Botany Bay Apartments Pty Ltd v Badolato

1. [1]

   This is a claim by the plaintiff, Botany Bay Apartments Pty Limited (BBA) for the payment of the balance of two deposits in relation to two contracts for the sale of land.

2. [2]

   On 12 March 2018 the plaintiff as vendor and the defendant as purchaser entered into contracts for the sale and purchase of units G03 and 204 in a proposed development at 71-91 in Euston Road, Alexandria. The deposit payable under each contract was $95,000 and was payable in two amounts. The first amount of $2,375 in each case was payable on the date of exchange.

3. [3]

   The parties acted on the basis that the balance of $92,625 in each contract was payable on or before 5pm on 26 March 2018 (the expiry of the cooling-off period), although the terms of the contract simply made reference to the five day period referred to in s 66S of the Conveyancing Act 1919 (NSW). The basis for the cooling-off period expiring on 26 March is to be found in letters of 12 March 2018 from the plaintiff’s solicitors enclosing by way of exchange the vendor’s copies of the contracts.

4. [4]

   In each case the defendant paid the amount of $2,375. On 26 March 2018 the defendant requested an extension of the cooling-off period to pay the balance in each case. The plaintiff agreed to extend the time for payment of the balance to 5pm on 27 March 2018.

5. [5]

   The defendant failed and refused to pay the balance of the deposit on each contract by 5pm on 27 March 2018 and thereafter.

6. [6]

   On 29 March 2018, pursuant to clause 2.5 of the contracts, the plaintiff terminated each contract.

Overview

1. [7]

   BBA is a building company. Its sole director is Mahmoud Mohanna (Mr Mohanna). In the period material to these proceedings, BBA was developing a mixed use site at Euston Road, Alexandria consisting of four commercial lots and 35 residential units (Site). The development of the Site was taking place pursuant to a development consent granted to it by the City of Sydney Council (Council) in about September 2016.

2. [8]

   Rayed Skaf has been a real estate agent for thirty years and is the managing director of Macquarie York, a property management company. In about November 2017 BBA engaged Mr Skaf to market and sell 'off-the-plan' the residential units to be built on the Site.

3. [9]

   In about February 2018 Mr Mohanna discovered that the survey report on which the development plans for the Site had been based and submitted to the Council was incorrect. The survey report (and therefore the development plans based on it) had failed to incorporate approximately one metre of land on the western boundary of the Site backing onto Euston Lane.

4. [10]

   After discovering the error Mr Mohanna asked an architect engaged by BBA to draw up new development plans which incorporated the additional one metre of land with a view to lodging with the Council an application to amend the terms of the existing development consent.

5. [11]

   In about February 2018 Mr Mohanna informed Mr Skaf of these developments, and they had a conversation to the following effect:

6. [12]

   Accordingly, Mr Skaf continued to market the units for sale according to the then current development plans and at the then current prices.

7. [13]

   The defendant is an experienced property investor. He described his self-employed work as carrying out property renovations. He has a number of qualifications including a diploma in conveyancing law. At the time of the hearing he owned some 11 investment properties. Before the events which led to the present proceedings, he had purchased apartments off-the-plan, including from Mr Mohanna or one of his companies.

8. [14]

   On about 11 March 2018 the defendant attended the display suite from which Mr Skaf was marketing the units for sale. During the course of discussing a possible purchase by the defendant of one or more units Mr Skaf informed the defendant of the matters described at [11] above. The defendant agreed to purchase two units on that day.

9. [15]

   After exchange of contracts and up to 26 March 2018, the defendant met with Mr Skaf, spoke with him on the telephone and corresponded with him by email. Their communications related to various amendments sought by the defendant to the features and designs of the units and to the terms of the contracts.

10. [16]

    Most of the amendments sought by the defendant were agreed to by the plaintiff. However, the plaintiff refused to agree to the insertion of one term requested by the defendant. The defendant requested that he be permitted to rescind the contracts in the event that Council approval was not forthcoming in relation to the plaintiff’s application for an amendment to the September 2016 development consent incorporating the additional one metre of land on the western boundary of the Site. Mr Skaf made the plaintiff’s refusal plain to the defendant on several occasions both over the telephone and by email.

The proceedings

1. [17]

   The plaintiff commenced proceedings on 27 April 2018. The defendant, acting for himself, filed a defence on 13 June 2018. The defence consisted of a lengthy narrative that amounted to the evidence the defendant was likely to give at any hearing, as well as material in the form of submissions.

2. [18]

   The plaintiff filed a notice of motion seeking that the defence be struck out and that summary judgment in favour of the plaintiff be granted. The motion was heard by Fagan J on 20 July 2018. His Honour declined to grant summary judgment, but struck out the defence on the basis that it did not comply with the rules of pleading in the Uniform Civil Procedure Rules 2005 (NSW). His Honour granted leave to the defendant to re-plead the defence.

3. [19]

   On 9 August 2018, the defendant, still acting for himself, filed an amended defence.

4. [20]

   That defence admitted the whole pleading in the statement of claim except paragraph 11 which pleaded that the plaintiff, pursuant to clause 9.1 of the contracts, claimed payment from the defendant in the amount of $185,250. The defendant denied that paragraph. It should be observed that paragraph 11 is not a pleading of a material fact but a claim for the amount which the plaintiff seeks. In substance, the defendant admitted that he breached the contracts in refusing to pay the balance of the deposits. Paragraphs 3 and 4 of the defence then went on to say:

5. [21]

   The substantive defences appear in paragraphs 39-49 of the amended defence. The substantive defences can be put into two categories. The first category alleges contraventions of the Australian Consumer Law (ACL) contained in Schedule 2 to the Competition and Consumer Act 2010 (Cth), on the basis of the plaintiff having engaged in misleading and deceptive conduct, unconscionable conduct, and having coerced the defendant. The second category of substantive defence is a reliance on s 55(2A) of the Conveyancing Act 1919 (NSW).

6. [22]

   The breaches of the ACL are set out at paragraphs 43-45 of the amended defence as follows:

7. [23]

   In relation to the Conveyancing Act defence, the defendant points to the broad discretion in s 55(2A) and sets out a number of matters which the Court should consider in exercising its discretion to order a return of the deposit. He relies, in that regard, on the decision of Hamilton J in Kylsilver Pty Ltd v One Australia Pty Ltd [2001] NSWSC 226.

8. [24]

   The substance of the defence is the assertion that the plaintiff’s agent represented that the internal size of the apartments being purchased by the defendant would be increased by 8.5m2 when amended plans were put to the council. The plaintiff’s agent denies ever having made such a representation. The plaintiff, in any event, says that even if the representation was made, any loss which the defendant now says he will suffer was not caused by that representation.

9. [25]

   As the defendant made clear, any rights he may have, whether under s 18 of the ACL, s 50 of the ACL, or pursuant to s 55(2A) of the Conveyancing Act, all depend on the defendant establishing the misrepresentation that the apartments would be increased in size by 8.5m2, and that the defendant’s liability for the balance of the deposits was caused by his reliance on that misrepresentation.

The evidence

1. [26]

   The defendant relied on four affidavits sworn by him. Much of the material in these affidavits was in inadmissible form. Objection was taken by the plaintiff’s counsel, but it was accepted that I should read those parts which were objected to as submissions made by the defendant. There was little admissible evidence in the affidavits which set out the defendant’s account of what occurred when he spoke with the agent. Far more time was spent denying evidence contained in the affidavits of the agent and Mr Mohanna. It is fair to say that, except for one paragraph of the defendant’s affidavit sworn 8 August 2018, the clearest evidence putting forward the defendant’s case emerged from cross-examination of the defendant.

2. [27]

   The defendant sought to read an affidavit sworn by his sister, Angela Badolato, on 1 February 2019. The defendant wished to read the affidavit so that I could compare the handwriting of Mr Skaf on the document annexed to that affidavit with handwriting of figures on a floor plan of one of the apartments which the defendant claimed had been written by Mr Skaf. That floor plan was said to provide evidence that Mr Skaf had represented to the defendant that the apartments he was buying would increase in size by 8.5m2 when the amended plans were approved.

3. [28]

   I rejected the affidavit of Ms Badolato. I did so for a number of reasons. First, directions were made on 14 August 2018 that the defendant’s evidence was to be filed and served by 16 October 2018. That order was confirmed at a directions hearing on 28 September 2018 when the matter was fixed for hearing on 11 February 2019. No reason was offered for the late service.

4. [29]

   Secondly, the plaintiff was prejudiced by the late service. The purpose of the affidavit was to support the defendant’s claim that it was Mr Skaf’s handwriting on the floor plan. The evidence already served contained an allegation that Mr Skaf had written on the floor plan, and a denial by him that he had done so. The matter had been left at that point. If the identity of the handwriting was to be pursued, the plaintiff would have wished to obtain a handwriting expert.

5. [30]

   Thirdly, the evidence appeared to have been obtained by subterfuge. The plaintiff’s counsel asserted, in objecting to the affidavit’s admissibility, that Ms Badolato “went to the display unit masquerading as a [prospective] buyer in order to have Mr Skaf write various numbers on” a floor plan. The defendant did not deny that that was what occurred. Section 138 of the Evidence Act 1995 (NSW) is relevant. Fourthly, in the absence of a handwriting expert, I am in no position to compare handwriting to determine that a particular person wrote figures on a document, when there is a dispute about that fact. Finally, as will become apparent from the later discussion about the figures written on that floor plan, a decision about whose handwriting appears on the document in question is not determinative of the issue of whether a representation was made.

6. [31]

   The defendant gave evidence that he visited the display unit on Sunday 11 March. He was interested in purchasing one or two two-bedroom apartments. When he spoke with Mr Skaf, Mr Skaf said that the architect had made a mistake with the approved plans. The building could be extended by one metre which would mean that the apartments at the rear on Euston Lane would be bigger. Mr Skaf said the new plans would be available later that week. The defendant gave evidence that Mr Skaf showed him an email from the vendor with the floor plan amendments to some of the apartments facing the laneway. Mr Skaf could not recall this when asked by the defendant in cross-examination. The matter was not thereafter pursued by the defendant, nor was any such email called for or produced.

7. [32]

   Paragraph 3 of the defendant’s affidavit of 8 August 2018 says this:

8. [33]

   During his cross-examination of the defendant, Mr Ed Anderson of counsel for the plaintiff asked the defendant what he claimed Mr Skaf said to him about the increase in the size of the units. He gave this evidence (T 107-108):

9. [34]

   A little later in his evidence, the defendant said this (T 116-117):

10. [35]

    The defendant gave evidence, which Mr Skaf did not dispute, that Mr Skaf said that he would have the new plans within a week.

11. [36]

    According to Mr Skaf, the defendant met the agent, Mr Skaf, on 11 March at the display suite for the development. During discussions between the two men, the defendant said that he knew Mr Mohanna and that he had bought from him previously. The conversation then continued:

12. [37]

    Mr Skaf denied that he told the defendant that the internal area of the units would increase by 8.5m2. He said, in answer to questions in cross-examination, that it was possible he used his business card and marked five metres on it from the scale on the floor plan of one of the apartments, because he does that from time to time. Although he agreed that applying that scale in that way would produce an extra 8.5 metres if the building was extended by a metre, he denied saying to the defendant on 11 March or at any time that the apartments would be 8.5m2 larger on the revised plans.

13. [38]

    When asked in cross-examination if the handwriting on the floor plan was his, he gave the following evidence (T 62-63):

14. [39]

    The defendant offered to purchase the two units each for $950,000, although one was priced at $970,000. His offer was accepted by Mr Mohanna after Mr Skaf rang him. It was necessary for the defendant to attend at the agent’s city office to sign the contracts. He did so later that day. The defendant paid $2,375 on each contract. About half an hour after he had left Mr Skaf’s office, the defendant rang Mr Skaf to ask if a term could be added to the contract making it conditional on the defendant getting the extra square metres in the contract as a result of the proposed one metre extension of the building. Mr Skaf said that the vendor would not agree to that. In his evidence, Mr Skaf agreed with what was said in that telephone conversation.

15. [40]

    The following day, BBA’s solicitors forwarded the signed vendor’s copies of each contract by way of exchange. As noted earlier, the covering letters provided for the cooling-off period to expire at 5pm on 26 March.

16. [41]

    On 18 March 2018, the defendant returned to the display unit because he had not received the new plans. He asked Mr Skaf if he had the new plans, and Mr Skaf said that he did not. The defendant suggested to Mr Skaf in cross-examination that Mr Skaf told him on that occasion that Mr Mohanna had said to Mr Skaf that he felt he was giving away $300,000. This was because Mr Mohanna believed that the increase in size of the units resulting from the extension of one metre meant that each was worth $1.1m rather than the $950,000 which the defendant had paid. Mr Skaf denied that such a conversation had occurred.

17. [42]

    On that day, the defendant also said that he wanted two additional parking spots, he wanted to move the walls and the laundry as per an attached plan, he wanted to confirm the depth of the laundry cupboard, and he wanted to replace carpets with timber flooring in all of the bedrooms. On 19 March 2018 those matters were agreed with prices being stipulated by Mr Mohanna.

18. [43]

    There was a further exchange of emails later on 19 March and on 20 March involving further negotiations about these matters. It should be noted that the time recorded on Mr Skaf’s emails appears in many cases to be an hour ahead of the correct time. Where below I state that an email is in response to an earlier email despite a time anomaly, I have done so by reason of the email’s position in an email chain.

19. [44]

    On 21 March 2018 at 11:42am the defendant sent an email to Mr Skaf saying:

20. [45]

    Mr Skaf forwarded that email to Mr Mohanna at 12.47pm, and in his email said that he had explained to the defendant that Mr Mohanna was not in a position to agree to making the extension of the building conditional to the contract.

21. [46]

    At 3:06pm (or 4.06pm) on 21 March Mr Mohanna sent an email to Mr Skaf saying that he could not agree to adding the clause to the contract which the defendant had requested. He went on to say:

22. [47]

    Mr Skaf forwarded that email to the defendant at 4.21pm and asked the defendant to get back to him.

23. [48]

    At 3:46pm on 21 March the defendant sent a further email in response to Mr Skaf:

24. [49]

    The agent forwarded that email to Mr Mohanna, who emailed back saying he did not agree and the contract had to be unconditional. The agent forwarded that to the defendant at 6:14pm (probably 5.14pm) saying:

25. [50]

    The defendant then sent an email to Mr Skaf at 5:41pm saying:

26. [51]

    By 22 March final agreement had been reached on proposed amendments, and a schedule of amendments sent by the plaintiff’s solicitors was attached for annexure to the contracts.

27. [52]

    The defendant said that he went back to the display apartment on 25 March to raise his concern with Mr Skaf about the one metre setback of the building when the adjoining building had a two metre setback. The defendant said that Mr Skaf told him he would speak to Mr Mohanna about the matter the next day. Mr Skaf did not remember this conversation. The defendant said that he sent an SMS to Mr Skaf the next day asking what the position was. He said that Mr Skaf then rang him and told him that the plaintiff was lodging new plans to extend the building with a two metre setback. Mr Skaf did not remember those exchanges.

28. [53]

    Mr Skaf said that on 26 March 2018 he received a telephone call from the defendant during which the following was said:

29. [54]

    Mr Skaf then sent an email to the defendant at 3:43pm on 26 March where he said this:

30. [55]

    The defendant replied at 6:04pm in these terms:

31. [56]

    At 6:25pm on that day Mr Skaf replied as follows:

32. [57]

    The defendant did not respond to this email despite his evidence that he saw it as inconsistent with the representation he alleged Mr Skaf had made to him.

33. [58]

    As mentioned earlier, on 26 March, the defendant requested an extension of the cooling off period until close of business on 27 March. The vendor agreed to that extension.

34. [59]

    The defendant said that he went back to the display unit on 27 March at about 2.00pm to collect another copy of the floor plan for unit 204. He met Mr Skaf in Euston Lane at the rear of the proposed development. The defendant said that Mr Skaf told him that the Council were intending to widen the lane on both sides. The defendant said that he went home and later in the evening “it started hitting me”. He said that he was up until midnight.

35. [60]

    He sent an email at 12.13am and another at 12.14am on 28 March in respect of each contract to the vendor’s solicitors, copied to the agents, saying that he would be transferring the balance of each deposit to the agent’s trust account and that the agent would then transfer the full 10% deposit to the solicitor’s trust account.

36. [61]

    On 28 March 2018 at 12:53am the defendant sent an email to Mr Skaf in these terms:

37. [62]

    He said that when he went to bed he did not sleep properly. His evidence then continued:

38. [63]

    In the meantime at 8.21am on Wednesday 28 March, Mr Skaf sent the defendant’s email of 12.53am ([61 above) to Mr Mohanna who replied in these terms at 3.33pm:

39. [64]

    The plaintiff’s solicitors sent two emails, one for each unit, at 3.15pm on 28 March to the defendant saying that if the balance of the deposits was not paid by 5.00pm on 29 March the contracts would be terminated.

40. [65]

    At some stage that day (the precise time cannot be identified), the defendant rang Mr Skaf and told him that the deposits would be paid into the agent’s trust account the following day. There is an email to that effect from Mr Skaf to Ms Elkington at the plaintiff’s solicitors sent at 3.40pm on 28 March.

41. [66]

    Mr Mohanna’s email at [63] above was forwarded onto the defendant who responded at 11:02pm to Mr Skaf:

42. [67]

    The defendant’s evidence set out at [60] above is not at all consistent with the defendant’s actions on 28 March.

43. [68]

    The first indication that the defendant had decided not to pay the balance of the deposits occurred on 29 March when he sent the following email to Mr Skaf at 10.38am on that day in these terms:

44. [69]

    It should be observed that nowhere in that email is there any assertion that a representation was made, nor is any reference made, to an increase in the size of the units by 8.5m2.

45. [70]

    Mr Skaf replied to the defendant’s email of 29 March 2018 at 12:25pm in these terms:

46. [71]

    The defendant replied to this email at 2.40pm that day saying this:

47. [72]

    In the meantime, on 29 March Mr Skaf sent an email to the defendant at 1.02pm saying that he had just received draft s96 plans “if your [sic] interested to review to reconsider your position”.

48. [73]

    The defendant responded by an email sent at 2.41pm as follows:

49. [74]

    The revised plans resulted in one of the apartments only increasing in size by one square metre, and the other not increasing at all. The evidence about which of them increased in size was contradictory. In his email of 4 June 2018 (at [76] below) to Mr Mohanna, the defendant said it was apartment 204, but in court the defendant said it was G03 (at T 208). For present purposes, it does not matter.

50. [75]

    When the defendant did not pay the balance of the deposits, the plaintiff commenced proceedings on 27 April 2019. After proceedings commenced the parties had a settlement conference on 1 June 2018.

51. [76]

    On 4 June 2018 at 8:49pm the defendant sent an email to the plaintiff’s solicitor noting that he was given three options to settle the matter which he identified as:

52. [77]

    Mr Mohanna agreed that they were the three options he offered. He said, however, in relation to the third option that he also offered to waive the plaintiff’s legal fees incurred to that time (approximately $10,000) and to make any amendments the defendant might reasonably request in relation to the apartments.

53. [78]

    In the defendant’s email of 4 June, he attached an email to Mr Mohanna and asked if the solicitor would ask Mr Mohanna if he was prepared to reconsider the situation. The email to Mr Mohanna was in these terms:

54. [79]

    The portions above in italics constitute the first reference in any form of written correspondence to the apartments increasing by 8.5 square metres. This email should be compared to the email of 29 March 2018 set out at [68] above.

Submissions

1. [80]

   The defendant submitted that Mr Skaf was responsible for writing on the floor plan of unit 204 those handwritten figures set out at [32] above, thereby demonstrating that he made the representation that the apartments would increase in size by 8.5m2 when the revised plans extending the building by one metre were approved. The defendant submitted that Mr Skaf’s statement that there was no guarantee about the increased size was not made on that first day when the defendant entered into the contract but only a week or so later. The defendant submitted that Mr Skaf had told him that Mr Mohanna had said that he felt the plaintiff was giving away $300,000 because he believed that the increase in the size of the units resulting from the one metre extension meant that each of the units was worth $1.1 million rather than the $950,000 which the defendant had paid.

2. [81]

   The defendant pointed to a number of inconsistencies in the evidence of Mr Skaf and Mr Mohanna including about such matters as whether the new plans would be available in the week following 11 March 2018, whether after the settlement conference all of the legal fees were being waived if the defendant went ahead with the purchase of two units or whether some discount was given of $10,000 on the price of the substitute unit being offered to the defendant. The defendant submitted that where Mr Skaf’s evidence about events differed from his, Mr Skaf was lying.

3. [82]

   The defendant submitted that the plaintiff knew that the two units he purchased were not to increase in size because Mr Mohanna was working closely with the architect on the revised plans. He submitted that the fact that the plans were available for him to see on 29 March demonstrated that the plans were available and known to the plaintiff and Mr Skaf prior to the expiry of the cooling off period.

4. [83]

   Although the defendant acknowledged that he decided not to pay the balance of the deposit because he did not have confidence that the s 96 application would be approved or would produce the result he expected, he said that that was irrelevant. He submitted that the mere fact that the apartments were not increased in size as he maintained had been represented to him was sufficient for him to succeed in showing a misleading representation. The defendant submitted that he was in a vulnerable position in all the circumstances and that the plaintiff took advantage of his position.

5. [84]

   The defendant submitted that the proceedings fell within the requirements of s 55(2A) of the Conveyancing Act and, in that regard, pointed to what was said by Hamilton J in Kylsilver Pty Ltd v One Australia Pty Ltd.

6. [85]

   The defendant submitted that coercion occurred because at the time he was given the three options by the plaintiff, the plaintiff knew that the apartments had not increased in size as had been represented to him. He accepted that the issue of coercion did not arise if he could not establish the misrepresentation concerning the increase in size.

Consideration

1. [86]

   The plaintiff’s case is a straightforward one. Under the contractual arrangements between the parties, the defendant became bound by the contracts at 5:00pm on 27 March 2018. That time represented the expiry of the cooling off period agreed by the parties. Accordingly, the defendant became bound to pay the balance of the deposit by that time although, by the emails sent at 3:15pm on 28 March, the plaintiff gave the defendant until 5:00pm on 29 March for the two amounts to be paid.

2. [87]

   Accordingly, the plaintiff is entitled to judgment for the amount representing the sum of the two deposits together with interest unless the defendant is successful in having orders made either pursuant to the Australian Consumer Law or by virtue of s 55(2A) of the Conveyancing Act.

3. [88]

   In relation to the claim under the Australian Consumer Law, the defendant must establish that (1) the plaintiff through its agent misrepresented that the internal size of the apartments which the defendant was purchasing would be increased by 8.5m2, (2) the plaintiff knew before the expiration of the cooling off period that the revised plans for the apartments would show that the apartments the defendant had purchased would not increase by 8.5m2 and stayed silent about that matter, or (3) coercion and undue influence was exercised upon the defendant subsequent to the settlement conference by insisting on one of three options to be performed by the defendant. To establish (2) above, the defendant would also need to establish (1) above. The defendant also accepts that, for him to succeed under s 55(2A), he needs to demonstrate the misrepresentation concerning the increase in size by the plaintiff relied upon under the Australian Consumer Law.

4. [89]

   As in so many cases alleging misleading and deceptive conduct by representation, the matter must be determined by assessing the relative credibility of the representor and the representee. Here, that means the evidence of Mr Skaf and the evidence of the defendant. However, the matter is made considerably easier in the present case because of the extent of the contemporaneous emails which passed between the defendant on the one hand and Mr Skaf and Mr Mohanna on the other.

5. [90]

   In The Nominal Defendant v Cordin [2017] NSWCA 6 from [165] I set out extracts from a number of authorities dealing with the fallibility of human memory, and the desirability of relying on contemporaneous documents to determine more accurately what has occurred in circumstances where competing versions of events are given. In one oft-cited passage, McLelland CJ in Eq said in Watson v Foxman (1995) 49 NSWLR 315 at 319:

6. [91]

   In Gestmin SGPS S.A. v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm) Leggatt J, having set out a number of propositions flowing from scientific research into memory, said at [22]:

7. [92]

   In some respects, Mr Skaf was not an entirely satisfactory witness. I found him to be somewhat arrogant and a little defensive. In that regard, I recognise that being cross-examined in a less than satisfactory manner by the person with whom he had the dealings now the subject of the dispute, rather than by a lawyer bound by obligations to the court, tends to make the experience much more personal and less than ideal. I consider that Mr Skaf’s reactions to matters that were put to him are largely explicable in that way. While his memory for all of the detail was not perfect, his recollection generally accorded with what was to be found in the emails set out above.

8. [93]

   Generally, I thought Mr Skaf was trying to give his evidence honestly. I do not accept that, where he differed from the defendant’s account of what transpired, he was lying, as the defendant asserted. The only issue for me in relation to Mr Skaf was the reliability of his evidence about whether he said that the defendant would receive apartments with an extra 8.5m2 of area.

9. [94]

   In his affidavit, Mr Skaf denied that he said to the defendant that the internal size of the units would increase by 8.5m2. In cross-examination he denied using the scale on the floor plans to calculate that the internal size would increase by eight and a half square metres. He said that he had used his business card to measure things off the scale on drawings in the past. Although he did not recall doing that with the defendant, he may have done it.

10. [95]

    The contemporaneous documentation points strongly against Mr Skaf having represented to the defendant that he would receive or was likely to receive an extra 8.5m2 in the event that the s96 application was successful. The defendant’s email of 21 March 2018 (at [44] above) makes no reference to such a representation but only to an expectation that the units would have “a lot more” than the 75m2 internal space shown on the current floor plans.

11. [96]

    The first document making reference to the 8.5m2 is the email sent by the defendant on 4 June 2018 (at [78] above). Significantly, that email was sent after the proceedings had commenced and after an unsuccessful settlement conference between the parties. Further, a comparison with what appears in that email and what appears in the email of 29 March (at [68] above) is important. The defendant gave evidence that the email of 29 March took him two to three hours to compose. He gave this evidence about it (T 183):

12. [97]

    That email was composed at the conclusion of what were virtually daily exchanges between the defendant and Mr Skaf since 18 March about what had happened on 11 March. In my opinion, if Mr Skaf had represented to the defendant on 11 March that the apartments he was buying would be increased by 8.5m2, it is inconceivable that the defendant would not have mentioned that matter in any of the emails he sent which concerned that issue, especially the lengthy email of 29 March which purported to set out the whole chronology that led to the defendant not rescinding the contracts within the cooling-off period, and thereafter indicating that he would not pay the balance of the deposits.

13. [98]

    The defendant’s explanation for not having mentioned that the alleged representation was that the apartments would increase by 8.5m2 was this (T 182):

14. [99]

    It is also important to note the sequence of events as described by the defendant. As is apparent from the defendant’s evidence in Court set out at [31] and [32] above, the defendant himself concluded, after having heard that the building may be extended by one metre, that he might get a larger unit, with the result that he made the offer to purchase the two units. The defendant also said (T 116-118):

15. [100]

    His evidence was that after the offers had been accepted he and Mr Skaf then discussed the extension of the building further, which resulted in various measurements being made and finally resulting in 8.5m2 being written on the plans, by whom I am unable to say. I accept that contracts were not signed until later that afternoon nor exchanged until early the next morning, but that evidence of the defendant points against his having entered the contracts in reliance on anything that Mr Skaf told him, apart from the fact that a s 96 application would be made to extend the building by one metre.

16. [101]

    It also points against the likelihood of Mr Skaf having said it. He had told the defendant about the possible extension of one metre. On the defendant’s own account, that was enough for him to make the offer to purchase which Mr Skaf duly conveyed to Mr Mohanna. If the defendant’s offer only came at the conclusion of the discussions, it could be more easily inferred that Mr Skaf may have made the representation as a means of persuading the defendant to buy.

17. [102]

    Even accepting the defendant’s evidence given in the witness box, it could not be concluded that a representation was made to the effect claimed. On that evidence, the highest Mr Skaf was putting the matter was that he thought there would be an extra 8.5m2, but it wouldn’t be known until the revised plans arrived. It is worth setting out again the defendant’s evidence where he was asked exactly what Mr Skaf told him. The evidence was this (T 107-108):

18. [103]

    What Mr Skaf said there, even if I accepted that account of it by the defendant (which I do not), does not amount to a representation of a future matter as alleged.

19. [104]

    What is also clear is that the defendant formed an early view that he stood a reasonable chance of getting larger units for the price of the ones actually on offer. What he said in his evidence that is highlighted in bold at [34] above and in the email at [68] above offer some support for that. Further in his oral submissions he said this (T 221):

20. [105]

    On the basis of all of the evidence I think what is likely to have occurred after the defendant made the offer to purchase the units and the offer was accepted by the vendor, is that the defendant and Mr Skaf sat down to calculate what the potential increase in size for the units might be if the building was extended by one metre. I accept Mr Skaf’s evidence when he said (T 63):

21. [106]

    While I do not think that the defendant is being deliberately untruthful in the evidence he gave, the contemporaneous material leads me to think that he has come to believe the position he now maintains, although that position does not accord with what really happened. I am strengthened in that view by many of the answers the defendant gave in the witness box, particularly when he was asked why he did not respond to emails from Mr Skaf and Mr Mohanna to assert what he alleges Mr Skaf had represented to him about the increase in size of the apartments, and why he did not rescind the contracts prior to the expiry of the cooling-off period. Many of his answers gave the impression of his trying to make his account of events fit into the picture established by so much of the objective evidence, in many cases with little success.

22. [107]

    I find that Mr Skaf did not represent to the defendant that if the building was extended by one metre he would receive an additional 8.5m2 area in the apartments he bought.

23. [108]

    Even if a representation had been made about an additional area of 8.5m2, the defendant was sent an email on 21 March by the vendor saying that the vendor could not guarantee the apartment size, and that if there was an increase in size it would be a bonus to the buyer. The defendant was on notice at the latest from that time that no representation was being made about the increase in size of the apartments. That was well within the cooling off period. The true position is disclosed in the defendant’s email to Mr Skaf at 5:41pm on 21 March ([50] above) where he acknowledges that he is taking a risk by going ahead without the s 96 application being approved. The defendant’s opinion that there was a high probability of the approval being obtained was merely an assumption. It was not the result of any representation made by Mr Skaf.

24. [109]

    The email of 21 March is also significant because the defendant did not assert, in answer to it, that it conflicted with what he asserts Mr Skaf had told him. He was asked about that in cross-examination, and he gave this evidence (T 140-142):

25. [110]

    That passage also provides a good example of the sort of answers I was referring to at [104] above.

26. [111]

    In the telephone conversation and emails of 26 March 2018, it was made perfectly clear to the defendant, and he accepted, that he was buying the units on an “as is” basis. It was those exchanges which led to the defendant seeking an extra day before the cooling off period expired.

27. [112]

    The correspondence and the conversations make clear that, whatever view the defendant may have formed about an increase in the size of the units on the day he entered into the contracts, perhaps through a misunderstanding, or perhaps because he had convinced himself about a possible 1m extension to the building, there was no reasonable basis for that view being maintained by the end of the cooling off period.

28. [113]

    It is also apparent that the defendant was given all necessary information to enable him to make a decision about exercising his rights to rescind the contract before the cooling off period expired. He had been told by Mr Skaf on the afternoon of 27 March that there was a proposal to widen the back lane by the council. Although that appears to have been the trigger for the defendant deciding not to go ahead with the contracts, as appears in his lengthy email of 28 March 2018 to Mr Skaf, the defendant did nothing to exercise his rights before the cooling off period expired. To the contrary, he sent emails after the expiry of the cooling period saying that he would be transferring the balance of the deposits to the agent’s trust account. He also rang Mr Skaf the following day and told him that.

29. [114]

    He thereafter purported to rescind on the basis of his analysis of the setbacks in the laneway and the possible widening of the laneway. That led him to the position, he said, where he did not feel comfortable that the one metre extension would occur, and he might not end up obtaining apartments of the size that he was expecting when he exchanged contracts.

30. [115]

    The defendant’s case is not that he failed to rescind before the expiry of the cooling-off period because of a continuing belief that the apartments would be 8.5m2 larger. He failed to rescind because he did not process all of the information he had until after the expiry of the period. He gave this evidence (T 111):

31. [116]

    He also gave this evidence (T 151-152):

32. [117]

    Ultimately, overnight on 27/28 March the defendant said that he became nervous that the contingency on which he had banked since entering the contracts would not come to pass. He had been troubled for a week or more about the setback problem, and the news about the potential lane-widening appears to have crystallised his fears. However, whatever he says now about his understanding and belief about the arrangement he entered, the emails (including his own) show beyond any doubt that he was prepared to gamble on the possibility that the vendor would make a s 96 application, that it would be approved, and that the apartments he had bought would thereby benefit, with the result that the value of the properties he purchased would exceed the price he had paid.

33. [118]

    Despite having all the necessary information to assist him with his decision whether to rescind before the expiry of the cooling-off period, he let that time pass. What is clear, however, that his decision to do so was quite unrelated to anything that the plaintiff or its agent said or failed to say, except one thing, the potential widening of the laneway, which was a consideration that supported a decision to rescind.

34. [119]

    Even assuming the misrepresentation alleged was made, any loss that the defendant suffers by being required to pay the balance of the deposits has not been caused by reliance on that misrepresentation. The loss flows from the defendant’s decision to repudiate the contracts by failing to pay the balance of the deposits. That decision to repudiate was not taken because the units had not increased in size by 8.5m2 (that was not known at that time); rather, the decision was taken because the defendant was no longer prepared to take the risk that the s 96 application would be approved, because of what he knew about the setback of the buildings and the proposal, as he had been told, to widen the laneway. Compensation and orders under s 237 of the ACL can only be made if the loss occurred “because of the conduct of another person” who was, relevantly, engaged in in contravention of a provision of chapter 2, which includes ss 18 and 30.

35. [120]

    This defence fails.

36. [121]

    The second basis upon which the defendant relied to resist the plaintiff’s claim was that there had been unconscionable conduct by the plaintiff in staying silent about what the new plan showed in relation to the size of the apartments purchased by the defendant. As counsel for the plaintiff submitted, this aspect of the matter appears to be a continuation of the first misrepresentation claim by not disclosing alleged knowledge held by the plaintiff and its agent about the revised plans, that is, that the apartments were not to be increased by 8.5m2 in size.

37. [122]

    The documentary evidence was that on 29 March at 1:02pm Mr Skaf sent an email to the defendant saying that he had just received the draft s 96 plans.

38. [123]

    Although the defendant alleged in his email of 4 June 2018 that he believed the plaintiff would have been in a position to know what the new plans provided before the cooling off period expired on 27 March 2018, there was no evidence at all to show that the plaintiff knew about those plans and what they provided by the end of the cooling off period. The evidence from Mr Mohanna was that he did not receive the plans from the architect until after the cooling off period expired. He was not challenged on that evidence, nor was it put to him that he was aware before he received the plans from the architect of what was contained in them or that he was working with the architect on them.

39. [124]

    Mr Skaf’s evidence was, unaided by seeing his email of 29 March to the defendant saying that he had just received the draft s 96 plans, that he could not remember when he received them, but when he did get them the defendant was the first person contacted by him so that the defendant could go through the plans. When Mr Skaf was reminded of his email, he confirmed that he received the plans on that day, probably within an hour prior to sending the email to the defendant.

40. [125]

    Mr Skaf was not challenged to suggest that he received the plans or knew of what was contained in them prior to the time he received them.

41. [126]

    The defendant’s submissions did not identify any evidence suggesting any knowledge in the plaintiff, either by Mr Mohanna or by Mr Skaf, in advance of those persons receiving the plans after the expiry of the cooling-off period. The defendant’s submissions suggested that Mr Mohanna must have known because, the defendant asserted, he was working closely with the architect on the plans. In fact, there was no evidence of that at all.

42. [127]

    To the extent that any other form of unconscionability is alleged, the evidence does not disclose that the defendant was in a position of special disadvantage. He was an experienced property investor, with a diploma in conveyancing, who had purchased units off the plan on a number of occasion previously.

43. [128]

    There was no unconscionable conduct in relation to the revised plans.

44. [129]

    The defendant’s case is that, after the proceedings commenced, although the plaintiff knew it could not provide to the defendant what he wanted, being apartments with an extra 8.5m2, the plaintiff attempted to coerce the defendant into purchasing two properties without that extra area, or to defend the plaintiff’s claim in court.

45. [130]

    The claim depends upon the assumption that the plaintiff had been promised two apartments with an extra 8.5m2. I have found that no such promise or representation was made. On that basis alone, the claim fails.

46. [131]

    However, even if there was a genuine dispute about whether or not a promise or representation to that effect was made, an offer such as the plaintiff made could not amount to coercion within s 50 of the ACL. That section provides:

47. [132]

    Coercion involves force or compulsion or threats of force or compulsion negating choice or freedom to act: Hodges v Webb [1920] 2 Ch 70 at 85-87; Australian Securities and Investment Commission v Accounts Control Management Services Pty Ltd [2012] FCA 1164 at [16]. The coercion need not be “undue”: Australian Competition and Consumer Commission v Maritime Union of Australia (2001) 114 FCR 472 at [59]-[62], but cf. Australian Competition and Consumer Commission v McCaskey (2000) 104 FCR 8. However, coercion is a much stronger word than harassment: Maritime Union at [61].

48. [133]

    Commencement of proceedings that are not vexatious, frivolous, baseless or an abuse of process cannot amount to coercion: Campbell v Metway Leasing Ltd (1998) ATPR 41-630 at p 40917; Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2006] FCA 1427; (2006) 236 ALR 665 at [75]. It must follow that a refusal by a plaintiff to negotiate after commencement of legitimate proceedings cannot amount to coercion. A fortiori, if a defendant is given a number of options, it cannot be said that there is a negation of choice or freedom to act.

49. [134]

    In the present case, the defendant became liable, prima facie, to pay the balance of the deposits. He did not do so. Proceedings commenced. A settlement conference was held. As a result of that conference, the plaintiff gave the defendant three options. One of those options was to continue with the court proceedings. If that situation amounted to coercion, most or all offers of settlement of court proceedings could be said to amount to coercion.

50. [135]

    It is significant also that the defendant accepted, in his lengthy email of 29 March that, if the issue between him and the plaintiff could not be resolved, he would be in breach of an essential term and he would have to face the consequences. Those consequences were that the defendant would have to defend his conduct in court. So far from that being a negation of choice, the plaintiff offered two alternatives, one of which was coupled with an offer to waive the legal fees incurred to that time, and to make any amendments to the plans which the defendant might reasonably request.

51. [136]

    This claim is entirely misconceived.

52. [137]

    Section 55(2A) of the Conveyancing Act provides:

53. [138]

    Although the plaintiff initially took the position that the defendant was not entitled to claim for the deposit in the present proceedings because there was not “any proceeding for the return of a deposit”, it ultimately accepted that a number of cases provided support for the applicability of the sub-section where a vendor was suing to recover the balance of the deposit, so as to avoid circuity of action.

54. [139]

    In Socratous v Koo (1993) 6 BPR 97,448; [1994] ANZ ConvR 208; (1993) NSW ConvR 55-685 McClelland CJ in Eq said (at p 13,228):

55. [140]

    In Kylsilver Hamilton J said at [13]:

56. [141]

    I am satisfied that the defendant brings himself within s 55(2A) to make the claim under that section.

57. [142]

    In relation to the exercise of the discretion, Darke J said in Sydney Developments Pty Limited v Perry Properties Pty Limited [2016] NSWSC 515 at [52]-[53]:

58. [143]

    The defendant submitted that what triggered the exercise of the discretion under s 55(2A) was that the situation he was faced with was a very unusual one (as he described it), and that what happened was not fair or just. The difficulty for the defendant, however, is that in the absence of his being able to establish that there was a misrepresentation, no basis is shown for the exercise of the discretion under s 55(2A) to justify an order for the return of the deposit. He was, as I noted earlier, an experienced property investor with a diploma in conveyancing law who, at the time of the hearing owned 11 residential units, and had purchased six units off the plan previously.

59. [144]

    The evidence, particularly the emails, show that he was prepared to take a risk that the units would increase in size so that he would end up with units more valuable than the price he paid for them. Under the contractual arrangements, he had more than twice the statutorily provided time to reflect on his entry into the contracts and rescind if he wished to do so. He had all the information he needed at the time the cooling-off period expired to rescind. He knew by that time that the revised plans were not available as he had been told on 11 March that they would be. He had been told, and he had accepted, that he was buying the units “as is”. His decision not to rescind before the expiry of the cooling-off period can only be seen as one that involved taking the risk that the hope he had would eventuate.

60. [145]

    In his submissions, the defendant appeared to accept that. Having said that if Mr Skaf had not told him about the lane widening he would have paid the balance of the deposits, the following exchanges occurred during the defendant’s closing address (T 227):

61. [146]

    He indicated he did not pay the balance of the deposits, not because he had ascertained that the units in the revised plans would not be increased by 8.5m2, but because, by the time he made the decision not to pay, he was sufficiently sure in his own mind that the s 96 application was unlikely to be approved. It is significant that he made no assertion about the alleged misrepresentation being the reason for his decision not to pay until after the proceedings commenced, although the revised plans were available from 29 March.

62. [147]

    In the absence of a misrepresentation or some other unconscionable conduct by the plaintiff, no basis is demonstrated for the defendant to be relieved of his obligation to pay the balance of the deposits by reason of s 55(2A) of the Conveyancing Act.

Conclusion

1. [148]

   Accordingly, the plaintiff is entitled to a judgment in an amount to be determined. I order that the plaintiff bring in short minutes of order to quantify the judgment.