Wollert Epping Developments Pty Ltd v Batten

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

PROPERTY LIST

S ECI 2019 00992

WOLLERT EPPING DEVELOPMENTS PTY LTD (ACN 625 963 028)	Plaintiff
v
BRUCE ANDREW BATTEN	First Defendant
COLLEEN MAREE BATTEN	Second Defendant

---

JUDGE:	Derham AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	11 June 2019
DATE OF JUDGMENT:	11 September 2019
CASE MAY BE CITED AS:	Wollert Epping Developments Pty Ltd v Batten
MEDIUM NEUTRAL CITATION:	[2019] VSC 618

---

PROPERTY LAW – Sale of land – Application under s 49(1) Property Law Act 1958 – Whether vendors in breach of warranties that they are in possession of the land and whether at settlement will be the holder of an unencumbered estate in fee simple in the land – Whether questions hypothetical or pointless – Interaction between warranties and identity clause – Difference between description of land in Certificate of Title and occupation of land – Encroachment by boundary fence – Koadlow v Bolland (1997) 1 VR 632; Fullers’ Theatres Ltd v Musgrove (1923) 31 CLR 524; Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1; Flight v Booth (1834) 1 Bing (NC) 370; 131 ER 1160.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr A Rollnik	HWL Ebsworth Lawyers
For the Defendant	Mr A Morrison	Fernando Zito & Associates

TABLE OF CONTENTS

Introduction......................................................................................................................................... 1

The facts............................................................................................................................................... 1

The Contract........................................................................................................................................ 1

The questions...................................................................................................................................... 1

Submissions........................................................................................................................................ 1

Is declaratory relief available in the form sought?....................................................................... 1

Submissions................................................................................................................................... 1
Consideration................................................................................................................................ 1

What interest did the Vendors agree to sell?................................................................................. 1

Submissions................................................................................................................................... 1
Consideration................................................................................................................................ 1

What is the effect of the identity clause (GC 3)?........................................................................... 1

Submissions................................................................................................................................... 1
Consideration................................................................................................................................ 1

What effect does the s 27 notice have on the Purchaser’s rights?.............................................. 1

Conclusion........................................................................................................................................... 1

HIS HONOUR:

Introduction

The plaintiff commenced this proceeding by originating motion seeking answers to several questions pursuant to s 49 of the Property Law Act 1958 (Vic) (PLA), the ‘vendor and purchaser summons’ provision.[1]
[1]Originating Motion filed on 7 March 2019. The hearing and determination of the proceeding was referred to me by order of Justice John Dixon made on 6 June 2019.

The defendants (Vendors) are the registered proprietors of land with the address 405 Epping Road, Wollert, Victoria (Property). By contract of sale dated 1 June 2018 the Vendors agreed to sell to the plaintiff (Purchaser) the Property, comprising the land in Certificate of Title Volume 10262 Folio 462 (Land) and ‘the goods’[2] to the Purchaser for the price of $6,800,000 (Contract). On 5 June 2018,[3] the Purchaser paid a deposit of $400,000. A further (additional) deposit of $500,000 is due to be paid on 31 October 2019.[4] Settlement is due to take place on 28 January 2020 at which time the balance of the purchase price of $5,900,000 is payable.
[2]The goods sold with the land are intended by the contract to be listed or in an attached schedule. There are no goods listed and no attached schedule.
[3]Affidavit of Colleen Maree Batten sworn 8 April 2019, [12] (Batten affidavit).
[4]Affidavit of Scott Watson sworn 6 March 2019, exhibit SW-2 (First Watson affidavit).

The Vendors live on the Property, which comprises about 58.1 hectares of farmland, but which under the Whittlesea Planning Scheme is included in an Urban Growth Zone. A strip of land along the southern boundary of the Land in the Certificate of Title is in possession of the Vendors’ neighbours, owing to a misaligned fence. The neighbours claim possessory rights to the strip of land. The parties are in dispute as to the interpretation of the Contract and the Purchaser seeks answers to questions whether three warranties in the Contract have been breached by the Vendors and for consequential declarations.

The facts

There is little dispute between the parties about the facts of this case. The Purchaser is a subsidiary of CFMG Land Limited (CFMG), a listed property developer, and sought to acquire the Property to develop it into a residential housing estate.[5]
[5]Defendants’ Outline of Submissions, 13 May 2019, 1 [2]; First Watson affidavit, [7].

In 2017, the parties began negotiating regarding the sale of the Property.[6] A contract for sale of the Land was signed by CFMG on the 25 January 2018 and the defendants on 26 January 2018.[7] The sale price of the land was $6.8 Million with two deposit tranches of $680,000.[8]
[6]Batten affidavit, [4].
[7]Ibid [5].
[8]Ibid, [7].

The contract of sale included a due diligence clause, which is special condition 11.[9] The original period for due diligence in the clause was 60 days after the day of sale.[10] This was extended to 5pm on 24 April 2018, and then 5pm on 8 May 2018 at the request of CFMG.[11]
[9]Ibid [6].
[10]Ibid; Affidavit of Ferdinand Zito sworn 4 June 2019, exhibit FZ-1, 17.
[11]Batten affidavit, [6].

By email dated 8 May 2018, CFMG rescinded the contract in reliance on the due diligence clause.[12] By the same email, however, CFMG requested that a fresh contract of sale be entered into by the plaintiff as purchaser, for the same price but with a lower deposit in two tranches of $340,000.[13] The Vendors refused this offer, and as a result on 15 May 2018 CFMG wrote to the Vendors stating that the contract was terminated.[14]
[12]Ibid [7], exhibit CMB-5.
[13]Ibid.
[14]Ibid [8], exhibit CMB-6.

CFMG then had further discussions relating to the deposit structure directly with the Vendors and informed their solicitors by email on 18 May 2018 that terms had been agreed. The Corporate Counsel of CFMG sent with the email another contract prepared by him at the same sale price, but with increased deposit tranches of $400,000 payable two days after the contract date and $500,000 on 31 October 2019.[15] The Vendors accepted this offer, and the Contract was signed by the Purchaser on 31 May 2018 and the Vendors on 1 June 2018.[16] Settlement under this Contract is due on 28 January 2020.[17]
[15]Ibid [9], exhibit CMB-7.
[16]Ibid [10]; First Watson affidavit, exhibit SW-2.
[17]First Watson affidavit, exhibit SW-2, 3.

On 31 May 2018, the day on which the Purchaser signed the Contract, it also signed a deposit release form purportedly in accordance with s 27 of the Sale of Land Act 1962 (Vic) (s 27 Notice).[18] This was provided to the Vendors with the signed Contract.
[18]Batten affidavit, [11], exhibit CMB-8.

The initial deposit tranche of $400,000 was paid on about 5 June 2018.[19] Shortly afterwards, the Purchaser engaged a surveyor to survey the Property, and to prepare a surveyor’s diagram summarising the results of the survey and inspection of the Property including the location of the title boundary and the surrounding fencing.[20]
[19]Batten affidavit, [12].
[20]First Watson affidavit, [10].

The survey was completed on 28 August 2018.[21] Mr Watson deposed that certain matters came to his attention in November 2018 regarding the survey. Specifically, that on the southern boundary of the Land, the fence is located inside the Land’s title boundary, resulting in the neighbour’s property at 395 Epping Road, Wollert encroaching on the title of the Land (the encroachment).[22] In addition, the Vendors point out that the survey also shows that the fences on the north and west boundaries are also out of alignment, but in the case of those boundaries the fences encroach on the neighbours’ lands resulting in a possible gain of land.[23] According to the Vendors’ submissions, the fences appear to be in excess of 15 years of age.[24]
[21]First Watson affidavit, [11]; see also exhibit SW-5.
[22]First Watson affidavit, [12]-[14]; see also exhibits SW-5, SW-6.
[23]The gain on the north boundary is about 503.5 m² according to the Vendors and 490 m² according to the Purchaser. The gain on the west boundary is 34.5 m² according to the Vendors and 35 m² according to the Purchaser. On the south, the encroachment results in a loss of 535.3 m² according to the Vendors and 507 m² according to the Purchaser.
[24]Defendants’ Outline of Submissions, 13 May 2019, [5]. The relevance of this is, of course, that the limitation period for the recovery of possession of land is 15 years: Limitation of Actions Act 1958 (Vic), s 8.

The encroachment was identified by the Purchaser as a part of the application to the Whittlesea Council for development approval.[25] Upon discovery of the encroachment CMFG’s Corporate Counsel, Mr Jeff Hall, was instructed to contact the Vendors’ solicitor to notify them of the encroachment and request that they take steps to re-align the farm fence with the title boundary.[26] The Purchaser’s Corporate Counsel asserted that unless the realignment of the fence with the title boundary was attended to expeditiously there was a real likelihood that their development application would be prejudiced or delayed by the boundary issue.[27]
[25]First Watson affidavit, exhibit SW-7.
[26]First Watson affidavit, [16]-[17], exhibit SW-7.
[27]First Watson affidavit, exhibit SW-7.

Then followed a debate by correspondence as to who was responsible to deal with the encroachment. In December 2018, the Purchaser suggested that the only way the situation could be remedied would be if the fence was re-aligned or the Vendors obtained statutory declarations from the neighbouring owners to confirm they will not make an adverse possession claim over the encroachment.[28] The Vendors refused to do this.[29] The neighbouring owners have indicated that they intend to assert their possessory rights over the encroachment.[30]
[28]First Watson affidavit, [16]-[17], exhibit SW-7.
[29]First Watson affidavit, exhibit SW-7, SW-9.
[30]First Watson affidavit, exhibit SW-8, SW-15.

Between November 2018 and February 2019 there was further correspondence between the parties about whether the Vendors were in breach of warranties in the Contract and the consequences of any such breach.[31] The Vendors acknowledged they were not in possession of the encroachment, but considered that they were not required to be in possession of it nor required to take steps to do so.[32]
[31]See First Watson affidavit, exhibit SW-7 to exhibit SW-9.
[32]First Watson affidavit, exhibit SW-7, SW-9.

On 25 February 2019, CFMG’s lawyers wrote to the neighbouring owners asking whether they intended to claim and/or assert their possessory rights to the encroachment.[33] On 4 March 2019, the lawyers representing the neighbouring owners responded that their clients intended to assert their possessory rights.[34]
[33]First Watson affidavit, 4 [28].
[34]First Watson affidavit, 4 [34], exhibit SW-15.

The Purchaser’s lawyers stated in the course of the correspondence that the Vendors’ actions had and was causing their client loss and damage.[35]
[35]First Watson affidavit, exhibit SW-7.

The Contract

The Contract was prepared by JMH Legal of the same address as CFMG in Fortitude Valley, Queensland.[36] The Contract purports to be in a standard form approved by the Law Institute of Victoria Ltd. The first part of the Contract includes, under the heading Contract of Sale of Real Estate:

Part 1 of the form of contract published by the Law Institute of Victoria Limited and the Real Estate Institute of Victoria Ltd.

[36]Presumably the firm bears the initials of the Corporate Counsel of CFMG, Mr Jeff Hall.

The General Conditions bear the notation:

Part 2 being Form 2 prescribed by the Estate Agents (Contracts) Regulations 2008.

The Estate Agents (Contracts) Regulations 2008 (Vic) prescribed standard forms of contract for the purposes of s 53A of the Estate Agents Act 1980 (Vic), that is for use by agents or agents’ representatives. In the case of a contract of sale of real estate, the form comprised Form 1 and Form 2 in the Schedule to the regulations. Form 1 was Part 1 of the standard form of contract and contained what are usually described as the execution or signature page and the particulars of sale (Particulars of Sale). The Particulars of Sale contain the names of the parties, their agents, solicitors or conveyancers, the property sold, title particulars, price, deposit, date of sale and of settlement and other matters. Prescribed Form 2 is Part 2 of the standard form of contract and sets out the General Conditions of contract.[37] The General Conditions in this Contract are the prescribed General Conditions whilst the execution page and Particulars of Sale are a variation of Part 1 of prescribed Form 1.
[37]The contracts regulations were revoked on 11 August 2018 by virtue of s 5 of the Subordinate Legislation Act 1994 (Vic). There is now no form of contract prescribed by regulation.

After the cover sheet of the Contract,[38] the execution page is the first page of the Contract. Under the heading Contract of Sale of Real Estate, the following is written:
[38]Which has the names of the parties, the property address and the name of the law firm that prepared the Contract, JMH Legal.

Property address 405 Epping Road, Wollert 3750
The vendor agrees to sell and the purchaser agrees to buy the property, being the land and the goods, for the price and on the terms set out in this contract.
The terms of this contract are contained in the –
·Particulars of sale; and
·Special conditions, if any; and
·General conditions

In that order of priority.

On the second page of the Contract, headed ‘Particulars of Sale’, after listing details of the Estate Agent, Vendors and Purchaser, details of the Land are included. These are:

Land (general conditions 3 and 9)[39]
[39]GC 3 is set out below. GC 9 concerns general law land and is not applicable.
The land is described in the table below

Certificate of Title reference	Being lot	On plan
Volume 10262 Folio 462	2	PS341902E

OR described in the copy of the Register Search Statement and the document or part document referred to as the diagram location in the Register Search Statement, as attached to the section 32 statement if no title or plan references are recorded in the table above or as described in the section 32 statement if the land is general law land.
The land includes all improvements and fixtures.

Immediately following this, over the page, is the following:

Property address
The address of the land is: 405 Epping Road, Wollert 3750. (Emphasis added)
Goods sold with the land (general condition 2.3(f) (list or attach schedule)

Amongst the General Conditions (GC) in the Contract are the following terms:

2. Vendor warranties
2.1 …
2.2The warranties in general conditions 2.3 and 2.4 replace the purchaser’s right to make requisitions and inquiries.

2.3 The vendor warrants that the vendor:
…
(c)is in possession of the land, either personally or through a tenant; and

…
(e)will at settlement be the holder of an unencumbered estate in fee simple in the land;

2.5The warranties in general conditions 2.3 and 2.4 are subject to any contrary provisions in this contract and disclosures in the section 32 statement required to be given by the vendor under section 32 of the Sale of Land Act 1962 in accordance with Division 2 of Part II of that Act.

3. Identity of the land
3.1An omission or mistake in the description of the property or any deficiency in the area, description or measurements of the land does not invalidate the sale.
3.2The purchaser may not:
(a)make any objection or claim for compensation for any alleged misdescription of the property or any deficiency in its area or measurements; or
(b)require the vendor to amend title or pay any cost of amending title.

10.      Settlement
10.1     At settlement
(a)       the purchaser must pay the balance; and
(b)       the vendor must:
(i)do all things necessary to enable the purchaser to become the registered proprietor of the land; and
(ii)give either vacant possession or receipt of rents and profits in accordance with the particulars of sale.

12. Stakeholding
12.1 The deposit must be released to the vendor if:
(a)the vendor provides particulars, to the satisfaction of the purchaser, that either-
(i)there are not debts secured against the property;
(ii)if there are any debts, the total amount of those debts does not exceed 80% of the sale price;

(b)at least 28 days have elapsed since the particulars were given to the purchaser under paragraph (a); and
(c)all conditions of section 27 of the Sale of Land Act 1962 have been satisfied.

12.2The stakeholder must pay the deposit and any interest to the party entitled when the deposit is released, the contract is settled, or the contract is ended.
12.3The stakeholder may pay the deposit and any interest into court if it is reasonable to do so.
12.4Where the purchaser is deemed by section 27(7) of the Sale of Land Act 1962 to have given the deposit release authorisation referred to in section 27(1) the purchaser is also deemed to have accepted title in the absence of any prior express objection to title.[40]
[40]GC 12.4 is added by Special condition 1A of the Contract, which is headed ‘Acceptance of Title’.

The questions

The originating motions seeks answers to three questions pursuant to s 49(1) of the PLA, in the circumstances outlined in the First Watson affidavit, in respect of the Contract:

Are the Vendors:

(a) in breach of the warranty given in Clause 2.3(c) of the General Conditions of the Contract that they are in possession of the land, either personally or through a tenant?

(b) in breach of the warranty given in Clause 2.3(e) of the General Conditions of the Contract that they will at settlement be the holder of an unencumbered estate in fee simple in the Land?

(c) in anticipatory breach of the warranty given in, or the obligation that arises from, Clause 10.1(b) of the General Conditions of the Contract that requires the vendor at settlement to give vacant possession of the land?

The originating motion then seeks that, if any of the above questions are answered ‘Yes’, the court make orders pursuant to s 49(1) of the PLA declaring that the Vendors are in breach of those provisions.

Submissions

Because of the encroachment along the south boundary of the Land, the Purchaser submits that the Vendors:[41]
[41]Plaintiff’s Written Outline of Submission, 6 May 2019, [39].

(a) are in breach of GC 2.3(c) of the Contract on the basis that they are unable to warrant that they are in possession of the whole of the Land;

(b) are in breach of GC 2.3(e) of the Contract on the basis that they are unable to warrant that at settlement they will be the holder of an unencumbered estate in fee simple in the Land; and

(c) will at settlement be in breach of GC 10.1(b) of the Contract because they will not be able to give vacant possession of the Land at that time.

The Purchaser contends that in order to comply with the warranties the Vendors must take action prior to settlement to have the south boundary fence moved so that it aligns with the title boundary, and for the neighbouring owners to expressly forego any adverse possession claim, (which the defendants have refused to do).[42]
[42]Plaintiff’s Written Outline of Submission, 6 May 2019, [15].

The balance of the Purchaser’s submissions deals with contentions raised by the Vendors as to the proper construction of the Contract, the interaction between the warranties relied upon and other terms and the operation of the s 27 Notice. I will deal with them under the head of the issues raised by the Vendors referred to below.

The Vendors contended in their submissions that the declarations sought by Purchaser raise 5 issues for determination:

(a) Is declaratory relief available in the form sought?

(b) What interest did the Vendors agree to sell?

(c) What is the effect of the identity clause (GC 3)?

(d) What effect does the s 27 notice have on the Purchaser’s rights?

(e) What is the consequence of a breach of GC 2.3(c), 2.3(e) and 10.1?

These issues are a convenient vehicle for the determination of the questions raised in the originating motion and I will consider each in turn.

Is declaratory relief available in the form sought?
Submissions

The Vendors submit that the Purchaser’s application seeks declarations that the Vendors are, or will be, in breach of warranty unless the misalignment of the south boundary fence is rectified. The Purchaser has not, however, sought either rescission of the Contract or damages for its breach. This raises a preliminary question as to whether the declarations sought are merely hypothetical without producing real consequences for the parties. The Vendors further contend:

(a) a court should not be asked to advise parties of their rights under a hypothetical state of facts, or to give advisory opinions or hypothetical decisions the effectiveness of which depends on matters which remain to be determined in the future;[43]

(b) a court should not advise a party which has not yet terminated an agreement whether it is entitled to do so.[44]Without expression of the consequences of breach, any declaratory judgment will be academic only and ought to be refused.

[43]Swift Australian Co (Pty) Ltd v South British Insurance Co Ltd [1970] VR 368, 369.

[44]Sanderson Computers Pty Ltd v Urica Library Systems BV (1998) 44 NSWLR 73, 80 (Sheller JA, with whom Mason P and Powell JA agreed), citing Galaxy Communications Pty Ltd v Paramount Films of Australia Inc (Court of Appeal, 27 March 1998, unreported).

The Purchaser submits that it is open to, and appropriate for, the court to answer the questions and make the declaration because:

(a) the controversy in this case is not hypothetical and the facts which give rise to the controversy are not in dispute, there is no factual controversy. The decision cited by the Vendors, Swift Australian Co Pty Ltd v South British Insurance Co Ltd[45] is distinguishable;
[45][1970] VR 368, 369.

(b) the court can determine, on the facts, whether the defendants are in breach of their obligations under the Contract and no hypothetical considerations arise;

(c) section 36 of the Supreme Court Act 1986 (Vic) provides that a proceeding is not open to objection on the ground that a merely declaratory judgment is sought, and the Court may make binding declarations of right without granting consequential relief;

(d) in the field of property law, declaratory relief is frequently resorted to in order to determine vendor and purchaser questions; and such declarations are particularly apt to abort lengthy and expensive litigation;[46]

(e) the jurisdiction to grant declaratory relief has been described as a ‘large and most useful jurisdiction’[47] which even extends to declaring that ‘conduct which has not yet taken place will not be in breach of a contract or a law’.[48]

[46]R Meagher, D Heydon and M Leeming, Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (LexisNexis Australia, 4^th ed, 2002) 618.

[47]Commonwealth v Sterling Nicholas Duty Free Pty Ltd (1972) 126 CLR 297, 305 (Barwick CJ).

[48]Ibid.

Consideration

It is well to recall the legislative source of the vendor and purchaser summons, s 49 of the PLA:[49]
[49]The context in which the vendor and purchaser summons was introduced included the distinction between a matter that had to be dealt with in Court and a matter that could be dealt with in Chambers, and the use of a summary procedure dependent on proof of matters by evidence on affidavit. The distinction between Court and Chambers was abolished in Victoria in 1986.

Applications to the Court by vendor and purchaser
A vendor or purchaser of any interest in land, or their representatives respectively, may apply to the Court, in respect of any requisitions or objections, or any claim for compensation, or any other question arising out of or connected with the contract (not being a question affecting the existence or validity of the contract), and the Court may make such order upon the application as to the Court may appear just, and may order how and by whom all or any of the costs of and incident to the application are to be borne and paid.

The object of s 49 of the PLA is to enable a party to obtain a decision of the Court upon some point arising under a contract of sale of land in a summary way instead of being compelled to institute a suit for specific performance.[50] The words of exception in parenthesis in the section, ‘not being a question affecting the existence or validity of the contract’, refer to that existence or validity at its inception.[51] Moreover, the words of exception do not prevent the Court determining the validity of a notice of rescission and thus whether the contract is enforceable, or has ceased to exist or be binding.[52]
[50]Re Hargreaves & Thompson’s Contract (1886) 32 Ch D 454, 459; Ventura v Ventura [2018] VSC 485, [20].
[51]Re Sneesby & Ades & Bowes’ Contract [1919] VLR 497, 504 (Cussen J); Nowak v Linton [1960] WAR 2, 3 (Virtue J); Putt v Perfect Builders Pty Ltd [2013] VSC 442 [21]; Ventura v Ventura [2018] VSC 485, [20].
[52]Re Jackson and Woodburn’s Contract (1887) 37 Ch D 44; Re Stone & Saville’s Contract [1962] 1 WLR 460, affirmed Re Stone and Saville’s Contract [1963] 1 WLR 163; Drayton v Graham [1923] VLR 549, 552; Ventura v Ventura [2018] VSC 485, [20].

The following principles about the scope of the Court’s jurisdiction, and the consequential relief available, under s 49(1) of the PLA have been recognised:[53]
[53]Ten Boundary Street South Melbourne Pty Ltd v Ivanhoe Project Pty Ltd [2016] VSC 755 [3]; NGL Properties Pty Ltd v Harlington Pty Ltd [1979] VR 92, 100; Ventura v Ventura [2018] VSC 485, [21].

(a) The Court may determine any short point of law or construction arising on the abstract, contract or requisitions;

(b) However, this procedure is not intended to enable the Court to summarily resolve disputed questions of fact; and cannot be used to determine claims for specific performance or rescission;

(c) The section empowers the Court to make such order as appears just, which enables the Court to give relief which is the ordinary consequence of the decision of the point submitted to it. However, such an application cannot be treated as a claim for damages.

The source of the declarations power of the Court is both statutory and inherent. The Supreme Court Act 1986 (Vic), s 36 provides:

A proceeding is not open to objection on the ground that a merely declaratory judgment is sought, and the Court may make binding declarations of right without granting consequential relief.

The court’s jurisdiction to grant a declaration is a very wide one and, where it is a question of defining the rights of two parties, is almost unlimited; that is limited only by the discretion of the Court.[54] Nevertheless, as the plurality of the High Court said in Ainsworth v Criminal Justice Commission:[55]

It is now accepted that superior courts have inherent power to grant declaratory relief. It is a discretionary power which “[i]t is neither possible nor desirable to fetter ... by laying down rules as to the manner of its exercise.” However, it is confined by the considerations which mark out the boundaries of judicial power. Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions. The person seeking relief must have “a real interest” and relief will not be granted if the question “is purely hypothetical”, if relief is “claimed in relation to circumstances that [have] not occurred and might never happen” or if “the Court’s declaration will produce no foreseeable consequences for the parties”. (citations omitted)

[54]Hanson v Radcliffe Urban District Council [1922] 2 Ch 490, 507; Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421, 435.

[55](1992) 175 CLR 564, 581-2 (Mason CJ, Dawson, Toohey and Gaudron JJ) (Ainsworth).

In this case there is a real controversy between the parties, regarding the construction of various terms in the Contract. They each have a real interest in the outcome of the construction of the Contract, in that it will determine from a practical perspective which of them has responsibility for dealing with the adverse possession claim on the south boundary of the land.

However the questions asked are almost rhetorical, in that it is admitted that the Vendors are not in possession of the encroachment and they propose to do nothing about it because they contend that under the Contract they are not bound to do so. The real question is what, if anything, flows from breaches of the provisions the subject of the questions?

As I noted on the day of the hearing, answering the questions and making, or not making, a declaration is a useful form of remedy in this instance as it can determine who is responsible for dealing with the strip of land that is in dispute, assuming the neighbouring owners continue to claim title to the encroachment by adverse possession between now and the date for completion of the purchase.[56]
[56]Transcript of Proceedings, Wollert Epping Developments Pty Ltd v Batten (Supreme Court of Victoria, S ECI 2019 00992, Derham AsJ, 11 June 2019) 92 (Transcript).

In relation to the questions:

(a) whether the Vendors are in breach of GC 2.3(e) of the Contract on the basis that they are unable to warrant that at settlement they will be the holder of an unencumbered estate in fee simple in the Land;

(b) whether the Vendors will at settlement be in breach of GC 10.1(b) of the Contract because they will not be able to give vacant possession of the Land at that time,

there is an element of hypothesis, in that the questions involve an assumption that the neighbouring owners will continue to claim title to the encroachment by adverse possession right down to the date for completion of the Contract and that the Vendors will continue in the meantime to contend that it is not their responsibility under the Contract to deal with the issue.

In my opinion the declaratory relief sought is not hypothetical in the relevant sense. But without putting any breaches in the context of the other provisions of the Contract so as to determine what flows from those breaches, then the questions and declaration are pointless, producing no real consequences for the parties, and will likely lead to further disputation.

The substantive point of the questions raised by the Purchaser is, it seems to me, to determine as between Vendors and Purchaser whether breaches of the relevant provisions are actionable so that it can be seen who bears the risk under the Contract of the encroachment and therefore who is responsible for dealing with the neighbouring owners; and to do so both for the purposes of the development application made to the local Council and completion of the Contract at settlement.

Whether the Purchaser has a remedy for the postulated breaches, that is whether they are actionable, depends on the interaction between the warranties in GC 2 that are relied on and GC 10.1(b), on the one hand, and GC 3 on the other. I propose to deal with the application on this basis. I do so in part on the basis of the power given by s 49 of the PLA to ‘make such order upon the application as to the Court may appear just.’

What interest did the Vendors agree to sell?

This question is better expressed as what is the subject matter of the sale, the land in the Certificate of Title or the land at the address of the property enclosed by the fences. That turns on whether the definition of the land in the Contract describes what is contained in the Certificate of Title or the physical property itself. The answer to this question rests on interpretation of various sections of the Contract.

Submissions

The Purchaser submitted that the interest in land sold was the land identified in the Certificate of Title.[57] The Purchaser relied on the language of the Contract, particularly on the first page of the Contract which is outlined below, to show that what was sold as the property was ‘the land’ and ‘the goods’.[58] As such the whole of what was sold was the land in the Certificate of Title and the chattels on that land.[59]
[57]Transcript 13-4.
[58]Transcript 15.
[59]Transcript 17.

The Vendors submitted that the interest in the land sold was ambiguous, because the Particulars of Sale do not clearly define the word ‘land’. The execution page refers to the sale of the property, being the land and the goods. This distinction between the property (the subject of sale) and the land and the goods (as constituent parts of the property) is preserved throughout the Contract. The Contract refers to the land both by reference to the Certificate of Title and by reference to the property address

What exactly is meant by the expression the land is therefore very relevant as it defines the boundary limits of what the Vendors agreed to transfer. This specific form of the standard Particulars of Sale was introduced on 1 March 2012[60] and was preserved in the 1 October 2014 version which the parties employed.[61] The original 28 September 2008 version was, it is submitted, clearer on this question as it did not include a separate reference to the property address.[62]
[60]Estate Agents (Contracts) Amendment Regulations 2011, reg 5 (which commenced on 1 March 2012).
[61]Estate Agents (Contracts) Regulations 2008, form 1 (as at 1 October 2014).
[62]Estate Agents (Contracts) Regulations 2008, form 1 (as at 28 September 2008).

Other parts of the Contract provide some assistance. The cover pages for the Contract and the Vendor’s Statement refer to the Property and the Land respectively by the street address and not the title folio number, indicating an intention that the physical boundaries are the relevant defining feature. Against this, however, is the inclusion of a register extract for the Certificate of Title in the Vendor’s Statement, which points towards the title boundaries being paramount.[63]
[63]First Watson affidavit, exhibit SW-2.

There is no case law that bears directly on the construction of this form of contract. The following cases were submitted as instances of varying constructions:

(a) In Abraham v Mallon, it was held that what was physically available for sale may be relevant.[64] This is consistent with the ‘true rule’ as to the use of extrinsic evidence as an interpretive aid in the event of ambiguity in a written document;[65]

(b) In Buckley v DRK, it was held that ‘what the parties agreed to sell and buy was a property that was described essentially in visual terms, and which had been inspected visually’, rather than the land in the Certificate of Title;[66]

(c) In Koadlow v Bolland[67] and Burgess v Kingston,[68] on the other hand, it was found to be the land in the Certificate of Title which was to be sold.

[64]Abraham v Mallon (1975) 1 BPR 97,012, 5 (Holland J): “…whilst the words chosen by the parties to describe the property sold must primarily determine the subject matter of the sale, a court, in interpreting the words used, is not bound to disregard what the vendor had for sale, ie what was physically there for sale”.

[65]Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 352 (Mason J).

[66]Buckley v DRK [1993] ANZ ConvR 423 (Teague J).

[67]Koadlow v Bolland [1997] 1 VR 633 (Brooking JA, Phillips and Charles JJA agreeing) (Koadlow).

[68]Burgess v Kingston (Supreme Court of Victoria, 19 November 1982, unreported); (1982) V Con VR 54-067.

The Vendors submitted that having regard to the ambiguity in the meaning of land in the Contract, it is open to the Court to conclude that what the parties looked at visually was what was sold. This is particularly so in light of the earlier contract of sale entered into but terminated pursuant to the due diligence clause.

Consideration

The construction of a contract is to be determined objectively, and in the case of a commercial contract it is necessary to ask what a reasonable business person would have understood the terms to mean. The approach which should be taken to the construction of commercial contracts was summarised by the High Court in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd[69] to the following effect:
[69](2015) 256 CLR 104, 116-17, [46]-[50].

(a) The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose;[70]
[70]Ibid [46].

(b) In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require 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;[71]
[71]Ibid [47].

(c) Ordinarily, this process of construction is possible by reference to the contract alone. If an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning;[72]
[72]Ibid [48].

(d) However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding of the genesis of the transaction, the background, the context and the market in which the parties are operating. It may be necessary in determining the proper construction where there is a constructional choice;[73]

(e) Each of the events, circumstances and things external to the contract to which recourse may be had is objective. 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. What is inadmissible is evidence of the parties’ statements and actions reflecting their actual intentions and expectations;[74]

(f) Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption that the parties intended to produce a commercial result. Put another way, a commercial contract should be construed so as to avoid it making commercial nonsense or working commercial inconvenience.[75]

[73]Ibid [49].

[74]Ibid [50].

[75]Ibid [51].

In my opinion, the interest that was sold is not ambiguous. What was sold in this Contract was the land described in the Certificate of Title. This is clear, from looking at the term I have inserted at paragraph [20], ‘the purchaser agrees to buy the property, being the land and the goods.’ This term clearly defines the property as having two elements: the land and the goods. Turning to the Particulars of Sale, which is the part of the Contract that is of the highest priority, the land is described in a table as the land contained in Certificate of Title Volume 10262 and Folio 462. The alternative description of the land is only used if there is no title or plan reference in the table (see above [21]).

There are various references to the property address on the front, first and third pages of the Contract, but this does not give rise to any ambiguity in the meaning of land in the Particulars of Sale. Noting the address of the property on the front page of the Contract does not inform what interest in land has been sold, only its location. Setting out the property address on the first page of the Contract does not define the subject matter of the sale as the next term does:

The vendor agrees to sell and the purchaser agrees to buy the property, being the land and the goods, for the price and on the terms set out in this contract.

Similarly, the property address contained in the Particulars of Sale notes that it is the address of the land. The Contract does not say, ‘for the purposes of the contract, the property address is the land.’ It is clear from the Particulars of Sale under the heading ‘Land’ that the subject matter of the sale is the land described by reference to the title particulars in the table.

This is also supported by the commercial purpose or objects to be secured by the Contract. The Land is former farming land now zoned for urban growth. The plaintiff is a subsidiary of a developer of land. The Vendors’ Statement given under s 32 of the SLA, even though not formerly a part of the Contract,[76] identifies the land in the body of the Statement by reference to its title and ‘diagram location’ being the plan of subdivision of which it is part, showing the boundaries of the land in the title.[77] It is objectively the commercial purpose of the Purchaser to buy and the Vendors to sell the land in the title.
[76]The more common form of execution page of the contract of sale includes the vendor statement as a component of the contract, but not in this case. However, GC 2.5 brings disclosures made in the vendors’ statement into potential contention.
[77]First Watson affidavit, exhibit SW-2, vendor statement p.4 and attached register search statement and diagram location.

I therefore conclude that the subject matter of the Contract was the land described by reference to the Certificate of Title Volume 10262 Folio 462, being lot 2 on PS341902E, which necessarily means in this case the land with the boundaries in the title plan.

What is the effect of the identity clause (GC 3)?
Submissions

There is no dispute that Vendors are not, and were not at the date of sale, in possession of all the land in the Certificate of Title, either personally or through a tenant. That is because the neighbouring owners to the south are in possession of the encroachment (as I have called it).

Thus prima facie there is a breach of the warranty in GC 2.3(c) and there will be a breach of GC 2.3(e) if at settlement the title passed is subject to the neighbouring owners putative adverse possession claim over the encroachment.[78] Similarly, there will be a breach of GC 10.1(b)(ii) if at settlement vacant possession of the encroachment is not given.
[78]Both parties agreed for the purposes of this proceeding that such a claim amounted to an encumbrance so that the title would not be unencumbered estate in fees simple.

But the Vendors contend that is not the end of the matter because of the operation of other terms of the Contract, particularly GC 3. In other words, a mere declaration that the Vendors are in breach of the warranty in GC 2.3(c) and will be in breach of GC 2(e) and GC 10.1(b)(ii) does not determine who is responsible as between Vendors and Purchaser to deal with the encroachment, nor determine liability under the Contract for the breaches or what consequences flow from them. The Purchaser does not seek to rescind or to know whether it has a right to rescind.

The interrelationship between the warranties and GC 3 underpins the Vendors’ argument that it is the Purchaser’s responsibility to deal with the encroachment.

The Purchaser contends that GC 3.1 does not apply to the present case, as it only relates to a misdescription of the title.[79] Because the subject matter of the sale is the land as described in the Certificate of Title, then the identity clause is of no moment – because there is no mistake in the description of the property since the property being sold is that described in the Certificate of Title (rather than the property actually occupied). Counsel for the Purchaser sought to draw an analogy between the present case and Travinto Nominees Pty Ltd v Vlattas,[80] to which I will return.
[79]Transcript 38.
[80](1973) 129 CLR 1 (Travinto); Transcript 38-42.

The Vendors, on the other hand, argue that the purpose of GC 3 is to place responsibility for the encroachment onto the Purchaser.[81] The Purchaser is responsible for conducting its own due diligence before signing the Contract.[82] The Vendors delve into the history of identity clauses, particularly by reference to the summary of the origin, history and effect of such clauses given by Brooking JA in Koadlow.[83]They point out that:
[81]Transcript 89.
[82]Transcript 89.
[83]Koadlow [1997] 1 VR 633.

(a) the Purchaser’s complaint is that the Vendors do not have the ability to deliver the subject matter of the Contract;

(b) the focus of an identity clause is on the physical nature of the land, regardless of whether the defect also constitutes a defect in title;[84]

(c) to the extent there is a difference between the physical characteristics of the land described in the Contract (that is the land described in the Certificate of Title) and the land the Vendors will be able to give the Purchaser possession at settlement, the difference falls within the operation of the identity clause.

[84]Travinto (1973) 129 CLR 1, 25-26 (Barwick CJ), 29 (Menzies J), 37 (Stephen J).

Consideration

The origin, history and effect of identity clauses in contracts for the sale of land in Victoria is summarised by Brooking JA in Koadlow.[85]In Koadlow the clause in question was condition 4 in the contract of sale, which provided:

Condition 3 of the said Table A shall not apply to this contract. The Purchaser agrees that the property sold is identical with that described in the Title particulars set forth and shall not make any requisition nor claim any compensation in respect of any deficiency in area, measurement, boundary, occupation, title or otherwise nor shall the purchaser be entitled to call on the Vendor to amend title or to bear the cost or expense or contribute to the expense of any amendment.[86]

[85](1997) 1 VR 633, 640-1 (Phillips and Charles JJA agreeing).

[86]Koadlow [1997] 1 VR 633, 638.

Many contracts excluded General Condition 3 contained in Table A, being Table A of the Seventh Schedule to the Transfer of Land Act 1958 (Vic) (TLA) which previously provided:

No omission from the particulars or mistake in the description measurements or area of the land hereby sold shall invalidate the sale unless the vendor rescinds pursuant to the last preceding Condition but if notified to the other party not less than three days before the day fixed for completion or within the applicable period specified in condition 1(a) or (b) (whichever is the earlier) the same shall be the subject of compensation to be paid or received by the vendor as the case may require and to be assessed in case the parties differ by two arbitrators or their umpire in accordance with the provisions of the Commercial Arbitration Act 1984 and this condition shall in that event be deemed to be a submission to arbitration within the Act.

Brooking JA noted that conditions bearing at least some resemblance to special condition 4 of the contract in Koadlow had long been common in Victoria in contracts of sale of land under the TLA. It was his impression that conditions quite closely resembling special condition 4 had been in general use in Victoria in contracts concerning land under the TLA since at least the middle of the century, but that they vary a good deal.[87]
[87]Koadlow [1997] 1 VR 633, 640.

Brooking JA used the term ‘identity clause’ to refer to any condition of sale which at least requires the land sold to be taken to be identical with that in the title particulars, and gave examples of various versions from 1927, 1948, 1950, 1954, 1957 and 1964. The usual special condition inserted in the ‘Institute’ Contract of Sale approved by the Law Institute of Victoria and the Real Estate and Stock Institute of Victoria and put out in September 1964 was:

The Purchaser admits the identity of the land with that comprised in the said Certificate of Title and shall not make any requisition or claim any compensation in respect of any excess or deficiency whether in area measurements boundaries occupation or otherwise nor shall the Purchaser be entitled to call upon the Vendor to amend title or to bear or contribute to the expense of any amendment of Title.[88]

[88]Koadlow [1997] 1 VR 633, 641.

Brooking JA identifies the origins of the identity clause –

…in difficulties experienced by vendors of general law land in discharging their obligation to show and make good title to property agreed to be sold where there was for one reason or another a want of correspondence between the description of the land in a particulars of sale and its description in the title deeds.[89]

[89]Koadlow [1997] 1 VR 633, 642.

With that background, the construction of GC 3 and its relationship with the other relevant provisions involves the construction and interpretation of the Contract as a whole. In this regard a number of matters need to be emphasised:

(a) The warranties in general conditions 2.3 and 2.4 replace the purchaser’s right to make requisitions and inquiries. Requisitions on title[90] were consigned to the ‘dustbin’ of history by the introduction of these warranties in the 2008 prescribed Contract of Sale of Land.[91] The replacement of requisitions with warranties puts the warranties into a similar position as requisitions so far as other provisions of the Contract are concerned. That is particularly relevant to the operation of GC 3 which, as a form of identity clause, necessarily interacts with requisitions on title;

(b) The warranties in GC 2.3 are subject to any contrary provisions in the Contract. This makes the warranties subject to the operation of GC 3, as was the position with respect to requisitions on title.

[90]In the strict sense, a demand addressed by the purchaser to the vendor concerning some matter arising out of the title, or some objection taken to the title shown by the vendor: P R Watts, ‘The Law Relating to Requisitions’ [1931] (5) Australian Law Journal 10-12, 50-53; P N Wikrama-Nayake, Voumard The Sale of Land in Victoria (The Law Book Company, 4^th ed, 1986) 404.

[91]Russell Cocks, David Lloyd, Murray McCutcheon and Richard Park, ‘The 2008 Contract of Sale of Land (Vic.)’ (Paper delivered on the Television Education Network, September 2008) type="1">

When considering the meaning of any particular identity clause, recourse to the case law is of limited assistance as each case turns on its own facts.[92] As Chitty J noted in Ashburner v Sewell:[93]

Cases on the law of vendor and purchaser are often extremely complex, and require minute investigation; and, although from some of them general principles may be evolved, they often result merely in the Judge’s opinion on the particular contract actually before him.

[92]Donohoe v Glover (1979) BPR 97,268, 4 (Waddell J); Gardiner v Orchard (1910) 10 CLR 722, 727 (Griffith CJ, O’Connor J agreeing).

[93](1891) 3 Ch 405, 410; Travinto (1973) 129 CLR 1, 26.

The contents of identity clauses can vary widely.[94] The identity clause in issue here is set out above at paragraph [23]. GC 3.1 is divided into two parts, the first referring to ‘an omission or mistake in the description of the property’ and the second to ‘any deficiency in the area, description or measurements of the land’. Neither of these will ‘invalidate the sale.’ The omission or mistake to which the clause refers concerns the description of the totality of the subject matter of the sale, that is the property, being ‘the land and the goods’. Then the second part refers to ‘any deficiency in the area, description or measurements’ of the land in contrast to the property. That is, in this case the land described in the Certificate of Title.
[94]Koadlow [1997] 1 VR 633, 640.

General Condition 3.2 may at first blush seem not to continue the distinction between the property and the land. But on a careful consideration, I consider it maintains that distinction. Again, GC 3.2(a) has two parts. First, it prevents the Purchaser from making any objection or claim for compensation for ‘any alleged misdescription of the property’. This part covers misdescription of the whole of the subject matter of the sale, that is, the land and the goods. The second part then picks up part of the wording of GC 3.1 by preventing the Purchaser from making any objection or claim for compensation for ‘any deficiency in its area or measurements.’ In context, prima facie the reference to ‘its’ is a back reference to the property. But that does not fit with the reference to ‘area or measurements’, which must refer to the land, as in the second part of GC 3.1. It is not necessary to consider GC 3.2(b).

In the natural and ordinary meaning of GC 3.1 and 3.2(a), it is my view that a breach of the warranties in GC 2.3 of the kind constituted by the encroachment do not invalidate the sale or give rise to any objection or claim for compensation because the encroachment is a deficiency in the area or measurements of the land. In my opinion, when combined with the rest of the clause ‘any deficiency in the area, description or measurements of the land’ does include an instance where a small part of a property is in the possession of another landholder. The words ‘any deficiency’ are extremely broad. Further, an error of the kind constituted by the encroachment between the land described in a title and the land as occupied is the very point of the protection afforded to the Vendors by the identity clause.

This construction is in accord with the purpose of the provision as demonstrated by the history set out above, and by another extraneous publication. When the 2008 Contract of Sale of Land prescribed under the Estate Agents (Contracts) Regulations 2008 came into effect on 28 September 2008 Mr Russell Cocks, David Lloyd, Murray McCutcheon and Richard Park, who had been involved in drafting the Contract, prepared a paper on the new contract.[95] In relation to GC 3 they commented:

Identity clauses have long been found included in contracts for the sale of land in Victoria by way of special condition. A useful examination of the many and varied forms of identity clause employed over time may be found in the judgment of Brooking J in Koadlow v. Bolland (1997) 1 VR 632.
Given that the purchaser is now provided with a copy of the certificate of title prior to signing the contract and is thereby able to check measurements prior to exchange, general condition 3 provides that an omission or mistake in the description, measurements or area of the land does not invalidate the sale and further that the purchaser cannot make any objection or claim for compensation for any alleged misdescription or deficiency in area or measurements, or require the vendor to amend the title or pay any costs of amending the title. However such a condition will always be subject to the common law principle – the so-called rule in Flight v Booth, as applied in Australia by Fullers’ Theatres Ltd v Musgrove (1923) 31 CLR 524 – to the effect that a significant discrepancy will justify avoidance of the contract by the purchaser, and the associated ‘rule of thumb’ that a 5% or greater diminution in area is likely to be considered significant.[96]

[95]See above at fn 91.

[96]The reference to Fullers’ Theatres Ltd v Musgrove concerns the statement of principle in that case by Isaacs and Rich JJ, at 537, apart from express stipulation to the contrary, one party to a contract is not entitled to force upon the other party something which, by reason of a departure from the terms of the contract, is so materially altered in character as to be in substance a different thing from that contracted for.

Another case concerning the meaning of a misdescription of land, and the remedial role played by identity clauses, is Travinto.[97] In that case the respondent (vendor) granted an option to the appellant (purchaser) to purchase Torrens title land, subject to some specified existing tenancies, in accordance with standard terms and conditions of sale. The tenancies included options to renew the terms of the leases over the properties in question. The solicitor for the purchaser was unaware of the options to renew. After the purchaser exercised the option to purchase and discovered the tenants’ options to renew, the purchaser completed the purchase and claimed compensation under the identity clause in the contract. The vendor claimed to be protected by the identity clause, amongst other defences.
[97](1973) 129 CLR 1; Transcript 38-42.

The identity clause was condition 8 and was as follows (so far as relevant):

No error or misdescription of the property shall annul the sale, but compensation if demanded in writing before completion, but not otherwise, shall be made or given as the case may require, the amount to be settled in case of difference by an arbitrator…

A great many authorities on identity clauses were reviewed by Barwick CJ in the course of his reasons and a number of statements of general application were made. For present purposes, the following points are relevant:

(a) Identity clauses are primarily for the protection of the vendor;[98]
[98]Travinto (1973) 129 CLR 1, 13.

(b) No clear principle arises from the decided cases other than that it is a question of construction in each case as to whether an identity clause is protecting the vendor against misdescription of the property, or against error in the statement of the title which he claims to have to it, or for that matter, against any other error in the terms of the contract;[99]

(c) Error or misdescription of the property in condition 8 means error in the description, or misdescription, of the property sold, that is the subject matter of the sale;

(d) Where the subject matter of the sale is land, what is put forward as error or misdescription must relate to the physical subject matter. It is not enough that there is a defect in the title.[100]

[99]Ibid 15.

[100]Ibid.

The result in Travinto was that the presence of the option to renew in the leases resulted in a defect in title, but not a misdescription of what was sold.[101]
[101]Ibid (Barwick CJ), 26 (McTiernan J), 29 (Menzies J), 37 (Stephen J), Gibbs J not deciding.

Another aspect of Travinto relevant for present purposes is the observations of Menzies J as follows:[102]

At common law, any difference, however trivial, between the land described in the contract and the land produced constituted a defect which entitled the purchaser to rescind.
Where there was only a slight difference, the Courts of Equity began to interfere and introduced the principle of compensation for deficiency: see Erskine L.C. in Halsey v. Grant [1806] EngR 290; (1806) 13 Ves Jun 73, at pp 76-79 (33 ER, at pp 223-224). Unless the deficiency was so substantial as to give the purchaser something entirely different from what he had contracted, equity would order specific performance on giving compensation for the deficiency.
Also to avoid the harsh effect of the common law, it became the practice to insert in contracts a clause stating that a difference from the description of the subject matter would not annul the sale. These clauses were of two types: those which allowed compensation to the purchaser for a deficiency, and those which did not. The right to compensation under a clause in the contract was independent of the right to compensation in a claim for specific performance.
However, where there was a clause in the contract preventing the sale from being annulled even if the purchaser had the right to compensation for a misdescription, equity would still permit the purchaser to rescind if the misdescription was a substantial one: see Flight v. Booth [1834] EngR 1087; (1834) 1 Bing (NC) 370, at p 377 [1834] EngR 1087; (131 ER 1160, at pp 1162-1163); Jacobs v. Revell (1900) 2 Ch 858; Lee v. Rayson (1917) 1 Ch 613.
In this case the appellant is not seeking to rescind. It has completed the contract and is claiming compensation under cl. 8 of the contract.

[102]Travinto (1973) 129 CLR 1, 27-28.

An understanding of the history and operation of identity clauses and the purpose of them is an aid in the resolution of the conflict between a breach of the warranties in GC 2.3, and a putative breach of GC 10.1(b)(ii), and the protection given to the Vendor by GC 3. So too is the history of the intervention of Courts of Equity where there was only a slight difference between the land described in the contract and the land produced, in which case the Court would order specific performance on giving compensation for the deficiency. But where the deficiency was so substantial as to give the purchaser something entirely different from what he had contracted to buy equity would not intervene. The common law would prevail and the purchaser would be entitled to rescind.

As Russell Cocks has said,[103] the requirements of the Sale of Land Act 1962 (Vic) in relation to Vendors’ Statements means that purchasers now have a copy of the Certificate of Title prior to signing the contract and are thereby able to check measurements prior to exchange of contract. In this context, GC 3 means that an omission or mistake in the description, measurements or area of the land does not invalidate the sale and, moreover, that the purchaser cannot make any objection or claim for compensation for any misdescription or deficiency in area or measurements, or require the vendor to amend the title or pay any costs of amending the title. This condition is subject to the common law principle – the so-called rule in Flight v Booth,[104] to the effect that a significant discrepancy will justify avoidance of the contract by the purchaser, and the associated ‘rule of thumb’ that a 5% or greater diminution in area is likely to be considered significant.
[103]See above at fn 91.
[104](1834) 1 Bing (NC) 370, 377; 131 ER 1160, 1162-3.

This rule of thumb was referred to in an ex tempore judgment of Nathan J in Ventura v Maladale Pty Ltd & Ors.[105] Nathan J noted that ‘it is common place that the statistical measure of significance is a variation from a mean of five per cent or more.’[106] Counsel for the Vendors submitted that the discrepancy on the southern boundary of the property in the present case was only 0.92% of the total area sold, and therefore could not be considered significant.[107]
[105][1987] ANZ ConvR 378, 3.
[106]Ibid.
[107]Defendants’ Outline of Submissions, 13 May 2019, [29].

It is also relevant to consider the particular circumstances of this case. The Purchaser is an experienced developer acquiring the property for redevelopment. The parent company of the Purchaser had entered into a contract to purchase the property which had been terminated after a due diligence period had expired. If the exact measurements of that property were objectively important, then it is to be expected that a check survey would have been done before entry into the Contract. The fact that the survey was not done until after the entry into the Contract indicates the relative unimportance to the Purchaser of the correspondence between the boundaries of the land on the title with the boundaries as occupied by the Vendors. I have little doubt that the property was inspected by the Purchaser thoroughly before the Contract was entered into and that the boundary fences appeared to be in accordance with the title, more or less. It is a notorious fact that farm land fences are often not precisely on the title boundaries. The Purchaser must be taken to have known of the replacement of requisitions and objections by the contractual warranties and the interaction between those warranties and the identity clause in GC 3 when it signed the Contract.

The deficiency in the area or measurements of the land in this case is not of the kind which constitutes a departure from the terms of the contract that so materially alters character of the land as to be in substance a different thing from that which the Purchaser contracted to buy. The difference in the measurements of the land as shown in the Certificate of Title compared with the land as occupied by the Vendors is not of such consequence that it may be reasonably supposed that but for the error or misdescription the purchaser would not have entered into the Contract. In these circumstances, the rule in Flight v Booth will not be applicable to this case.

In conclusion, I find that the protection to the Vendors afforded by the identity clause in GC 3 is enlivened so that although prima facie the encroachment means there is a breach of the warranty as to possession (GC 2.3(d) and if the position remains as it presently is there will be a breach of GC 2.3(e) and GC 10.1(b)(ii) at settlement, those breaches are negatived by the protection given to the Vendors by the terms of GC 3 and the breaches constituted by the encroachment give rise to no remedy available to the Purchaser. In short, there is no actionable breach of GC 2.3(d), and there will at settlement be no actionable breach GC 2.3(e) and GC 10.1(b)(ii).

What effect does the s 27 notice have on the Purchaser’s rights?

The next issue debated is whether by operation of GC 12.4, inserted by Special Condition 1A of the Contract and the giving of the s 27 Notice, the Purchaser has accepted title to the land. In light of my conclusion that the identity clause is enlivened and the encroachment does not constitute an actionable breach of the warranties or GC10.1(b)(ii) of the Contract, it is unnecessary to consider this issue.

Conclusion

In the light of my consideration of the issues mentioned above, and the basis upon which I have proceeded to deal with the application, although there has or will be a breach of the provisions the subject of the questions, those breaches are not actionable by the Purchaser. The result is that it is not appropriate to answer those questions as formulated, and it is not appropriate to make the declaration sought.

Another way to approach the resolution of the application is to re-phrase the questions so that they ask questions which can produce real consequences for the parties:

Whether there has been an actionable breach, actual or anticipatory, by the Vendors:

(a) of the warranty given in Clause 2.3(c) of the General Conditions of the Contract that they are in possession of the land, either personally or through a tenant?

Answer: No

(b) of the warranty given in Clause 2.3(e) of the General Conditions of the Contract that they will at settlement be the holder of an unencumbered estate in fee simple in the Land?

Answer: No

(c) of the warranty given in, or the obligation that arises from, Clause 10.1(b) of the General Conditions of the Contract that requires the vendor at settlement to give vacant possession of the land?

Answer: No

Whichever way the matter is approached, it is appropriate to say that as between Vendors and Purchaser the risk under the Contract of the encroachment, and therefore who is responsible for dealing with the neighbouring owners, is borne by the Purchaser. That position applies for the purposes of the development application made to the local Council and completion of the Contract at settlement. If the encroachment is to be dealt with, it is the Purchaser who is responsible for it.

In the result, either –

(a) the Purchaser’s originating motion and summons should be dismissed and the Vendors’ costs should be paid by the Purchaser; or

(b) the questions should be rephrased and answered as I have mentioned above, and the Vendors’ costs should be paid by the Purchaser.

I will hear the parties as to the appropriate form of relief.

[2019] VSC 618

11 September 2019