsened. In the absence of evidence of repairs having been done in relation to the Item 7 issue, he assumed that none had been done and therefore, the problem had deteriorated. In particular, he commented that “correctly repaired leaking through render in March would not leak in November. It would be done properly.” When a similar point was put to Rozenbes, he did not address it directly – he said:
“What I was asked to comment on and what I observed in April was whether or not there were rust spots. I did not see the condition before the rust spots were rectified. When I was there, there was no rust evident. My report reported on the conditions on the day that I was there, only on those conditions, and I gave my opinion on what those conditions were on that day.”
101 This seemed to me an unduly narrow approach to the problem. It implied that whether or not the repair work lasted for a reasonable time after completion was not something which Rozenbes addressed or was concerned with. This was confirmed by his oral evidence that he “was not instructed or requested to go into whether or not any of the works would survive any period of time, or last a certain period of time”.
102 The vendor was critical of Tiller’s November 2015 inspection, partly on the basis that it could not provide useful evidence about the state of the property in March that year. However, in my view, for the reason Tiller gave, namely, that repair work done properly on the leaking in March would not allow the resumption of leaking in November the same year, this statement is incorrect.
103 In short, in relation to Item 7, I find that some of the work in relation to the rust was not done in a proper and workmanlike manner[30] and the work in relation to the distortion of the render was not done properly or at all.
Item 9
[30]Because it was still leaking or leaking again in November the same year, after allegedly being fixed in March.
104 In his March 2015 report, Tiller wrote in relation to Item 9:
“9(a) Repair observed to the rear balcony (since previous report) as an applied secondary bitumen membrane over tile and partial secondary flashing/over upstand. Gaps observed to the rear secondary bituminous membrane retrofitted over the tile, at the aluminium door sill of the membrane upstand (read also with item 21(a) and 21(c) – moisture running behind cladding & dripping from soffit of entertaining area, below rear balcony).”
105 In response to this, Mahoney wrote:
“The repair of the leak was done. This was the only agreed repair.”
106 Mahoney’s approach was consistent with Gatt’s view that the installation of capping solved the problem for the balcony, and nothing more was required. The vendor’s response did not specifically deal with the issue about the finish to the balcony work, and seems to assert that no repair was required regarding the observed consequences of the leak as set out in Item 21.
107 Gatt said that the case of the leak on the balcony area was identified and remedied. Gatt and Rozenbes agreed that because the repair work involved capping or flashing, it should be done by a certified plumber. As previously noted, the invoice was inadequate to establish what was done and how, and there was no evidence from Maguire. Thus, the court does not know whether he was a certified plumber.
108 Tiller, in his initial report, accepted that there were repairs done but said that there were still gaps in the membrane and there was moisture running behind the cladding and dripping from the soffit of the area beneath the balcony. In his expert report, Tiller noted gaps at the upstand edge. He said that the secondary colorbond over flashing to the balcony edge upstand relied on silicone sealant due to the lapped nature of the apparently retrofitted elements. He recommended that the sealant between various uneven elements be monitored. Tiller’s view was that the repair had not been carried out in an appropriate workmanlike manner for a house of this standard.
109 Rozenbes relied upon what Gatt told him about the performance of the repair work on this item. Rozenbes did not know who did the work or whether they were properly qualified. He made no enquiries about these matters. Nor did Rozenbes inspect the work when it was being done.
110 Gatt said that the balcony would require regular maintenance and the sealant should be redone every six to twelve months. The purchaser submitted that if the balcony repairs required such a level of maintenance, then the repair work was not performed in a proper and workmanlike manner. As noted, Rozenbes did not consider the question of ongoing maintenance. His comment in court confirmed this, where he said:
“I didn’t consider the implication of anything that would follow in the future. … .”
Rozenbes said that his report addressed the question of whether the installation of a capping at the bottom of the balustrade to prevent water penetrating through the upstand to the area below was a proper and workmanlike approach. In saying this, he made clear that his report focussed on the repair methodology allegedly used according to the instructions given by Gatt.
111 Because of the hearsay and veracity issues associated with Gatt’s evidence regarding the performance of the Item 9 repair work, the absence of any evidence from Maguire and Rozenbes’ reliance upon Gatt’s instructions, I find that the work in relation to Item 9 was not done in a proper and workmanlike manner.
Item 21
112 In relation to Item 21, which related to the main house rear porch and semi-enclosed alfresco entertaining area, Tiller wrote in his March 2015 report:
“21(b) Water observed dripping from the rendered soffit of the wall opening above the entry area bench (near the sink), i.e. beneath previously problematic balcony.
21(g) Corrosion visible to the central room fan at the surface (apparently a consequence of earlier leaks above prior to membrane application).”
113 Mahoney responded to this point as follows:
“The screen is plastic and when it storms water will get through the gaps. This is an outdoor area and not required to be watertight. The other items have not previously been raised are existing conditions and will not be attended to.”
114 I infer from Mahoney’s response that the vendor considered the capping fixed the problem with the leak, and no other aspect of Item 21 required attention.
115 Rozenbes, in his April 2015 report, made no express comment on this item. His views on the matters relating to this item were set out in relation to Item 9. Because they focussed on the issues affecting the balcony, he effectively said nothing about Item 21.
116 Also in his December report, Tiller said that the alfresco interior ceiling had not been repaired. There were residual damp stains. Further, the ceiling light and fan fittings were still stained and tarnished. Hence, even though there was now a membrane which appeared to be effective on the upper balcony, these issues in the alfresco area were yet to be addressed.
117 Although he did not conduct an inspection of the property in November 2015 when Tiller went back to the property, Rozenbes still made some comments on this item in his February 2016 report. Given the circumstances governing Rozenbes’ presence at the property at that time, the role he played at the time, and the underlying problem that Rozenbes’ views about the items were based on instructions from Gatt (which remained hearsay and were not proved by the people who actually performed the work), I do not find his views persuasive.
118 In terms of other evidence, Gatt relied upon what Case told him when Gatt said that a small patch of the raw timber ceiling was sanded where it was stained. Gatt stated that the vendor did not repair or replace the fan in this area.[31] However, this was in a context where Gatt said he did not agree to do anything in relation to the alfresco area. To that extent, it would not be surprising if no repairs were done.
[31]Shown in one of the photographs in Tiller’s December 2015 report at CB-440, photographs 75-76.
119 In summary, I find that the vendor did not perform at all the repair work on Item 21. Thus, I am not satisfied it was done in a proper and workmanlike manner.
Expert evidence of Tiller and Rozenbes
120 Where work was done regarding the Agreed Works, the standard of repair is largely determined by an assessment of the expert evidence of Messrs Tiller and Rozenbes. Both were experienced architects and were competent to offer an opinion about the work performed by the vendor in accordance with the varied contract.
121 During the course of the trial the purchaser objected when the vendor sought to lead evidence of its expert consultant, Rozenbes. The plaintiff objected because the copies of the two expert reports contained no acknowledgment that he had read the Expert Witness Code of Conduct (“the Code”) and he did not agree to be bound by the Code as required by Rule 44.03(2)(b) of the County Court Civil Procedure Rules 2008 (Vic). The purchaser contended that this was a fundamental aspect of the Rule 44 procedure providing for the admission of expert evidence at trial. The plaintiff referred to the decision of Forrest J in Matthews v SPI Electricity Pty Ltd & Ors (No 9),[32] where His Honour said that the rationale for Rule 44.03 and Order 44 as a whole was twofold. One point was to ensure that each party had adequate forewarning of the expert evidence to be led at trial. The other was to ensure that the expert witnesses were aware of their responsibilities to the court in preparing an independent opinion. The rule aimed to eliminate, or at least reduce, the “gun for hire” approach endemic to adversarial litigation prior to the introduction of the Code. The purchaser submitted that an error of this kind could not be satisfactorily addressed after the event because the court could not be satisfied that the expert report was in fact prepared in accordance with the requirements of the Code.
[32][2012] VSC 340 at [14].
122 The vendor contended that the court should not refuse to admit the expert reports because to do so would elevate form over substance. It was said that if Rozenbes went into the witness box and gave evidence, he could be questioned and the court be satisfied that he was familiar with the requirements of the Code and had prepared his expert report in the manner required by the Code.
123 During the hearing of the objection, neither party referred me to any case in which a court had faced a similar situation. To that extent, I received no guidance as to what factors I should take into account in ruling on the objection. Subsequently, after court rose for the day, counsel for WAG forwarded to my associate and counsel for the purchaser the decision of O’Reilly v Western Sussex NHS Trust (No 2).[33] In that case, the plaintiff claimed damages pursuant to the Fatal Accidents Act 1976 (UK) and for personal injury by way of psychiatric injury arising from the death of her husband on 2 November 2006. She alleged, and the defendants denied, that her husband’s death was caused by, or materially contributed to by, their negligence. The first defendant was said to be vicariously liable for the negligence of two specialist medical practitioners. The matter first came before Justice Garling for judicial management in December 2012. Before then, the matter had been in the Registrar’s List for management. In September 2012, the court made orders requiring the parties to serve their evidence in accordance with the designated timetable. The matter returned to court on a number of further occasions after the plaintiff finally complied with the court order to serve expert reports. The reports included two by Professor Tattersall dated August and October 2012 respectively. Professor Tattersall was a cancer specialist and dealt with issues including the nature of the tumour likely to have been present in the late Dr O’Reilly’s colon in November 2003.
[33][2013] NSWSC 1659.
124 Neither of Professor Tattersall’s reports made any reference to the Code.
125 On 22 February 2013, the matter was before the court for directions. At that time, the defendants were represented by senior counsel. There was considerable discussion about arrangements to be made for the hearing. This was necessary because some of the evidence was to be heard in London as well as Australia.
126 There was further talk regarding logistics and the timing of Professor Tattersall’s evidence at another directions hearing on 15 March 2013.
127 On none of these occasions did either party raise any issue regarding the failure by Professor Tattersall to acknowledge and adopt the Code. Nor was there any suggestion that the defendants would object to his evidence. In particular, at a directions hearing in July 2013, when senior counsel for both parties were present, the issue of objections to evidence was raised. At that time, no application was made or foreshadowed that Professor Tattersall’s evidence was objectionable or that the defendants proposed to have his evidence ruled inadmissible at the trial.
128 Notwithstanding the intensive case management, the defendants objected to the admission into evidence of Professor Tattersall’s reports shortly before he entered the witness box.
129 The trial judge noted the submissions that the failure to refer to and adopt the Code was a fundamental problem which could not be rectified after the event by the retrospective adoption of the Code. However, His Honour decided to overrule the objection and allow Professor Tattersall to give evidence. Garling J did this on the grounds that:[34]
[34][2013] NSWSC 1659 at [30] – [37].
· Professor Tattersall was an experienced witness and had given evidence in courts both in New South Wales and elsewhere in Australia.
· Professor Tattersall gave evidence that in preparing his report he had in mind the substance of the Code. The failure to mention it resulted from the omission by the solicitors to include a copy of the Code and a reference to it in their instructions.
· The objection was at a stage in the trial where Professor Tattersall’s evidence had been the subject of comment by others and he had participated in an expert conference to produce a joint report.
· Due to the significant amount of case management and the expert conference, it was too late to object.
· It would be unfair to exclude the evidence of one expert when others in the case had also failed to address the issue of the Code.
· It was in the interests of justice to permit the admission of the evidence.
130 In the present case, I consider that the purchaser had received the Rozenbes reports well before the trial (albeit in incorrect form) and suffered no disadvantage in that sense. Rozenbes said in his Order 44 statement that he had read the Code and agreed to be bound by it. The vendor would suffer substantial prejudice if the expert reports of Rozenbes were excluded. To that extent, it was in the interests of justice that the reports be admitted into evidence. The failure to comply with Order 44 was not due to any deliberate act or omission of the vendor.
131 In overruling the purchaser’s objection, I should not be taken as saying that the evidence of Rozenbes would necessarily be accepted without question. Indeed, I have concerns about aspects of Rozenbes’ evidence and the extent to which I should accept it.
132 Tiller was prone to talk at some length, and had difficulty confining his answers. By contrast, Rozenbes was more focused and direct. For example, he made it very clear that, when he returned to the property in November 2015 at the time Tiller conducted a second inspection, he was not asked or retained to prepare another report. Thus, he said that he did not conduct an inspection himself at that time, and he did not record any observations. Later, in January 2016, he was asked to respond to Tiller’s second report.
133 While Tiller’s evidence was on occasion a little discursive and unclear, I had more substantial reservations about the evidence of Rozenbes. First, Rozenbes filed two expert reports, one in April 2015 and one in February 2016. At the time the two reports were prepared, neither of them made reference to, or obviously complied with, the requirements of Order 44. The filed versions of the reports say:
“I have read the Expert Witness Code of Conduct in Form 44A of the County Court Civil Procedure Rules 2008 and agree to be bound by it.”
134 From this, I was not sure whether Rozenbes actually read the Code before he began work on the two reports or whether the Section 44.03 Statement appended to the rear of each report was intended to validate the report retrospectively. Given the objection taken by the purchaser to the admissibility of the reports, I would have expected the vendor to lead some evidence on the point. However, it was only in cross-examination that it became clear that Rozenbes was not provided with a copy of the Code before preparing either of his reports.
135 Rozenbes gave no evidence about the existence of an equivalent expert code applying at VCAT where he had previously given evidence. Rozenbes said that he had not given evidence before in either the Supreme Court of Victoria or the County Court of Victoria. To that extent, he was not familiar with the Code. Although I allowed the two Rozenbes reports to be admitted into evidence, it troubles me that Rozenbes did not unambiguously comply with the Code in preparing the reports. Indeed, if he did not have a copy of the Code and was not otherwise familiar with it,[35] one wonders how he could have prepared his reports in compliance with the Code.
[35]Rozenbes did not claim to be familiar with the Code at the time he produced his reports.
136 Secondly, the reports stated that there was no relationship between Rozenbes and the party for whom he prepared his reports. However, in evidence, he acknowledged that Gatt had previously retained him as an expert in a matter before VCAT. While this does not constitute the same kind of relationship as would exist if WAG and Rozenbes were in business together, I regard it as relevant for the purchaser to know this connection and for the expert to reveal the connection to the court. To simply state that there was no previous relationship between the expert and the vendor is misleading at best, and false at worst.
137 Thirdly, Rozenbes has commented on Tiller’s second report in circumstances where he was physically present at the November 2015 inspection but, on his own testimony, was not considering matters in the closely-observed and analytical way which would have been appropriate if he were to prepare another report. Also, he made no contemporaneous note or record of any observations. Such records are a useful tool because they can provide a helpful source of information which reflects a person’s perceptions at a given time and are not affected by the vagaries of memory or other factors which might affect the later giving of evidence. Especially when Rozenbes did not conduct a careful inspection on 6 November 2015, and made no notes of the visit, it is appropriate in my view to be careful in accepting too readily his comments made about Tiller in his report dated 26 February 2015.
138 Fourthly, Rozenbes did not always explain his path of reasoning to make clear how his expertise and analysis led to his conclusion. I have referred before to the logical disconnect in the sentence at paragraph 98 above: it does not follow that because the affected area had been treated as far as was practicable, that the repair works have necessarily been carried out in a proper and workmanlike manner.
139 Fifthly, another aspect of Rozenbes’ reasoning which troubled me was his approach to assessing whether the repair work had been done in a proper and workmanlike manner. It is clear from his reports that he first inspected the property only after the vendor had performed the repair work, so he could not conduct a comparison based on his inspection before and after the repair. Rozenbes spoke only to the vendor’s representative, Gatt, about the repair work. He did not speak to anyone who actually performed the work or was physically present and observed the work being done. Hence, the knowledge Rozenbes has about the method of work and materials used is based, at least in part, on hearsay, assumption or guesswork. Rozenbes’ evidence did not address how someone can reach a conclusion about the quality of work done without knowing the method adopted and material used.
140 My concern is heightened by the fact that Rozenbes:
· did not consider whether the work was done by relevantly qualified tradespeople.
· on the November 2015 visit to the property with Tiller, was present because the vendor “wanted a body there while Mr Tiller was there”[36] but did not pay detailed attention to, or take detailed or any notes of, his (albeit limited) observations at the time.
· said his April 2015 report was concerned only with the conditions at the property on the day when he was there. He said he was not instructed or requested to consider whether or not any of the work would last a certain period of time. The expert did not explain how the quality of the repair work could be assessed without paying any regard to the issue of the time for which the repairs should be effective. It seems to be that, for example in relation to Item 7, just because on the day of the inspection Rozenbes could see no rust at the particular place he was told to examine, does not mean that the rust problem has been repaired in a proper and workmanlike manner. The problem could simply have been treated cosmetically or in a defective manner, but, because the inspection occurred soon after the work was done, insufficient time had elapsed to reveal the shortcomings in the repair work. Also, in relation to Item 9, Rozenbes agreed that he was given no information about who performed the work and whether they were appropriately qualified.
[50]Ibid at [48].
173 Where there is a breach of a non-essential term, the court must consider whether the breach goes to the root of the contract so that the innocent party is deprived of a substantial part of the benefit to which it was entitled under the contract. This assessment is determined primarily by the construction of the contract.[51]
[51]Koompahtoo Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at [54] – [55].
174 What was the bargain made by the parties in this case?
175 The contract used as its base the standard form contract of sale document for conveying Torrens law land in Victoria. To this document were added some special conditions which, though introduced at the request of the purchaser, were agreed to by the vendor. It is a well-accepted principle of interpretation that where there are special clauses introduced into an agreement which largely comprises standard form clauses, it will normally be appropriate to give greater weight to the specially negotiated clauses.[52]
[52]K Lewison and D Hughes, The Interpretation of Contracts in Australia (Thomson Reuters, 1st Edition 2012) at 7.04; Walker v Citigroup Global Markets Australia Pty Ltd (2006) 233 ALR 687 at [77].
176 The varied contract was finalised after Gatt, on behalf of the vendor, confirmed in writing that, in consideration of the purchaser not exercising its rights under special condition 3 to terminate the contract, the vendor undertook to carry out certain identified repair work at its expense and in a proper and workmanlike manner before settlement.
177 The varied contract identified in its terms certain matters which, when read objectively in the context of the whole agreement, and having regard to the context and purpose of the dealings between the parties, were plainly important:
· the Agreed Works – the nominated repairs listed in the McAleer report;
· timing of the repair work – the Agreed Works had to be completed before settlement;
· standard of repair work – the Agreed Works had to be completed to a proper and workmanlike standard. [53]
[53]And with respect to the work involved with special condition 4, to the purchaser’s satisfaction.
178 The meaning of the terms of a commercial contract is to be determined by what a reasonable business person would have understood those terms to mean. This requires a consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.[54] While the process of construction is ordinarily performed by reference to the contract alone, it may be necessary in identifying the commercial purpose or objects of a contract to understand the genesis of the transaction, the background and the context.[55] Likewise, it may be necessary to have recourse to events, circumstances and things external to the contract when there is a constructional choice.[56] In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd,[57] French CJ, Nettle and Gordon JJ said:[58]
[54]Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 325 ALR 188 at [47](ff).
[55]See the article Reynolds, D, Construction of contracts after Mount Bruce Mining v Wright Prospecting, (2016) 90 ALJ 190, where the author reconciles and explains the essential principles to be taken from the ten High Court judgments since 2000 which deal with the construction of contracts.
[56]Ibid.
[57](2015) 325 ALR 188.
[58]Ibid at [50].
“What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating.”
In the same case, Kiefel and Keane JJ referred to Codelfa Construction Pty Ltd v State Rail Authority of New South Wales[59] and said:[60]
[59](1982) 149 CLR 337.
[60]Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 325 ALR 188 at [108].
“Mason J, with whom Stephen and Wilson JJ agreed, accepted that there may be a need to have regard to the circumstances surrounding a commercial contract in order to construe its terms or to imply a further term. In the passages preceding what His Honour described as the “true rule” of construction, His Honour identified “mutually known facts” which may assist in understanding the meaning of a descriptive term or the “genesis” or “aim” of the transaction.”
They also referred to the judgment of French CJ, Hayne, Crennan and Kiefel JJ in Electricity Generation Corporation v Woodside Energy Limited[61] where they explained that a commercial contract should be construed by reference to the surrounding circumstances known to the parties and the commercial purposes or objects to be secured by the contract in order to avoid a result that could not have been intended.
[61](2014) 251 CLR 640 at [35].
179 In my view, a reasonable business person familiar with the genesis of the transaction, the aim or commercial purpose of the contract and the varied contract, together with the background and surrounding circumstances known to the parties would have understood that the matters set out in the varied contract were significant. The variation required the vendor to perform remedial works to a specified standard.
180 Part of the context for the varied contract was that the purchaser surrendered a significant unilateral right to terminate the agreement under special condition 3.3. In addition, the purchaser plainly wanted assurance from the vendor before settlement about the condition of the property which was to become his principal place of residence in 2 – 3 years.
181 The timing was important because the purchaser wanted the problems which were identified in McAleer’s report to be fixed before he settled the transaction. After the property was leased out over the Christmas 2014 holidays and sustained some resultant wear and tear, the purchaser also wanted other issues attended to (in addition to the Agreed Works) so that the property was in the same condition as it was at the time of sale. These tenancy-related issues, while important to the purchaser from a cosmetic viewpoint, did not have the same contractual significance as the terms of the varied contract and special condition 4.
182 The standard of repair workmanship was also important. The reference to “proper and workmanlike” has been considered in cases under the Domestic Building Contracts Act 1995 (Vic) and equivalent legislation interstate, but there is no single widely accepted definition. In Barton v Stiff,[62] Hargrave J noted that an obligation to complete work in a proper and workmanlike manner was similar to an obligation to act with reasonable care and skill. Justice Dixon in Stojanovski v Australian Dream Homes Pty Ltd[63] said, in the context of a building contract, that the fact of works being carried out in a proper and workmanlike manner would usually be fundamental to the owner and a failure to do so enlivened the power to serve a default notice.
[62][2006] VSC 307.
[63][2015] VSC 404 at 56.
183 That the purchaser put forward the variation in relation to the Agreed Works showed that these were important issues for it – otherwise the purchaser could simply walk away from the contract. The vendor opted to agree to the variation. This represented the vendor’s free choice. It was not forced or coerced to agree. If the vendor were not willing to undertake the repair work and address the issues raised by the purchaser, it should not have agreed to the variation but left the purchaser either to walk away or proceed with the contract in its original terms.
184 The purchaser contended that as a result of the variation, it was a condition of the varied contract that the vendor complete the Agreed Works in a proper and workmanlike manner before settlement. Further, by special condition 4, the vendor was to fix the balcony in a proper and workmanlike manner before settlement and to the satisfaction of the purchaser and this provision was a condition of the contract. In circumstances where the options were for the purchaser to walk away or the parties make a new varied contract which addressed the concerns of the purchaser, the reasonable business person could readily infer from the varied contract that the purchaser required the vendor to strictly perform its obligations in relation to the Agreed Works.
185 In the circumstances I find that the term regarding the vendor’s performance of the Agreed Works in a proper and workmanlike manner before settlement was a condition of the varied contract. In short, it was an essential promise which the varied contract and context showed was a term of such importance to the purchaser that he would not have entered into the varied contract unless he was assured of strict performance of that promise.
186 Although I do not need to decide this point, if the term about the Agreed Works were not a condition but a non-essential term, I consider that the vendor’s breach went to the root of the contract. This conclusionary description takes account of the nature of the contract and the relationship it creates, the nature of the term, the extent of the breach and the consequences of the breach for the innocent party. Buckley LJ in Dero-Wall International SA v Practitioners in Marketing Ltd[64] said that a breach of a term going to the root of a contract is a breach which deprives the injured party of a substantial part of the benefit to which it was entitled under the contract. A decision about such an alleged breach is determined primarily upon a construction of the contract. The High Court in Koompahtoo said that “a judgment as to the seriousness of the breach and the adequacy of damages as a remedy is made after considering the benefit to which the injured party is entitled under the contract”.[65]
[64][1971] 1 WLR 361,380.
[65]Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at [55].
187 A reasonable person reading the varied contract with a knowledge of the background and surrounding circumstances known to both purchaser and vendor, including the contract and the matters giving rise to the variation, could readily appreciate that the successful completion of the Agreed Works was a significant matter. In order for the purchaser not to walk away from the contract, the vendor agreed to complete the Agreed Works to a particular standard and by a particular time. In failing to do this, the vendor did not satisfy the purchaser’s expectations in an important respect – the agreement about the Agreed Works was critical to the creation of the varied contract. To that extent, the breach was serious. I do not consider that the purchaser should be confined to a claim for damages for breach. The purchaser should be entitled to terminate the varied contract.
188 The plaintiff also contended that the term regarding the completion of the Agreed Works in a proper and workmanlike manner before settlement was a term which went to the root of the contract.[66]
[66]Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at [54].
189 Another way in which the purchaser put its case on this point was to submit that the vendor repudiated the varied contract by failing to complete the Agreed Works before settlement in a proper and workmanlike manner, or at all. It submitted that the vendor’s conduct was such as to convey to a reasonable person in the situation of the purchaser renunciation of the varied contract as a whole or of a fundamental obligation under the varied contract. The purchaser referred to the decision of Bensons Fund Management v IMMS Financial Services Limited[67] in which the trial judge held there was no proper basis for a vendor to issue a rescission notice because:
[67][2008] VCC 858.
· the vendor, by asserting a default under the agreement when there was no proper basis for it, insisted upon performance of a different agreement from that entered into by the parties;
· it was conceded to be a clear example of repudiation when a party asserted without justification that the contract was at an end and the party was therefore freed from further performance of its obligations under the contract.
190 Here, the purchaser contended that the repudiatory conduct included:
· a failure to perform the Agreed Works, either at all, or in a proper and workmanlike manner;
· a failure to provide the purchaser with evidence, rather than mere assertion, that the Agreed Works had been performed to the standard specified in the varied contract;
· the vendor pressing for settlement when it was aware that it had not completed all the Agreed Works in a proper and workmanlike manner, or at all;
· the issuing of a rescission notice when there was no proper basis for the vendor to issue one.
191 In Koompahtoo, the plurality explained[68] that one sense in which the word repudiation is used is to denote conduct which evinces an intention no longer to be bound by the contract or to fulfil it only in a way substantially inconsistent with its obligations. It is not necessary to show an intention to repudiate. The issue is determined objectively by reference to the effect which the conduct of the party in breach would have on a reasonable person.
[68]Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at [44].
192 Again, I do not need to decide this point. However, if I am wrong regarding the purchaser’s argument about the term being a condition, I would nevertheless be inclined to accept the repudiation argument.
193 In the present case, the vendor’s conduct in relation to the Agreed Works was such that a reasonable person in the purchaser’s position could properly conclude from the varied contract and the vendor’s conduct that the vendor had not performed, and would not perform, an obligation of a fundamental or essential nature under the contract.
194 In my view, the vendor’s failure to undertake the repairs contemplated in the Agreed Works, especially Items 7, 9 and 21 in a proper and workmanlike manner before settlement was a significant failure. The vendor decided it had done enough to satisfy its obligations under the varied contract – even though it had plainly not performed all the Agreed Works. Moreover, the vendor was insisting that the purchaser settle on the varied contract notwithstanding the vendor’s failure to perform. To this extent, the vendor sought to enforce a contract that was different from what was agreed between the parties.
195 In the circumstances, I consider that the vendor’s conduct in refusing to comply with and be bound by the terms of the varied contract entitled the purchaser to accept the vendor’s repudiation, terminate the varied contract and recover the deposit. The purchaser did this by its letter dated 7 April 2015 or by commencing this proceeding in May 2015. Thus, the purchaser does not have to complete the contract and sue only for damages. The vendor’s breach was too serious in the context.
196 The final way in which the purchaser put its case in relation to the term regarding the Agreed Works was to contend that the obligation of the purchaser to pay the balance of the purchase price at settlement was dependent and contingent upon the vendor completing the Agreed Works. This was said to be the parties’ bargain as was apparent from the language of the varied contract which referred to the Agreed Works being completed prior to settlement in a proper and workmanlike manner.
197 In support of this proposition, the plaintiff relied upon the decision of the Queensland Court of Appeal in Jeppesons Road Pty Ltd v Di Domenico.[69] There, the appellant and respondents entered two interdependent contracts for the sale by the respondents to the appellant of two parcels of land at Toogum. One parcel included a tenanted caravan park. The due date for settlement was 19 January 2004. On the settlement day, the appellant did not tender the purchase price because its financiers failed to make the necessary funds available in time to settle the contracts that day. As a result, the respondents purported to terminate the contracts. The appellant brought an action for specific performance of the contracts. The appellant contended that the respondents were not entitled to rescind the caravan park contract because, at the time fixed for settlement, the respondents were not in a position to deliver to the appellant the attornment notices required under the terms of the contract to be given to the tenants of the caravan park.
[69][2005] QCA 391.
198 Each contract was in the standard form approved by the Real Estate Institute of Queensland and the Queensland Law Society for the sale of residential houses and land. Clause 5.1 provided that settlement must occur between 9am and 5pm on the settlement date. The critical clause in the appeal was clause 5.3(1)(d)(ii) which was in the following terms:
“In exchange for payment of the balance purchase price, the seller must deliver to the buyer at settlement:
…
(d) If there any tenancies:
…
(ii)A notice to each tenant advising of the sale in the form required by law;”
199 There was no dispute at trial that, at no time on settlement day did the respondents’ solicitors have the attornment notices required under clause 5.3(1)(d)(ii).
200 The Court of Appeal found that delivery of the attornment notices was a step which the respondents were bound to perform in order to trigger the appellant’s obligation to pay the price. Hence, an ability to deliver the notices was a precondition to the respondents being entitled to terminate the contract.
201 The Court of Appeal commented that whether or not clause 5.3(1)(d)(ii) was to be characterised as an “essential term” of the contract was a distraction from the real issue.[70] It said that the intent of the parties, as set out in the contract, was that the obligation to pay the purchase price would only arise on the satisfaction of each and every requirement of clause 5.3. Because this had not occurred by the time set for settlement, the respondents were not entitled to rescind on the basis that the purchase price had not been paid. The court unanimously allowed the appeal.
[70][2005] QCA 391 at 21.
202 I doubt that the facts of this case are sufficiently analogous to the present case to say that a similar approach is justified. In Jeppesons Road, much was made of the fact that, in terms, important obligations of the parties were concurrent and interdependent. Here, the purchaser is required to pay the balance at settlement and the vendor has agreed to perform the Agreed Works in a proper and workmanlike manner before settlement. However, the two obligations are not explicitly conditional, upon one another, in the same way as the obligations in Jeppesons Road. If it were enough that breach of the obligations of the kind in the present case could justifiably result in a party terminating a contract, then it would leave little if any scope for the operation of the condition/warranty distinction and the consequences which flow from the breach of those respective terms.
203 In summary, I find that the term in the varied contract to the effect that the vendor remedy or repair the Agreed Works before settlement in a proper and workmanlike manner at its expense was an essential term. Hence, the vendor’s breach of this term was a serious matter entitling the purchaser to be discharged from further performance and to sue for loss of the contract. Alternatively, if the term were not essential, its breach went to the root of the contract with the same outcome for the purchaser. As a further alternative, the vendor’s breach constituted repudiation of the varied contract and the purchaser accepted the same. However, I do not find that the purchaser’s reliance on concurrent or interdependent obligations as found in Jeppeson’s case was well-founded.
(d)Did the purchaser breach the varied contract by failing to settle in March 2015? If the answer is yes, was the vendor entitled to terminate the contract and claim damages?
204 Having regard to the matters already set out in the judgment, I find the purchaser did not breach the varied contract by not settling the sale. Accordingly, the vendor was not entitled to terminate the varied contract.
(e)What should happen to the deposit?
205 I am satisfied that the purchaser was entitled not to proceed with settlement under the varied contract but to terminate it. Accordingly, the contract is now at an end and the purchaser is entitled to a return of the deposit. This is the result at common law and pursuant to section 26(1)(b) of the Sale of Land Act 1962 (Vic) (“Sale of Land Act”). However, if I am wrong about that, I now consider what would happen if I had found it was the purchaser, and not the vendor, which breached the contract.
(f)If the purchaser breached the varied contract, was it entitled to recover the deposit as relief against forfeiture pursuant to section 49(2) of the PLA or otherwise?
206 Generally, if a purchaser defaults and does not remedy the default within any period of grace allowed, the vendor is entitled to terminate the contract for breach, retain the deposit, retain or resell the property and sue the defaulting purchaser for any additional damages where applicable.
207 In this case, the vendor’s right to retain the deposit moneys was said to be supported by:
· common law authority;
· general condition 28 of the varied contract;
· section 26 of the Sale of Land Act;
208 At common law, the position is conveniently summarised in the Queensland Court of Appeal decision of Phillips v Scotdale Pty Ltd,[71] where Keane JA delivered the judgment of the court stating:
“It has long been recognised that the essential characteristic of a deposit in a contract for the sale of land is that it is susceptible to being forfeited by a buyer to a seller upon the buyer’s breach. Its essential character is that of a payment guaranteed to the vendor in the event that the purchaser fails to complete the contract – Howe v Smith (1884) 27 Ch 89 at 95, 98, 101-102…”
[71][2008] QCA 127.
209 In the varied contract, the vendor’s rights in relation to the deposit are set out in general condition 28.4 which says:
“If the contract ends by a default notice given by the vendor:
(a)the deposit up to 10% of the price is forfeited to the vendor as the vendor’s absolute property, whether the deposit has been paid or not; and
(b)the vendor is entitled to possession of the property; and
(c)in addition to any other remedy, the vendor may within one year of the contract ending either:
(i)retain the property and sue for damages for breach of contract; or
(ii)resell the property in any manner and recover any deficiency in the price on the resale and any resulting expenses by way of liquidated damages; and
(d)the vendor may retain any part of the price paid until the vendor’s damages have been determined and may apply that money towards those damages; and
(e)any determination of the vendor’s damages must take into account the amount forfeited to the vendor”
Hence, the prima facie position is that the vendor is entitled to retain the deposit.
210 With respect to section 26 of the Sale of Land Act it provides that, in a transaction regarding the sale of land, where the vendor rescinds the contract as a result of default by the purchaser, the vendor is immediately entitled to be paid the deposit in his own right.
211 In addition to these provisions, the court should also consider section 49 of the Property Law Act which grants relief against forfeiture. A defaulting purchaser can seek the indulgence of the court under this provision to recover the deposit. Section 49(2) of the Property Law Act provides as follows:
“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”
212 Although the section states the discretion in broad terms, it has operated more narrowly in practice. In Poort v Development Underwriting (Victoria) Pty Ltd[72], Gillard J examined the authorities at some length and said:
“In Mallet v Jones [1959] VR 122, Dean and Smith JJ specifically stated that where a purchaser is in default and the contract provides for the forfeiture of the deposit, the court would require “exceptional circumstances” to justify departure from the agreed terms”
[72][1976] VR 779. The Full Court of the Supreme Court affirmed Gillard J’s decision in Poort v Development Underwriting (Victoria) Pty Ltd (No 2) [1977] VR 454.
213 His Honour went on to suggest that the court should consider the terms of the contract, the conduct of the parties, whether the vendor can be adequately compensated, and whether the amount of the deposit can be regarded as a mutually fair and reasonably proportioned security.
214 Other cases have included a consideration of whether the vendor was in any way responsible for the purchaser’s breach or otherwise acted in a manner fairly described as unconscionable.
215 The requirement for exceptional circumstances has been followed in subsequent cases such as Aussie Invest Corporation Pty Ltd v Pulcesia;[73] Putt v Perfect Builders Pty Ltd;[74] and Lockwood v PSP Investments Pty Ltd.[75] In the first of those cases, Dodds-Streeton J noted that the authorities indicated that although the court’s discretion under section 49 was unfettered, its exercise is “the exception rather than the rule” and would not be justified merely because the vendor would obtain a windfall.
[73](2005) 13 VR 168 at [322]-[324].
[74][2013] VSC 442 at [27].
[75][2013] VSC 10 at [50].
216 In Voumard Sale of Land,[76] the learned author says:
“… it has been decided in Victoria that exceptional circumstances must exist to justify the exercise of the statutory discretion and the purchaser must satisfy the court than an innocent vendor would not be injured by the exercise of its discretion. This discretion must be exercised having regard to all relevant considerations including the terms of the contract.”
[76]P N Wikramanayake SC, Voumard The Sale of Land (Thomson Reuters, 6th Edition 2016) at 19.28.
217 The purchaser in this case relied upon several matters to justify the return of the deposit under section 49(2). First, the plaintiff said it was not a wrongdoer to the extent that its non-completion of the contract (if found) was due to the reliance reasonably placed upon Tiller’s expert report. There, Tiller said that parts of the Agreed Works had not been done. Second, the purchaser submitted that the vendor had resold the property at a higher price than that obtained under the contract of sale. Finally, it contended that the amount of the deposit far exceeded the damages claimable by the vendor as a result of the breach.
218 I accept that the purchaser relied upon Tiller’s report. However, on the present hypothesis, the vendor did not breach the varied contract and the purchaser did. Even if the purchaser had a genuine but mistaken belief as to its entitlement to terminate the agreement based on Tiller’s advice, that fact of itself would not constitute a sufficient excuse to warrant return of the deposit.
219 Secondly, while the courts have on occasion taken into account the position where a vendor would derive a windfall by selling the property at a higher price and simultaneously retaining the deposit, there are no immutable rules which dictate the vendor must necessarily return the deposit. In any event, in the present context, I do not regard a sale price $20,000 greater than that obtained under the varied contract as a sufficiently large increase to constitute a windfall. The sale was about 5 months after the abortive settlement and the vendor did not have the settlement monies during that time.
220 Thirdly, while again I accept that, even on the vendor’s own case, the deposit moneys exceed by a substantial margin the vendor’s entitlement to damages, that is not a sufficiently strong factor to justify an order returning the deposit to the purchaser.
221 While some cases, mainly from England or New South Wales, suggest the court can attempt to adopt what it perceives to be the fairest course between the parties in deciding how to deal with the deposit, the test in this case is stricter. It seems that the court cannot simply return the balance of the deposit to the purchaser after compensating the vendor for damages suffered as a result of the breach simply because it seems generally fair.
222 I consider that I am bound by the Victorian authorities. I am not satisfied in the present case that there are exceptional circumstances of a kind sufficient to warrant depriving the vendor of the deposit moneys.
223 Because I do not consider the discretion under section 49(2) of the Property Law Act can be appropriately exercised in favour of the purchaser, I do not propose to examine the question of damages which might have been payable to the vendor as compensation for the breach of the varied contract.
Vendor’s criticisms of the purchaser
224 In addition to the matters already canvassed in these reasons, the vendor made several other criticisms of the purchaser.
225 First, in its submissions, the vendor contended that the Agreed Works were not major or objectively serious.[77] This submission is ambiguous. It could mean that the work itself was not extensive and, in that sense, was not major. It could also mean that it was not important to the parties to this particular contract. To the extent that there was evidence that the cost of the work undertaken was about $3,000 or more and the property sold later to another buyer for $1.84 million, I accept that the Agreed Works were not “major” in the sense of being very extensive and correspondingly expensive. However, that does not mean that, viewed objectively, the work was not serious or important for the parties. Given the circumstances in which the varied contract came into existence, I consider that the work was serious. The performance of the Agreed Works was the rationale for creating the varied contract – without it, the purchaser could and indicated that it probably would, have exercised its right under special condition 3.3 of the contract to walk away. The fact that the property was resold for $1.84 million might be relevant to the extent of remedial works required. But it is irrelevant for whether the Agreed Works were significant to the parties to the varied contract.
[77]At paragraph 53 of the defendant’s submissions.
226 Secondly, the vendor contended[78] that the purchaser’s case amounted to a proposition that the vendor was to perform the Agreed Works in such a complete way that there would be no need for any ongoing maintenance work in the future. This is an exaggeration which mischaracterises the purchaser’s case. The vendor acknowledged[79] that by the varied contract, it agreed to “attend to, rectify, remedy, repair or fix” in a proper and workmanlike manner those items in the McAleer report which constituted the Agreed Works. The vendor breached its obligations by either not performing parts of the Agreed Works at all or performing them in a way which was not proper and workmanlike. Tiller’s point in relation to Item 7 was that if the repair work had been completed to the requisite standard in March, it would not have been in such a poor state in November the same year. There was no necessary inference that the house would not need maintenance in the future. To that extent, the vendor sought to refute an argument the purchaser did not make.
[78]At paragraph 56 of the defendant’s submissions.
[79]At paragraph 21 of the defendant’s submissions.
227 Finally, the vendor contended that, after seeing the property in March 2015, the purchaser was concerned about the appearance of the property and was keen to find any grounds to avoid proceeding with the purchase. By implication, this was said to reflect the purchaser’s lack of bona fides. As a result, I understood the vendor to submit that the court should be sceptical of the purchaser’s witnesses and the genuineness of its complaints. The vendor referred to Curtain’s evidence where he said that Vassiliadis revealed in March 2015 that the purchaser would not accept fair wear and tear and that the hole in the kitchen bench was a deal breaker. I reject the vendor’s submissions for two reasons. First, while I have no reason to doubt Curtain, the comments by Vassiliadis were made before settlement was due. The purchaser’s solicitors subsequently sent a Transfer of Land form, statement of adjustments and other documents to the vendor’s solicitors on the basis that the settlement would take place. So, even assuming the comments were made, the purchaser’s subsequent actions were not consistent with them – rather, they were consistent with honouring the varied contract. Secondly, I regard the purchaser’s motivation or state of mind as largely irrelevant. If valid grounds existed for the purchaser to terminate the varied contract or to avoid its obligations in the future, then it was entitled to do so. If valid grounds did not exist, the purchaser would be in breach of the varied contract. The purchaser’s motivation or state of mind would not affect the existence of valid grounds. These grounds existed or not independently of the purchaser’s motivation or state of mind.
Conclusion
228 In summary, I find that the vendor breached the varied contract by failing to remedy or repair before settlement the Agreed Works in a proper and workmanlike manner. This was a breach of a condition. Alternatively, it was a breach which went to the root of the varied contract and/or constituted a repudiation of the varied contract. The purchaser was entitled to terminate the varied contract due to the breach or acceptance of the repudiation and to recover the deposit. Had I found that the purchaser breached the varied contract, I would not have granted relief against forfeiture pursuant to section 49 of the Property Law Act.
229 I shall hear the parties on the final form of orders and costs.
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