Waysone Pty Ltd v M Property Group Pty Ltd
[2015] VCC 1422
•8 September 2015
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION GENERAL LIST | Revised Not Restricted Suitable for Publication |
Case No. CI-14-05795
| WAYSONE PTY LTD | Plaintiff |
| v | |
| M PROPERTY GROUP PTY LTD | Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 17, 18, 19 August 2015 | |
DATE OF JUDGMENT: | 8 September 2015 | |
CASE MAY BE CITED AS: | Waysone Pty Ltd v M Property Group Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2015] VCC 1422 | |
REASONS FOR JUDGMENT
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Subject: Contract of Sale
Catchwords: Contract for sale of vacant lot for residential development; deposit paid; settlement subject to registration of plan of sub-division; right of parties to rescind; extension of settlement sought by defendant; plaintiff purported to rescind; settlement negotiations continued; plaintiff relying on earlier rescission on-sold property to 3rd party, sued defendant for breach of contract based on rescission, alternatively repudiation; defendant counterclaimed damages for breach on grounds of misrepresentation and misconduct; whether contract validly rescinded by plaintiff or repudiated by defendant; reasonableness of price on resale; calculation of damages
Legislation Cited: Competition and Consumer Act 2010; Sale of Land Act 1962;
Cases Cited:Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd [2014] VSC 57; Sargent v ASL Developments Ltd (1974) 131 CLR 634; Tropical Traders Ltd v Goonan (1964) 111 CLR 41; Inness v Waterson [2006] QCA 155; Shevill v Builders’ Licensing Board (1982) 149 CLR 620; Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; Chelmaness Pty Ltd v Tridalet Nominees Pty Ltd (1991) V ConvR 54-399; Holland v Wiltshire (1954) 90 CLR 409
Judgment: 1. The plaintiff’s claim for damages succeeds to the extent indicated. The counterclaim fails. 2. Within 14 days of this day, the parties must bring in short minutes to give effect to these reasons. 3. Costs reserved.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J. Harris | L.N. Christie & Co |
| For the Defendant | Mr A. Almosawi |
HIS HONOUR:
Background
1 This proceeding concerns a development site whose previous address was 930 and 940 Bridge Inn Road, Doreen. Doreen is a relatively newly established suburb to the north-east of Melbourne in the City of Whittlesea, adjacent to South Morang.
2 The plaintiff is Waysone Pty Ltd (“Waysone”), whose principal and director is a Mr Murphy. According to Mr Murphy, Waysone is a property developer and has carried on business as such for the last seven years. It bought an 8 acre site in Bridge Inn Road, Doreen, most of which he said was used for a commercial development, including a petrol station and a McDonalds outlet. The other 3½ acres were earmarked for residential development and included in a residential subdivision. One of the allotments described in the subdivision as Lot “B” was a “super lot” earmarked for more intense development than the rest. Lot “B” consisted of approximately 1 acre.
3 Following the grant of the planning permit for the residential subdivision, Waysone offered Lot B for sale through the agency of Ray White Epping. The agent dealing with the site was Mr Vic Sarov. Another agency operating in the Doreen area is known as Platinum Real Estate. Its principal is Mr Daniel Nikoloski. One of the other agents at Platinum is a Mr Mulovski. On 5 February 2011, Mr Nikoloski sent an email to Mr Sarov attaching an offer to purchase on behalf of the defendant, M Property Group Pty Ltd (“M Property Group”). The principal of the Group is Mr Alex Almosawi. The particulars of sale of the contract signed as an offer by Mr Almosawi on behalf of M Property Group included a sale price of $1,250,000 with a deposit of $62,500, representing 5 per cent of the price which was said to be payable “14 days after acceptance of offer”, leaving a balance of purchase price of $1,187,500. Settlement was to be made 180 days “from the date the vendor’s solicitor gives the purchaser written notice that the Plan of Subdivision has been approved by the Registrar [of Titles]”. Ultimately, the parties signed a contract in a somewhat different form. The deposit was increased to $80,000, apparently at the insistence of the vendor and, as a quid pro quo, two special conditions were inserted, one of which gave M Property Group the right to occupy the land “from title release for building purposes” and the second stated “Contract is subject to due diligence for (7) seven days from the day of sale”. The effect of this second special condition was to give M Property Group a seven day “cooling off” period to allow it to make whatever investigations it saw fit.
4 Mr Almosawi told me that the seven day period was used by M Property Group to conduct a feasibility study as to the design of some 23 townhouse units to be located on the proposed Lot B. Mr Almosawi rejected any suggestion that the seven days could have been or were in fact used to make inquiry as to planning issues with Whittlesea City Council, as responsible authority under the Whittlesea Planning Scheme. According to Mr Almosawi, it was impossible to get a straight answer from a municipal council on a subject such as that within seven days. Settlement was, as the offer provided, to be 180 days after the vendor’s solicitor gave the purchaser written notice of approval of the Plan of Subdivision. Special Condition 10.1 of the contract stated that it was subject to registration of a Plan of Subdivision by the Registrar of Titles within 18 months of the day of sale. Clause 10.2 provided that if the Plan of Subdivision was not approved within that timeframe, or its approval became impractical or impossible, either party was at liberty to rescind the contract if the party acted before registration of the Plan of Subdivision.
5 The contract had, as an annexure, a vendor statement which appeared in accordance with s32 of the Sale of Land Act 1962. This disclosed that the land was in a Residential 1 Zone and affected by the Whittlesea Planning Scheme, of which the Whittlesea City Council was the responsible authority. The statement also included the proposed Plan of Subdivision PS632417Q, which showed the land subdivided with some four subdivisional roads, Edelbrock Avenue which abutted the northern boundary of Lot B, Barron Drive which ran north/south and then swung at 90 degrees to the west. There was a short street known as Navarro Way and a still shorter street running north/south to the southern boundary of the sub-division known as Ardun Way.
6 Lot B was shown as consisting of some 3,730 square metres. There were some 23 individual residential lots ranging from 518 square metres down to 316 square metres. Lot C was shown as consisting of 1,811 square metres and Lot D consisted of 4,439 square metres with a number of reserves making up the balance of the land. The evidence did not disclose the ultimate fate of Lots C and D. The petrol station and McDonald’s outlet were not amongst the land comprised in this sub-division. The Contract of Sale is to be found in PCB 20-136.
7 The 18 month timeframe within which it was anticipated the plan of sub-division would be registered by the Registrar of Titles ended in August 2012 without registration having taken place. The effect of this was to give either party the ability to rescind the contract, that is, extricate itself from further liability.
8 During the opening of the case by plaintiff’s counsel, Mr Harris, drew attention to that entitlement. Mr Almosawi, who represented the defendant, said that exercise of that power by the defendant would have been impracticable at the time because of the large expenditure for architects and other consultant fees which it had incurred. I took this to be an indication that the defendant considered rescinding the contract following the failure to attain registration of the plan of sub-division within the 18 month period, but rejected the possibility after making an economic assessment and having regard to the expenditure it had already incurred.
9 However, when Mr Almosawi gave evidence he seemed to suggest that the defendant simply did not advert to the possibility of rescission. An email from him to selling agent, Mr Sarov, was put into evidence which stated:
“Hi Vic
Hope you are well mate.
Just an email letting you know we have intensions (sic) to rescind the contract for Lot B, 930 Bridge Inn Road, Doreen as we have passed the sunset clause.
There are bigger blocks for cheaper money on the market as we speak. Even with the architectural fees already spent, it’s still not worth it.
I have instructed my solicitors to send something over to the vendor’s solicitor.
Just a courtesy email to keep you in the loop.
Kind regards.” (Exhibit C)
10 The plaintiff’s solicitors sent a letter dated 13 February to the defendant’s solicitor stating:
“Plan of sub-division PS632417Q was registered at Land Victoria. We enclose copy of the Title allocation list for your information.”
11 The letter stated that settlement was therefore due on 12 August 2013.
12 Mr Les Christie of Christie & Co, the plaintiff’s solicitors, wrote to Collards, who were acting on behalf of the defendant on 1 August 2013, inviting Collards to submit the land transfer and adjustment statements “in readiness for settlement”. (PCB 239)
13 Collards replied, stating that the defendant would “be in a position to complete settlement in 30 days” and requesting an extension of settlement date to 13 September 2013. (PCB 240)
14 The same day, a further letter from Collards (PCB 241) stated that the defendant was “experiencing loan difficulties as the proposed lender requires pre-sales…”. This letter requested an extension of settlement by three months “penalty free”.
15 Mr Christie responded on the same day stating that no extension would be granted. (PCB 242) This was reiterated on 12 August. The letter concluded, “A notice of rescission shall be prepared and served”. (PCB 243)
16 The following day, a document styled “Rescission Notice” was served by registered post on the defendant. The breach alleged was “failure to pay the residue of $1,170,000” on the due date. The notice threatened exercise by the plaintiff of its “contractual and other rights” unless the breach was remedied, interest paid and legal costs of $605 inclusive of GST repaid within 14 days of service of the notice.
17 Within that period, Collards sent an email to Christie & Co of 23 August 2013 stating that the defendant would be in a position to settle on 30 September. It requested an extension of settlement date until 30 September.
18 Mr Christie responded in a letter dated 26 August, indicating that the plaintiff would extend settlement to 30 September on the basis that the extension was without prejudice to the notice of rescission and that penalty interest of 12 August to 30 September was paid together with the $605 costs relating to the rescission notice. This offer was said to be open until the close of business on 26 August. (PCB 248)
19 No settlement took place on 30 September and (PCB 249) Mr Christie then wrote to Collards indicating a willingness to extend settlement to 30 November 2013 subject to a number of conditions including a requirement that the extension was without prejudice to the rescission notice already served.
20 The defendant was to furnish a release of deposit under s27 of the Sale of Land Act by close of business 30 September 2013 and penalty interest would be levied from 12 August to 30 November. The legal costs were increased to $830. On 2 October, a facsimile letter from Collards (PCB 252) accepted the proposals put by Mr Christie “other than the deposit being released at this stage”.
21 Mr Christie responded in a letter of 3 October (PCB 253-4) rejecting the counteroffer. Mr Christie observed:
“Your client should note that the vendor has its own obligations to its lender. The extension of settlement has caused the vendor to incur holding costs and to vary original arrangements with its lender”.
22 Collards responded (PCB 255) the following day, accepting the stipulation relative to the deposit but asking for an extension of 90 days rather than the previously requested 60 days, remarking:
“This will provide out client with enough time to finish off the sales of its further subdivision lots. Our client is prepared to settle earlier should all the lots sell before the 90 days”.
23 Mr Christie responded in a letter headed “Without Prejudice Save as to Costs”, agreeing to extend settlement to 20 December 2013 and stipulating the form of deposit relief that should be provided. (PCB 256)
24 These terms were accepted by Collards in a letter of 8 October 2013. (PCB 257) A letter releasing the deposit was provided on the same day. (PCB 258)
25 Settlement did not take place on 20 December either. Collards wrote to Mr Christie on 17 December stating:
“Our client has pre-sold eight properties of the subdivision and the purchaser’s solicitors are currently holding the deposit monies.
We understand the plan of subdivision is in its final stages with the council as well.”
26 A further extension was sought. (PCB 261)
27 The following day, Mr Christie responded in a letter of 18 December 2013 offering two options. One entailed settling on 18 February 2014 with the defendant paying penalty interest to that date, together with land tax to 31 December 2013, a total of $84,453.91. The second option entailed settlement on 20 March 2014, which would include the same land tax but further interest up to the later date, making a total additional payment of $95,993.64. These amounts were to be paid by close of business 20 December 2013.
28 Collards responded on 20 December stating that, since the defendant was relying on sale proceeds to effect its payout, it could not make the required pre-payments. (PCB 264)
29 Mr Christie responded in a further letter headed “Without Prejudice Save as to Costs” dated 15 January 2014, suggesting that $84,453.91 should be included in the payout figure and should be paid, in any event, no later than 18 February 2014. (PCB 266)
30 By 29 January 2014 no response had been made. Mr Christie pressed for a response. The same day (PCB 268) Collard suggested a “round table conference with you and your clients”.
31 Mr Christie responded in a letter of 4 February 2014 agreeing to the conference “on a without prejudice basis”. His letter included a series of bullet points identifying the key issues from the plaintiff’s point of view, such as when could settlements take place and could settlements take place before the individual dwellings were erected.
32 On 16 June 2014 a new law firm, RJ Legal, was acting for the defendant and advised as follows:
“We are instructed by our client that it seeks to proceed with the Contract of Sale executed by the parties on 5 February 2011 subject to the following variations:
1. The Contract Price be amended to $750,000 of which a $80,000 deposit has been paid; and
2. Settlement take place within 60 days of the parties entering into a Deed of Variation.” (PCB 272)
33 Mr Christie responded in a letter dated 27 June 2014, again expressed to be “Without Prejudice save as to Costs”. That letter (PCB 273) included the following points:
“1. The Contract of Sale of Real Estate and subsequent Notice of Rescission will be observed.
2. Your client has forfeited the deposit.
3. Your client has received adequate and appropriate Notice in relation to the Breach of Contract and the subsequent Notice of Rescission.
4. That my clients have marketed the property through tendering process and on open market and intend to re-sell at the best available price.
5. We can advise that the current offers from prospective purchasers are well in excess of $750,000.”
34 There followed a further letter of 23 July 2014 from Mr Christie addressed to the defendant. It was a letter of demand but, perhaps, surprisingly headed “Without Prejudice save as to Costs”. The letter referred to the Contract of Sale and the rescission notice and alleged loss as follows:
“1. $430,000 being the difference between the purchase price as noted in the aforesaid Contract noting that the property has now sold for $820,000.
2. Agency fees in the sum of $25,000.
3. Conveyancing fees for both the attempted settlement with you and the actual settlement of the property totalling $3,800 for the first Contract which was rescinded and $1,700 for the subsequent conveyance.
4. Notice of Rescission fee in the sum of $605.
5. Holding fees relating to interest and fees paid tot eh NAB due to your non-preformance as follows:
12th of August 2013 to 3rd November 2014 $34,616.24
6. Note that interest will continue to accrue from the 3rd of November 2014 at 6.7330% or otherwise in accordance with the relevant interest rate charges by the NAB.
7. Minus deposit paid in the sum of $80,000.”
35 The letter demanded payment of $415,721.24 within 14 days, failing which a Writ would be issued out of this Court.
36 Meanwhile, on 26 June 2014, the plaintiff exchanged a Contract of Sale for the subject property now known as 5A Mulwala Drive, Doreen, with a purchaser company Red Moon Investment Pty Ltd (“Red Moon”) . Mr Murphy signed as director on behalf of the plaintiff. The purchaser company was controlled by a gentleman known to Mr Murphy only as “Hassan”. He said that this gentleman had previously worked at an accountancy firm next door to the office of Christie & Co.
37 Mr Christie was a shareholder in the plaintiff. Mr Christie and Mr Murphy had obtained shelf companies from the accountancy practice. Hassan had left the accountancy profession and taken up business as a small scale property developer, including building work on his own development. Mr Murphy said that he had placed the subject property with estate agency Lauder & Co, which he said specialised in the sale of vacant land.
38 Despite the assertion by Christie & Co in June 2014 that the marketing campaign was eliciting purchase offers substantially in excess of $750,000, Mr Murphy said that a tender process had brought offers of $560,000 and $640,000 respectively.
39 Following this disappointing outcome, Mr Murphy said he met Hassan at a coffee shop and Hassan offered to purchase the land for $750,000. Mr Murphy said that he negotiated an increase in the price to $820,000, which was embodied in the Contract of Sale. (PCB 138FF)
40 The sale to Red Moon was settled on 6 November 2014.
The present proceeding
41 Solicitors acting for the plaintiff issued the Writ commencing this proceeding on 21 November 2014. The Statement of Claim alleged that the contract for the sale of the subject property for $1,170,000 had been terminated for breach of the obligation to pay the outstanding balance of purchase price demanded by a default notice dated 13 August 2013. Damages were sought for breach of contract based on a $430,000 deficiency in price on resale and for the outlay of various estate agents’ fees, solicitors’ fees upon conveyancing and preparation of default notice, and $34,616.24 “holding feels and interest payable to National Australia Bank between 12 August 2013 and 3 November 2014”. Credit was given for the deposit of $80,000 and $415,721.24 by way of damages together with interest and costs was sought in the Prayer for Relief.
42 The defendant filed a Defence and Counterclaim. It referred to the special condition giving a power of rescission upon failure to obtain registration of the plan of sub-division within 18 months from the day of sale, noting that the 18 month deadline was not met, and said:
“By reason of the plan of sub-division being registered after the Approval Date, the Contract is rescinded in accordance with Special Condition 10.2, and accordingly, the defendant is entitled to the immediate return of the deposit in the sum of $80,000.”
43 Further, it was alleged that “on or about 24 January 2011” through its agent Mr Sarov, the plaintiff represented to the defendant that the subject land “was in a medium density residential area”. This representation was said to be both oral and in email correspondence. It was said that the defendant was thereby “induced into entering into the contract”.
44 This representation was said to be false, negligent and fraudulent “in that the land was in fact in a low density residential area”. The particulars there were said to derive from the defendant being advised:
“By representatives of the City of Whittlesea Council (and rejecting the defendant’s application for a planning permit for 23 residential properties allowed in a medium density area) that the land was in a low density residential area, and therefore, only 10 properties could be constructed on the land.”
45 Further, particulars were to be given prior to trial. Alternatively, it was said that misrepresentation executed misleading and deceptive conduct contrary to s18 of Schedule 2 of the Competition and Consumer Act 2010.
46 Therefore, it was said that the defendant was entitled to, and did, rescind the contract. It said that it suffered loss and damage seeking a return of the deposit of $80,000, $21,000 in legal fees paid to Collards, $93,500 for architectural plans, surveyors’ fees of $3,520, council’s fees of $3,000, loss of profit of $1 million. This damages claim was relied on as a set-off.
47 It was said that the failure to meet the deadline for registration of a plan of sub-division led to the contract’s being rescinded. Alternatively, misrepresentation and misleading conduct entitled the defendant to rescind. The default notice was said to be ineffective because either the contract had already been rescinded by the failure to request the plan and sub-division or because the misrepresentation or misleading and deceptive conduct brought about “or materially contributed to the event giving rise to the plaintiff’s alleged right of rescission”.
48 Even if the notice was said to be valid, it was contended that the plaintiff elected to affirm the contract and waived its right to rescind and was therefore estopped from relying upon the notice.
49 The resale, it was said, was made “under market value in order to achieve a sale within the required one year period” [in accordance with a default provision in the contract]. The pleading continued:
“The defendant requires strict proof of the market value of the land, as assessed by an independent valuer, at the time that the further contract was entered into”.
50 The pleading foreshadowed a joinder of Mr Sarov and/or Josdan-Bell Pty Ltd, trading as Ray White Epping. It appears that no such joinder has been made. There was a claim for an apportionment of liability under the Wrongs Act 1958.
51 By way of Counterclaim, the defendant sought a declaration that the default notice was invalid and an injunction restraining the defendant from relying on it, a declaration that the contract was rescinded in accordance with the Defence and Counterclaim of the defendant, and an order refunding the deposit and damages.
52 By way of Reply, the defendant alleged there was no right of contribution or any entitlement to treat the plaintiff’s claim as apportionable under the Wrongs Act.
53 At trial, by leave, the plaintiff’s claim was amended so as to allege that further or alternatively to the termination of the contract by operation of the notice served by the plaintiff in August 2013, if the contract was not so terminated, it was terminated by reason of repudiatory conduct on the part of the defendant constituted by the repeated failure to pay the balance of purchase price in the face of several extensions of time and the ultimate proposal to perform the contract only at a much reduced price.
Rescission of contract for delay in sub-division registration
54 The special condition giving the parties an entitlement to rescind the contract if the plan of sub-division was not registered within 18 months of the day of sale, is clear in its terms that it renders the contract voidable at the option of either party in the event of delay and registration. It does not automatically avoid the contract merely by reason of the delay.
55 Despite the correspondence from the defendant which flirted with the idea of rescission, it did not distinctly exercise the power to rescind.
56 Mr Almosawi did not contend that it had. This point was not relied upon at trial at all. For the sake of certainty, however, I record that I reject the contention in the Defence and Counterclaim that the defendant rescinded the contract based upon the delay and registration of the plan of sub-division.
Misrepresentation – misleading and deceptive conduct
57 The gravamen of the case advanced on behalf of the defendant by Mr Almosawi as to alleged misleading and deceptive conduct or misrepresentation was that Mr Sarov, the selling agent for the defendant, represented that the subject land was in a medium density area when the fact was that at the time of the contract it was not.
58 Mr Almosawi produced versions of the Garden Road Development Plan which was apparently approved by Whittlesea City Council pursuant to the Whittlesea Planning Scheme in 2010 and 2012. This plan, he said, placed the property in a low density area. Whatever might have happened thereafter to change this could not alter the fact, he said, that the land had been misrepresented at the time of sale.
59 According to the evidence, the defendant was engaged in some form of joint venture with Mr Nikolovski and Mr Mulovski of Platinum Real Estate. Mr Nikolovski and/or Mr Mulovski contributed part of the deposit on the property upon the basis that they would be repaid a premium at the conclusion of the development. Neither their original contribution nor the premium has, in the event, been paid to them.
60 Mr Almosawi, Mr Nikolovski and Mr Mulovski all gave evidence that Mr Sarov had described the subject property to them as being in a medium density area. Mr Sarov denied that he had said such a thing.
61 It does not appear that the expression “medium density” has a fixed meaning either under the Whittlesea Planning Scheme or in planning law in this State generally.
62 In support of his contention that the subject land was not medium density land at the relevant time, Mr Almosawi put into evidence Minutes from the meeting of the Whittlesea City Council on 17 April 2012, in which council was considering amendments to the Garden Road Development Plan.
63 According to the use adopted in these Minutes, medium density land use would entail allotments of 250 to 320 square metres with transitional density being designated as allotments between 320 to 500 square metres. What constitutes high, low or medium density in a particular neighbourhood must vary, having regard to the nature of the neighbourhood. What would be reckoned high density in inner suburban Melbourne would entail much smaller allotments than what would be regarded as high density in the countryside or on the edge of the metropolis in an area such as Doreen.
64 In my view, it is proper to be guided by the benchmark adopted by the responsible authority for planning affecting this subject property that an allotment under 300 square metres would be reckoned as medium density.
65 Indeed, in closing submissions, Mr Almosawi was ready to concede that 300 square metres is a benchmark generally adopted in planning in Victoria below which special permits are required for residential development which stipulates either the details of an actual residential structure or, at the very least, building envelopes.
66 An email was produced purporting to be from Mr Sarov describing the land as being in a medium density area. Mr Sarov said that he could find no record of having despatched such an email. With some hesitation, I proceed upon the footing that Mr Sarov did make the alleged representation that the land was comprised in a medium density area.
67 On 4 January 2013, Whittlesea City Council, as the responsible authority, issued a permit for the construction of 16 double-storey dwellings on the subject land. (PCB 230) A letter from Mr Huw Gerrard, dated 27 January 2011, on behalf of Whittlesea City Council to M Property Group, acknowledged receipt of a permit application for the construction of some 23 double-storey dwellings. No documentation was produced as to the outcome of the application, but I am prepared to infer that it was rejected and a scaled back proposal for some 16 units which was the most intensive development which Council was prepared to approve. Mr Almosawi told me that the approved proposal entailed sites of some 225 square metres, but he regarded a proper medium density outcome for the development as entailing units as small as 130 square metres. In his view, therefore, and it was M Property Group’s contention, that the land was not properly described as medium density at the time of sale and it did not become medium density land thereafter.
68 For reasons I have already given, I regard, at least in this neighbourhood, any approved development of units of less than 300 square metres as constituting a medium density development. I therefore reject the second part of Mr Almosawi’s submission on behalf of M Property Group. As at January 2013, the subject property plainly was properly described as medium density.
69 Mr Almosawi placed stress upon the planning status of the land as at the day of sale and therefore as at the day when I am prepared to accept the statement about medium density was made to M Property Group, viz 24 January 2011. Was the statement at that time either a misrepresentation or misleading and deceptive conduct?
70 The contract was subject to the registration of the Plan of Subdivision. If the Plan of Subdivision did not go through, the subject property would not even exist as a marketable parcel of land. The plain contemplation of setting aside this large site assessed under the old imperial system of measures by Mr Murphy at 1 acre was that it would be the subject of further subdivision in allotments smaller than the specific allotments catered for in the subdivision. That is, it was, as Mr Murphy described it, a super lot. It was earmarked for medium density development. Therefore, the smallest of the specifically created allotments was only just over 300 square metres and plainly the contemplation was that the allotments within the super lot would be smaller than that. The contract was not to be enforceable unless this Plan of Subdivision came into force. In my view, in those circumstances, therefore, there was no element of misleading and deceptive conduct or misrepresentation in describing the property as being medium density land, if this statement was in fact made. Plainly, there was an element of futurity in the statement. If a vendor asserts, at the time of entering into a contract, “I have the right to sell this land”, is he to be regarded as engaging in misrepresentational, misleading and deceptive conduct, because what he really means is that, as at the time he is called upon to make title under the contract, he will be able to convey a clear title by, for instance, completing a purchase, paying off a mortgage, obtaining probate of his late parents’ will, et cetera? In my view, the present situation is analogous to that one. It is artificial and unreasonable to focus in ascribing meaning to the alleged representation of medium density upon the day of sale, rather than the contemplated date of completion.
71 The Defence and Counterclaim, as I summarised it, refers to a 23 unit subdivision proposal only for the purpose of describing the circumstances in which it was said M Property Group was disabused of the belief that the property was “medium density” land. When Mr Almosawi, Mr Nicoloski and Mr Mulovski gave evidence at trial, however, they went further. They said not, only did Mr Sarov say that this was medium density land, but he gave them to understand that a 23 unit subdivision would be available. Mr Sarov denied making such a statement. He said that he would not make a prediction as to the number of units which would be allowed on a development site.
72 Resolving this dispute is difficult. On the one hand, I had much sympathy for the proposition put to Mr Sarov in cross-examination by Mr Almosawi that it was of the essence of marketing a development site to convince a prospective purchaser that it was valuable because of the number of units which could be constructed upon it. On the other hand, the fact that the professionally drawn Defence and Counterclaim makes no reference or allegation of representation by Mr Sarov as to a development entailing 23 units leaves me with some hesitation to accept his denial.
73 Even if I had been persuaded that this representation was made, I would not have seen it as entitling M Property Group to relief either by way of damages or otherwise in the circumstances. The Australian Consumer Law, by s18, prohibits misleading and deceptive conduct in terms similar to the old s52 of the Trade Practices Act 1974. Section 238 empowers a court in a proceeding to grant relief to a party that has suffered damage as a result of inter alia s18. The premise is that loss or damage has been suffered as a result of the contravention. In the case of common law or equitable relief for misrepresentation, it must be shown that the contract to be affected was induced by the misrepresentation and the Defence and Counterclaim so pleaded. Mr Almosawi conceded, at the outset of his final submissions on behalf of M Property Group in answer to questions from me, that he well knew that there were no “as of right” entitlements to carry out developments of residential units of 300 square metres or less. Developments of this type require specific permits from the relevant responsible authority, usually, as in the present case, the local municipal council. Mr Almosawi said that, on an important planning matter, it would be impossible to obtain a straight answer from a local council within seven days. He agreed that, whilst community groups criticise councils for being too compliant with developers’ proposals, in fact developers find them difficult to deal with and “picky”. Knowing all these things, even if Mr Sarov had said something like “You’re sure to get 23 units on this site”, Mr Almosawi could not have taken that literally. His knowledge of the matters just recited would indicate that a statement along these lines was, at worst, no more than hype or puffery and, at best, an example of unwarranted confidence. I reject the contention that a person of Mr Almosawi’s experience in the property industry, which he said extended over a couple of years, even although he is a relatively young man, would, in reality, have been induced to enter into a contract by the alleged statement as to 23 units or attach any genuine significance to it at all.
74 The defendant’s claim, based on misrepresentation or misleading and deceptive conduct, therefore fails.
Reasonableness of price on resale
75 Mr Almosawi made a sustained attack upon the propriety of the resale of the property to Red Moon. He said the deficiency in price was almost half a million dollars and such a precipitous fall in price in a period of only three years demonstrated, in itself, that the resale was not a bona fide arm’s length transaction.
76 Next, he drew attention to the personal connections between Mr Murphy and the principal of Red Moon. His acknowledgement that the deal originated from social contact between the two is acceptance that Red Moon’s principal had been an accountant at a practice next door to Christie & Co, the plaintiff’s solicitor and shareholder, and a lifelong friend of Mr Murphy. Further, he said that reference to the Trust Journal Ledger for this sale at PCB 282 showed that monies were drawn down from the deposit paid into trust forthwith. He submitted that this showed there was something unusual about the transaction and was also indicative of a breach by those involved of the terms of the Sale of Land Act 1962.
77 Mr Almosawi was also critical of the failure to produce documentation from the estate agents, Lauder, which was said to have conducted a tender process. He said that the resale contracted in June 2014 occurred too early for the tender process to have been completed, as Mr Murphy alleged in his evidence.
78 In resolving these issues, we are confronted with a number of the unsatisfactory aspects of the trial in this proceeding. The evidence was, at best, perfunctory. Neither party financed the provision of a transcript of the evidence. Given that there was an allegation of a sale at an undervalue, one might have expected that the plaintiff would have called a representative from the estate agency which was said to have conducted the tender process. At the very least, it might have produced that agency’s file. Mr Almosawi sought an adjournment so that that file could be produced. Having regard to the experience that I have had in attempting to resume part-heard matters in this list the effect of my granting such an adjournment would have been to send the matter off part-heard for a substantial period of time. For this reason and based upon the fact that the defendant had ample time to take steps, by way of third party discovery subpoena and so forth, to obtain production of those documents, I declined the adjournment. As to the obligations of a reselling vendor, Mr Almosawi referred me to a paper entitled “Sale of Land: Enforcing Rights and Remedies” issued under the sponsorship of Foley’s List and authored by Mr Philip Barton of counsel. According to paragraph 14 of Mr Barton’s paper, the Supreme Court in Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd [2014] VSC 57 (Garde J) held that there was an implied obligation upon the vendor to act reasonably in the exercise of its power of sale; but a purchaser seeking relief for a breach of that obligation was obliged to show that the vendor failed to mitigate or did not act reasonably in the resale process and, as a result, a higher price for the resale of the property was not achieved. This formulation places the burden of proof upon the purchaser. Mr Almosawi called no market evidence which would indicate that the resale was at an undervalue. M Property Group could have secured production of the agent’s file, but did not take proper steps before the last day of the trial to raise the issue. Mr Murphy gave his evidence in a straightforward manner and impressed me as a truthful witness. Based upon this and what I saw as a failure on the part of M Property Group to discharge the burden of proof which lay upon it, I accept Mr Murphy’s evidence as to the conduct of the tender process and the circumstances in which he negotiated a resale of the subject property. I reject the contention that the resale was at an undervalue. The market for development land is volatile. The lapse between the two contracts of sale was over three years. It is far from incredible that the market may have moved adversely in the manner which it appears to have done here. This element of the defence of M Property Group also fails. In seeking to revise the contract in June 2014 M Property Group assessed the land’s value at $750,000 - $80,000 less than the resale negotiated by Waysone.
79 I am fortified in making these findings by the consideration that at no stage before the commencement of this proceeding does it seem that M Property Group complained about the alleged misrepresentations or misleading and deceptive conduct. When the Rescission Notice was served and M Property Group was being pressed to settle and threatened with the consequences of alleged default, had it been misled or relied upon a misrepresentation or misrepresentations, as now alleged, it would have been expected to make a complaint and rely upon the complaint as a reason why it should be afforded concession by Waysone Pty Ltd. No such complaints were made. This is supportive of the view that M Property Group was not misled and deceived or induced by misrepresentation to enter into the contract.
80 I am unable to attach significance to the apparent immediate release of the deposit in the resale transaction. According to the proven evidence, Waysone was delayed by many months in the receipt of the sale monies which it was expecting. It would be unsurprising that there was some arrangement, either specifically in accordance with statute or a simple consensual arrangement, that it would seek to receive money as soon as possible. Mr Murphy readily conceded that the principal of Red Moon, Hassan, was a friend or acquaintance of his and connected with lifetime friends of his, such as Mr Christie. If all that had happened was that there had been a private sale to such a person, I agree that there would be substantial grounds to doubt the propriety of the resale as setting a proper basis for an award of damages to Waysone. However, I accept the evidence of Mr Murphy that the land was offered to the market generally in a tender process previously. The sale to Red Moon was at a price substantially in excess of the best that that process was able to offer.
The Rescission Notice
81 As I understand the case for M Property Group, it does not attack the form or service of the Rescission Notice. Rather, it says that what happened after its service constituted an election on Waysone’s part to treat the Contract of Sale as still in force. Once that election was made, it is contended Waysone could not thereafter rely upon the effectiveness of the notice.
82 In Sargent v ASL Developments Ltd (1974) 131 CLR 634, a contract for the sale of land included a clause entitling a party to rescind the contract if it were established that the land was affected by a Planning Scheme not disclosed in a schedule to the contract. This state of affairs was known to the vendors at the time that the contract was entered into. Thereafter, they purported to rescind the contract in reliance on the special condition. The High Court affirmed the decision of the trial judge that, in placing reliance upon the contract by receiving interest payments and instalments of purchase price, the vendors had elected to affirm the contract and could not thereafter rescind it. Stephen J said:
“15.It is not by mere delay that it is said that the right of rescission was lost but rather by conduct evincing an intention to keep the contracts on foot at a time when the alternative, but inconsistent, right of rescission had become available. The vendors having two inconsistent rights were, it is said, bound to elect as between them and having elected to treat the contracts as subsisting they were thereafter bound by their election and thus forfeited their right of rescission. (at p641)
16.The doctrine of election as between two inconsistent legal rights is well established but certain of is features are not without their obscurities. The doctrine only applies if the rights are inconsistent the one with the other and it is this concurrent existence of inconsistent sets of rights which explains the doctrine; because they are inconsistent neither one may be enjoyed without the extinction of the other and that extinction confers upon the elector the benefit of enjoying the other, a benefit denied to him so long as both remained in existence. As Williston points out (Contracts, 3rd ed., vol. 5, par. 683) the doctrine is not out of harmony with the general rule that a binding surrender of a right requires a sealed release or consideration; by surrendering one right the elector thereby, gains an advantage not previously enjoyed, the ability to exercise to the full the other, inconsistent right. (at p641)” (1974) 131 CLR 634, 641
Mason J, as he then was, said:
“27.Essential to the making of an election is communication to the party affected by words or conduct of the choice thereby made and it is accepted that once an election is made it cannot be retracted (R. v. Paulson (1921) a AC 271, at p284; Tropical Traders Ltd. v. Goonan (1964) 111 CLR 41, at p55). No doubt this rule has been adopted in the interests of certainty and because it has been thought to be fair as between the parties that the person affected is entitled to know where he stands and that the person electing should not have the opportunity of changing his election and subjecting his adversary to different obligations. (at p656)
28.A person confronted with a choice between the exercise of alternative and inconsistent rights is not bound to elect at once. He may keep the question open, so long as he does not affirm the contract or continuance of the estate and so long as the delay does not cause prejudice to the other side. An election takes place when the conduct of the party is such that it would be justifiable only if an election had been made one way or the other (Tropical Traders Ltd. v. Goonan (1964) 111 CLR 41). So, words or conduct which do not constitute the exercise of a right conferred by or under a contract and merely involve a recognition of the contract may not amount to an election to affirm the contract. (at p656)” (1974) 131 CLR 634, 655‒6
83 As I understood Mr Almosawi, he contended that the extended discussions and negotiation, which ensued following the service of the notice, entailed Waysone treating the contract as being still in force and thereby electing to affirm it.
84 Mr Harris, on behalf of Waysone, submitted that there had been no election to affirm. He referred to an earlier decision of the High Court in Tropical Traders Ltd v Goonan (1964) 111 CLR 41, which was referred to by Mason J (as he then was) in Sargent’s case. In the Tropical Traders case, the balance of purchase price in a sale of land was payable on Sunday 6 January 1963, effectively, therefore, on 7 January. On that day, an instalment of interest was paid with no principal sum. A representative of the purchaser said that it could not make the final instalment and asked for an extension of three months. An extension was given until 14 January, subject to payment of an extra £50 for additional interest. On 15 January, the vendor’s solicitor gave notice of rescission of the contract and forfeiture of the deposit. The question for the High Court was whether the rescission was effective and the Court determined that the rescission was effective. Kitto J said:
“Any act done by it and consistent only with the continuance of the contract on foot the law would hold to constitute an election against rescinding; and an election once made could not be retracted. But the appellant was not bound to elect at once. It might keep the question open, so long as it did nothing to affirm the contract and so long as the respondents' position was not prejudiced in consequence of the delay.”
Mr Harris referred to a decision of Queensland Court of Appeal in Inness v Waterson [2006] QCA 155 as another example of the giving of time not being regarded as an election to affirm where the Court followed Goonan’s case.
85 Mr Harris relied upon conditions GC27, 28.1 and 28.2 of the contract between the parties which were quoted in paragraph 3 of the Statement of Claim as justifying the process adopted by the plaintiff. He also referred to clause 16.1 of the general conditions which made time of the essence of the contract. He submitted, in accordance with the reasoning in Goonan’s case, that nothing was done which led to time’s ceasing to be of the essence.
86 The issue is finely balanced. No particular event was identified by Mr Almosawi as constituting the affirmation. There was nothing as clear, for instance, as the receipt of interest or instalments as in Sargent’s case. The plaintiff vendor did press for penalty interest and, indeed, for pre-payments of interest, but the stipulation of additional interest as a quid pro quo for an extension does not, it seems, in itself, constitute an election to affirm since the vendor in Goonan’s case sought further interest, but was not regarded as having elected to affirm the contract thereby.
87 Mr Harris drew attention to the pains taken in the correspondence to reserve the effectiveness of the Rescission Notice.
88 Nevertheless, the delays and the complexity of the toing and froing, the multiple extensions of time and so forth put this contract in a vastly different arena from the single extension of a few short days, which was under debate in Goonan’s case. Moreover, as time wore on, the reservation of rights under the Rescission Notice became less unambiguous and correspondence was emanating under the somewhat perplexing heading “Without Prejudice save as to Costs”, whatever that might mean in the context of an impasse in a conveyancing transaction. With some hesitation, I conclude that, taken as a whole, the extent and complexity of the negotiations were inconsistent with the notice’s simply remaining in force over so long a period. In those circumstances, the notice cannot be regarded as having operated to terminate the contract. I note that the process of negotiation commenced before the expiry of the Rescission Notice. It was the defendant’s case, which I accept with hesitation, that the effect was that the notice never operated and became effective to terminate the contract.
Repudiation
89 Mr Harris’ fall-back position on behalf of the plaintiff was to say that if the Rescission Notice was not, in the events that occurred, effective to terminate the contract, then M Proprerty Group by its conduct repudiated the contract, which repudiation was accepted by Waysone. I gave him leave to amend the Statement of Claim in the course of trial on the basis that, without filing a further document, the defendant would be deemed to deny the repudiation allegation.
90 In Shevill v Builders’ Licensing Board (1982) 149 CLR 620, 625-6, Gibbs CJ said:
“…a contract may be repudiated if one party renounces his liabilities under it - if he evinces an intention no longer to be bound by the contract … or shows that he intends to fufil the contract only in a manner substantially inconsistent with his obligations and not in any other way.”
In Shevill’s case, the Court held that a tenant had not repudiated a real estate lease as a result of some rental defaults, and notwithstanding the landlord’s entitlement by written notice in those circumstances to terminate the lease, which it had done. In contrast, in Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17, the Court held that a tenant had repudiated a lease where it went into default and, for an extended period of time, made no rental payments and denied liability on spurious grounds. Mr Almosawi referred me to an online service, “By Lawyers, For Lawyers”, authored by Mr Russell Cocks and the chapter on rescission and repudiation. According to this service, “Mere lateness of payment, even if it occurs on more than one occasion, or frequently, does not of itself necessarily lead to a conclusion that the purchaser does not intend to be bound”. The author referred to Chelmaness Pty Ltd v Tridalet Nominees Pty Ltd (1991) V ConvR 54-399. In that case, as in this, the primary matter relied on by the vendor was a Notice of Rescission. Marks J held, on the facts before him, that the notice was not effective. As a “fall-back” position, the vendor contended that the purchaser had, by its acts and omissions, repudiated the contract. Marks J said that he had been referred to a number of cases and—
“Each case turns on its own [facts]. It is my opinion that the mere lateness of a payment, even if it occurs on more than one occasion, or frequently, does not itself necessarily lead to the conclusion that the purchaser does not intend to be bound by the contract. In this case, the contract price was $2,000,000. The purchaser paid some $650,000 or more towards it, although this amount might have included some interest. This is a fact which is to be taken into account with all the others and including whether the purchaser repudiated the contract.
Repudiation may be inferred from conduct including statements of intention. There is no evidence that the purchaser made any statement of intention not to be bound. Insofar as there is evidence of communication between the parties, it is to the opposite purport. The purchaser sought an extension of time for payment and in fact tendered the payment which, according to my findings, was in accordance with the notice.”
His Honour found no repudiation.
91 The present case stands in contrast to Chelmaness. Here, the only payments made by the defendant were a 5 per cent deposit. This is a stark contrast from Chelmaness. There was certainly no tender at any time.
92 Moreover, in Holland v Wiltshire (1954) 90 CLR 409, 420, where again, in the context of a conveyancing transaction, the High Court of Australia found that there had been a repudiation. Kitto J said:
“Delay or neglect without more, if continued long enough, may amount to a refusal ; and the other party is not bound to allow an unlimited time after the day named for performance of the contract.” (1954) 90 CLR 409, 420
93 As to statements of intention, it will be recalled that solicitors acting for M Property Group wrote in June 2014 suggesting that the contract of sale be completed with the price reduced to $750,000. This clearly evinced an intention to perform the contract only in a manner drastically inconsistent with its actual terms and could be regarded as repudiatory. On the other hand, as Mr Almosawi noted, by that time the plaintiff had already commenced marketing the property. In Holland v Wiltshire, the High Court regarded the marketing of the subject property for resale as constituting an acceptance of repudiation. (1954) 90 CLR 409, 416 per Dixon CJ. If, in marketing the property, Waysone had already accepted a repudiation, then the repudiatory conduct in question must be found earlier than June 2014. In my view, the inordinate delay constituted that repudiation in accordance with the principles stated by Kitto J in Holland v Wiltshire. The contract was validly determined by Waysone for repudiation.
Damages
94 The damages awarded for repudiation represent the compensation to the plaintiff for the loss of the bargain. The basic element of loss for Waysone in the non-performance of the original contract is a loss on resale of some $450,000. The damages are to be assessed as at the date of breach. There may be room for debate as to when the relevant breach occurred: whether at expiry of the August 2013 notice or later at the date of acceptance of repudiation. There is no evidence that the market value of the land varied over this period. As at June 2014 the purchaser’s proposal suggests the value was as low as $750,000. Next, there was a claim for interest at the rate of 4 per cent above the rate set under s2 of the Penalty Interest Rates Act under Special Condition 16.2A up to 6 November 2014. This is a rate stipulated by a special condition in the contract as payable on amounts due but unpaid under the terms of the contract. This claim is not, in my view, properly made as on a claim for damages for repudiation. It applies to liquidated sums payable under the contract. In my view, the proper interest allowable in these circumstances is interest upon an amount of damages in accordance with the relevant provisions of the Supreme Court Act 1986 and a recalculation will have to be done. The effect would appear to be to delete the 4 percent margin above the rate fixed under the Penalty Interest Rates Act. The costs of advertising the property through Lauders Real Estate are also properly to be allowed. The $27,500 commission, which was paid to Ray White on the initial sale, is not properly to be allowed as damages. The damages are to compensate the plaintiff, Waysone Pty Ltd, for loss of its bargain with M Property Group. If M Property Group had performed, then the commission would have been properly payable and would have represented a cost to Waysone of deriving the benefit under the original contract. The legal costs are recoverable as damages relative to the abortive sale to the defendant as are those costs which pertain to the default, only. The costs which would have been incurred simply upon the regular completion of the contract would not be recoverable for the same reason that the costs by way of commission on the sale would not be recoverable.
Disposition
95 The plaintiff’s claim for damages succeeds to the extent indicated. The counterclaim fails.
96 Within 14 days of this day, the parties must bring in short minutes to give effect to these reasons.
97 I have heard no argument as to costs and so I will reserve costs.
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