Smogurzewski v AIT Investment Group Pty Ltd

These proceedings concern a contract for the sale of land dated 22 August 2015 entered into by the plaintiff as purchaser and the defendant as vendor. The contract was an off-the-plan purchase of a proposed lot in a strata plan. The lot was to consist of a home unit and carspace.

The principal issue is whether the plaintiff’s rescission of the contract on 22 March 2019 was valid and effective. By his Points of Claim, the plaintiff seeks a declaration that the contract was validly rescinded by him on that day. The plaintiff further seeks an order that the $72,000 deposit he paid be returned, together with all interest earned on the deposit. The plaintiff alleges that he had a right to rescind based upon the principle enunciated in Flight v Booth (1834) 1 Bing NC 370. In brief, the plaintiff contends that the presence of the International Symbol of Access (“the ISA”) that was painted upon the carspace, which symbol the defendant was unwilling to remove, constituted a substantial and material departure for what was promised under the contract. It is common ground that the ISA is a symbol widely used to identify a carspace or other facility that is intended for use by persons with a disability.

The plaintiff also makes claims in the alternative to his primary rescission claim. In particular, he seeks an order under s 237 of the Australian Consumer Law that the contract be declared void ab initio, and consequential orders for the return of the deposit together with interest. This claim rests upon allegations that the defendant contravened ss 18 and 30 of the Australian Consumer Law by making false representations and remaining silent about the subject matter of the contract, in particular the nature of the carspace to be provided. The plaintiff also seeks an order for the return of the deposit pursuant to s 55(2A) of the Conveyancing Act 1919 (NSW).

The defendant denies that the rescission of the contract was valid, and denies that the plaintiff is entitled to any of the relief he seeks. However, the defendant has not sought to terminate the contract and forfeit the deposit. The defendant is treating the contract as remaining on foot.

The contract was entered into on 22 August 2015. It took the form of the Law Society/Real Estate Institute standard form (2005 Edition), as amended and supplemented by a number of special conditions.

The land the subject of the contract is described as “Unit 7.01, Kingston Quarter, Shepherds Bay, 22-36 Nancarrow Avenue, Meadowbank” and “Lot 107 in an unregistered Strata Plan…”. The improvements are noted as a home unit and a carspace. The purchase price was $720,000, with a deposit of $72,000. The plaintiff paid a holding deposit of $5,000 upon exchange. The balance of the deposit was paid on 7 September 2015. Payment of the deposit in that manner was in accordance with Special Condition 61.2. The deposit is held by the vendor’s solicitor named on the front page of the contract.

By Special Condition 38, the completion date was to be the later of 42 days after the date of the contract, 14 days after notification to the purchaser of registration of the Strata Plan, and 14 days after the vendor gives a copy of the Occupation Certificate to the purchaser. As matters turned out, the Occupation Certificate in respect of the relevant building was given to the plaintiff’s solicitor on 7 January 2019. The Strata Plan (SP98937) was not registered until 25 January 2019. Notification of the registration was given to the plaintiff’s solicitor on 7 February 2019.

Special Condition 58 concerns car parking. It provides:

Special Condition 52 provides:

The draft strata plan documents that were attached to the contract provided for a strata scheme that would have 153 lots. The draft plans showed a number of basement levels which had no details included, and were stated to be “under review”. The location of the carspace the subject of the contract was thus not specified. The home unit that was to be included in Lot 107 was shown on the draft plan as located on level 7 of the building.

It is apparent from Special Condition 61.4 that the vendor had lodged an application for a development consent in respect of the site. The contract was made conditional upon the vendor obtaining a consent on terms acceptable to it.

Amongst the documents that were attached to the contract was a Planning Certificate issued pursuant to s 149 of the Environmental Planning and Assessment Act 1979 (NSW). The certificate referred to various instruments and plans that apply to the carrying out of development on the land, including the City of Ryde Development Control Plan 2014 (“the 2014 DCP”). Part 9.2 of the 2014 DCP is headed “Access for People with Disabilities”. Of particular relevance are the following provisions:

On 15 December 2015 the City of Ryde Council (“the Council”) issued a deferred commencement development consent (LDA 2015/0031) in respect of the site, subject to numerous conditions. Condition 33 was in the following terms:

Australian Standard AS4299-1995, headed “Adaptable Housing”, relevantly provides:

Australian Standard AS2890.1-1993, referred to in clause 3.7.3 of AS4299, made provision for parking spaces for people with disabilities in clause 2.4.5. One of the requirements was that such parking spaces be identified by a sign incorporating the ISA. However, AS2890.1-1993 was superseded by, and withdrawn following the publication of, AS/NZ 2890.6:2009, headed “Off-Street Parking for People with Disabilities”. Clause 2.4 of that standard relevantly provides:

In any event, the construction certificate drawings in respect of basement level 2 depict nine of the fifty-six carspaces on that level as having the ISA. One of the nine is located in the same place as the carspace ultimately allocated to Lot 107.

On 6 December 2017 a construction certificate was issued in relation to the excavation and construction of the development (Stages 8 and 9). On 2 January 2019 an Interim Occupation Certificate was issued in respect of the construction of Stage 8. This certificate was served upon the plaintiff’s solicitors on 7 January 2019.

Strata Plan 98937 was registered on 25 January 2019. Notification of the registration was given to the plaintiff’s solicitors on 7 February 2019. It seems that completion of the contract was thus due by 22 February 2019 (although the defendant’s then solicitors took the view that it was due by 28 February 2019).

The Strata Plan provided for a home unit component of Lot 107 on level 7 of the building and a carspace component of Lot 107 on basement level 2.

There are four basement levels extending from level 1 (on which level there are numerous visitor parking spaces on the common property) down to level 4. Levels 2 to 4 contain numerous carspaces that form parts of lots in the strata scheme, and a number of storage areas.

Evidence adduced by the plaintiff (including evidence given by Mr Gary Finn, architect) showed that none of the visitor carspaces on basement level 1 were marked with the ISA, but that nine of the carspaces on basement level 2 were so marked. It seems that each of those spaces was also marked with the applicable unit number. The home unit that forms part of Lot 107 is referred to as Unit 701. The plaintiff gave evidence to the effect that the carspace for Unit 701 would be the first of the carspaces marked with the ISA to be seen by a driver proceeding down from basement level 1 to basement level 2.

The plaintiff, as he was entitled to do under Special Condition 45 of the contract, conducted a pre-completion inspection of the property on 15 February 2019. On that occasion the plaintiff inspected the home unit, the allocated storage space, and the allocated carspace. In relation to the carspace he deposed that he observed that “the car space allocated to 701 had painted upon it the logotype or ideogram representing that the space is reserved for drivers of cars with a disability”. The plaintiff took a photograph of the carspace. The photograph shows that painted on the floor of the carspace is the number “701” and also the ISA.

On 18 February 2019 the plaintiff gave his solicitors a list of various defects in relation to the home unit. The list also included the following:

The defendant’s solicitors sent a response to the plaintiff’s solicitors on 20 February 2019. The response included the following:

On 27 February 2019 the plaintiff’s solicitors sent another letter to the defendant’s solicitors. The letter included the following:

It appears that preparations were made by the parties for a settlement of the contract to possibly occur on 28 February 2019. Late in the morning of 28 February 2019, the plaintiff’s solicitors sent an email to the defendant’s solicitors which included the following:

No response was given, and the settlement did not proceed. Indeed, no response had been received by 5 March 2019 when the plaintiff’s solicitors sent a further letter to the defendant’s solicitors. This letter included the following:

Again, there was no response. On 21 March 2019 the plaintiff’s solicitors sent yet another letter to the defendant’s solicitors. The letter included the following:

On 22 March 2019 the plaintiff’s solicitors sent a Notice of Rescission to the defendant’s solicitors, whereby the plaintiff purported to immediately rescind the contract and demand the return of the $72,000 deposit, together with all interest earned upon it. It is not necessary to set out the entirety of the asserted grounds for the rescission. It is sufficient to record the following:

The plaintiff’s solicitors made a further demand for the return of the deposit on 3 April 2019. The commencement of proceedings was foreshadowed.

On 5 April 2019 the defendant’s solicitors sent an email to the plaintiff’s solicitors in which the validity of the purported rescission was disputed. The email included the following:

On 8 April 2019 the plaintiff’s solicitors sent another letter to the defendant’s solicitors, confirming that the plaintiff regarded the contract as “validly rescinded and at an end”, and reiterating the arguments in support of the plaintiff’s position.

The proceedings were commenced by the plaintiff on 10 May 2019.

The plaintiff submitted that the presence of the disabled parking symbol (the ISA) on the Lot 107 (or Unit 701) carspace indicates that the space may be used by disabled persons with a current disabled parking permit, and results in the owner of the lot not having exclusive use of the space. It is submitted that the presence and effect of the disabled parking symbol constitutes a substantial and material departure from the terms of the contract for sale, and hence gives rise to an entitlement to rescind in accordance with the principle enunciated in Flight v Booth (supra). It was further submitted that Special Conditions 52 and 58.2, which limit or exclude the purchaser’s rights of rescission, should be construed against the defendant and not so as to exclude a right to rescind in accordance with Flight v Booth (supra). It was also put that the 14 day period referred to in Special Condition 52 would not commence until a reasonable time had passed following the plaintiff’s final request for the removal of the ISA on 5 March 2019.

The plaintiff submitted that having regard to the well-recognised meaning of the ISA, the Court should not accept the contention that the plaintiff would have exclusive use of the carspace upon completion of the contract. It was submitted that in light of the manner in which some of the carspaces in the basement were marked with the ISA, there was a real risk that a driver who held a disabled person’s parking permit would park in the Unit 701 carspace, thereby depriving the owner of its use. The plaintiff contended that the contract had been validly brought to an end, and he was entitled to a refund of the deposit together with interest.

The plaintiff submitted, in the alternative, that he was entitled to substantially the same relief pursuant to the Australian Consumer Law by reason of misrepresentations made by the defendant. The misrepresentations were said to be to the effect that Lot 107 would be provided with a dedicated carspace for the plaintiff’s exclusive use. It was further said that the defendant failed to disclose that the lot was to be constructed as an adaptable unit. It was submitted, by reference to evidence given by the plaintiff, that the plaintiff relied upon the representations made by the defendant in deciding to enter into the contract, and would not have proceeded had he been told that the lot the subject of the contract was to be an adaptable unit and that the carspace would contain the ISA.

Finally, the plaintiff submitted that even if he failed to make out the above claims, the Court should exercise the discretion under s 55(2A) of the Conveyancing Act to order the return of the deposit. In this regard the plaintiff relied upon all the circumstances of the case including the defendant’s response (or lack of response) to the plaintiff’s complaint about the presence of the ISA.

The defendant submitted that the plaintiff had no right to rescind the contract as the plaintiff received (or would receive on completion) substantially what he had contracted to purchase. The defendant submitted that the ISA was not required to be present in the Lot 107 carspace even though Lot 107 (or Unit 701) had been designed as an adaptable unit. It was put that the unit being an adaptable unit did not affect the ownership of the unit or mean that the owner would have anything less than exclusive use and enjoyment of the property. The defendant took issue with the contention that the presence of the ISA gave rise to a real risk of unauthorised persons making use of the Lot 107 carspace. It was put that this was most unlikely to occur. The defendant submitted that, in any event, any right to rescind was excluded by Special Condition 58.2, or not made within the time limit set by Special Condition 52.

The defendant denied that it was guilty of any misrepresentation, or that it otherwise engaged in any conduct that was misleading or deceptive or likely to mislead or deceive. It was suggested that the plaintiff was on notice of the fact that the defendant had lodged a development application, and that some adaptable units were contemplated. The defendant submitted that the absence of any misrepresentation made by or on behalf of the defendant was a material factor to be taken into account in relation to the claim under s 55(2A) of the Conveyancing Act. Reference was also made in this regard to Special Condition 36.1(a) which contains a warranty by the plaintiff that he did not enter into the contract as a result of any representation or promise made by the defendant apart from those given in the contract itself.

The statement of the rule in Flight v Booth (supra) was made in that case by Tindal CJ in the following terms:

I recently discussed the operation of the rule in Flight v Booth (supra) in Victorsen v Easy Living Holdings Pty Ltd [2019] NSWSC 1721 at [62]-[65] as follows:

Under the contract for sale in the present case, the defendant promised to convey a lot (Lot 107) in a strata scheme that was to be registered, with the lot to comprise a home unit and a carspace. Upon registration of Strata Plan 98937, Lot 107 came into existence. The boundaries of the lot can be discerned from the floor plans of the strata scheme. The plaintiff does not contend that the home unit component of the lot differs from that which was promised under the contract. His complaint is focused upon the carspace, and in particular the presence of the ISA. It is not suggested that the carspace proposed to be conveyed as part of Lot 107 otherwise departed from that which was promised under the contract. As the plaintiff stated in the course of cross-examination, he complains about the affixing of the ISA on the carspace: “Because I don’t I won’t have exclusive use. I run the risk of someone parking on my park spot”.

However, upon completion of the contract the plaintiff would be in a position to become the registered proprietor of Lot 107 in SP98937. As such, he would obtain title to the fee simple in accordance with the provisions of the Real Property Act 1900 (NSW), including, of course, the provisions that confer indefeasibility of title. The plaintiff would thus obtain exclusive rights of ownership of Lot 107, including the carspace component of it. Subject to any rights granted by the plaintiff himself in respect of Lot 107, he alone would have the right to possess, and enjoy the use of, the lot. No other person would have a right to park in the Lot 107 carspace.

That is so even in the case of a holder of a disabled parking permit. The evidence adduced concerning the Australian Disability Parking Scheme and the New South Wales Mobility Parking Scheme did not establish that a disabled parking permit entitled the holder of the permit to park in a privately owned parking space that happened to be marked with the ISA. The evidence given by Mr Finn was to the effect that the New South Wales Mobility Parking Scheme applies to on-street parking and Council operated carparks, and would only apply in respect of a strata scheme if there was an agreement to that effect between the strata scheme and the local Council. In this regard, Mr Finn referred in his report to s 271 of the Strata Schemes Management Act 2015 (NSW) and s 650A of the Local Government Act 1993 (NSW). The former section, which confers a power to make regulations, does not seem to be relevant. The latter section provides for the establishment of strata parking areas which are regulated by a council in accordance with notices and signs erected by the council. As stated by Mr Finn, such areas are established pursuant to an agreement between an owners corporation of a strata scheme and a council. However, it is clear that a strata parking area must be part of the common property of a strata scheme (see s 650A(6)). Lots in a strata scheme cannot be the subject of a strata parking area established under s 650A of the Local Government Act.

The plaintiff maintains that at least as a matter of practicality, the presence of the ISA gives rise to a risk that holders of a disabled parking permit will park in the Lot 107 carspace. Whilst that risk could not be dismissed as fanciful, it strikes me as a small risk. The photographic evidence suggests that access to the basement carpark is controlled by a security system of some sort. Presumably, only lot owners or persons authorised by lot owners or the owners corporation would or should have the ability to access the carpark. In addition, a driver entering the carpark would first drive on level 1 where numerous visitor parking spaces are located before coming to level 2 (where the Lot 107 carspace is located). Finally, any driver (including a driver holding a disabled parking permit) considering parking on level 2 would not see any spaces marked only with the ISA. The nine spaces on that level that are marked with the ISA are also marked with the applicable unit number. These markings tend to suggest that the spaces are not intended for general use by disabled persons.

In any event, such risk as exists could be readily eliminated by painting over, or covering over, the ISA. I cannot see any reason why an owner of Lot 107 could not lawfully take steps to remove or conceal the ISA on the Lot 107 carspace. The plaintiff did not identify any legal obligation that would compel the owner to maintain the ISA on the carspace. Indeed, in the course of opening, counsel for the plaintiff said that it appeared to be common ground that there is no requirement for the ISA to be on the Lot 107 carspace. That seems to be the case even if Lot 107 is or was intended to be an adaptable unit. Any unit intended to be one of the 42 adaptable units to be provided in the development pursuant to condition 33 of the consent must only comply with the spatial requirements of AS4299. Even if the superseded AS2890.1-1993 applied, any requirement for the ISA would not in my view be a spatial requirement of AS4299. To the extent that clause 3.7 of AS4299 incorporates the requirements of AS/NZ 2890.6:2009, clause 3.1 of that standard seems to me to state that any requirement to identify a parking space for people with disabilities, by affixing the ISA, does not apply if the parking space is a privately owned space associated with a single residence and intended primarily for use by the occupants of that residence. The Lot 107 carspace falls within that description.

Accordingly, an owner of Lot 107 would not only have the right to exclusively possess and enjoy the Lot 107 carspace; the owner would also be entitled to remove or conceal the ISA so as to eliminate the risk that its presence might encourage unauthorised use of the carspace by the holders of disabled parking permits. That is something that could be readily achieved. In these circumstances, I do not accept that the presence of the ISA on the Lot 107 carspace gave rise to a right of rescission in accordance with the rule in Flight v Booth (supra). The defendant was willing to convey Lot 107, which included a carspace, albeit one marked with the ISA. Even if the presence of the ISA amounts to a discrepancy between what the defendant promised to convey and what the defendant was prepared to convey, I do not think that the discrepancy, viewed objectively, is one of substance as opposed to merely nominal. Removal or concealment of the ISA could be readily achieved, probably at a relatively minor cost. It is not a discrepancy of such substance that it would cause specific performance, even with compensation, to be denied to the vendor.

It follows from the above that the plaintiff did not have a right to rescind the contract when he purported to do so on 22 March 2019. It is unfortunate that the defendant stated, incorrectly, that as Unit 701 was an adaptable unit the carspace was required to be labelled as a disabled spot. It is doubly unfortunate that the defendant failed to correct the position prior to the plaintiff’s purported rescission of the contract. However, the matter could have been further investigated by the plaintiff before taking the serious steps of rescinding the contract and commencing the proceedings.

It is not strictly necessary to consider whether any right of rescission pursuant to the rule in Flight v Booth (supra) would in any event be excluded or defeated by the Special Conditions of the contract. I will state, however, that even though very clear words are needed in order to oust the operation of the rule in Flight v Booth (supra), Special Condition 58.2 appears to achieve that purpose where the asserted right of rescission is “in respect of the final car space”. The plaintiff submitted that Special Condition 58.2 did not operate in the present case because the carspace the defendant was prepared to convey did not qualify as a final carspace for the purposes of Special Condition 58. I do not think that is correct. The defendant was prepared to convey Lot 107, which included a carspace, albeit one marked with the ISA. The space did not cease to be a carspace merely because the ISA was affixed to it. In my opinion that carspace was “the final carspace” within the meaning of Special Condition 58. The Special Condition excludes rights of rescission that are “in respect of the final car space”, including but not limited to the size and location of the carspace. The evident intention is to exclude rights of rescission on the grounds of the quality of the carspace. The right of rescission asserted by the plaintiff was in my view “in respect of final car space”, and would thus in any event be excluded by Special Condition 58.2.

I turn now to the claim for relief under the Australian Consumer Law. The claim, as articulated in the plaintiff’s Points of Claim, rests in part upon allegations that at all relevant times up to the time the contract was entered into, the defendant was aware that the lot proposed to be purchased by the plaintiff was to be an adaptable unit which would have an accessible carspace to which the ISA would be affixed (see Points of Claim at paragraphs 25 and 26). These allegations, which were denied by the defendant, were not made out on the evidence.

When the contract was entered into on 22 August 2015, the defendant did not have a consent for the proposed development of the site. An application for a development consent had apparently been made (see Special Condition 61.4) but the form of the application was not adduced in evidence. It seems likely that Lot 107 was not earmarked to be an adaptable unit until construction certificate drawings were produced, probably in 2016, after the grant of the development consent. It was not put to Ms Tan, who was called to give evidence in the defendant’s case, that the defendant, at the time the contract was made, intended proposed Lot 107 to be constructed as an adaptable unit. The assertion made on 5 April 2019 that the plaintiff was aware at all times that he was purchasing an adaptable unit seems to be another erroneous statement made by the defendant.

However, when the contract was made, the provisions of Part 9.2 of the 2014 DCP (a plan referred to in the Planning Certificate annexed to the contract) would have indicated to a reader that a number of units in the development would ultimately be required to be constructed as adaptable units as specified in AS4299.

It is clear that before the contract was made the defendant said nothing to the plaintiff (or the plaintiff’s father, who also had some pre-contractual dealings with the defendant) about proposed Lot 107 being constructed as an adaptable unit. This was first made known to the plaintiff on 20 February 2019. Nevertheless, I do not accept that the defendant made any false or misleading representations, or otherwise engaged in conduct that was relevantly misleading or deceptive or likely to mislead or deceive, as alleged in paragraphs 28 to 33 of the Points of Claim. In the circumstances that existed when the contract was made the defendant, by contracting to convey a lot with a carspace, and by not stating that the proposed Lot 107 was to be constructed as an adaptable unit, did not falsely represent that the plaintiff as the owner of the lot would have exclusive rights of possession and use of the carspace. As explained earlier in these reasons, even if Lot 107 was constructed as an adaptable unit, the plaintiff would obtain those rights following completion of the contract and would be entitled to remove or conceal any ISA that was present on the carspace. Further, there was no misrepresentation about whether proposed Lot 107 would be an adaptable unit. It was not shown that the lot was then intended to be so constructed, although there was a prospect, deriving from the 2014 DCP, that it ultimately might be. The defendant made no representation at all about whether proposed Lot 107 would or might ultimately be constructed as an adaptable unit. It was silent about that matter, but in circumstances where both parties were in a position to appreciate that the proposed lot might ultimately be constructed as an adaptable unit, and in the absence of any enquiry by the plaintiff in that regard, it would not be reasonably expected that the defendant would volunteer any information about the matter (see Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31 at [18]-[20] and [91]).

For these reasons, the plaintiff has failed to establish that the defendant contravened either s 18 or s 30 of the Australian Consumer Law as alleged. The claim for relief under the Australian Consumer Law must therefore be rejected.

The final matter to consider is the plaintiff’s claim under s 55(2A) of the Conveyancing Act for a refund of the deposit he paid. In my opinion, this is not an appropriate case for the exercise of the power to order the refund of the deposit. The Court has found that the plaintiff was not entitled to rescind the contract, as he purported to do on 22 March 2019, and has rejected the plaintiff’s claim for relief under the Australian Consumer Law. The defendant has not sought to terminate the contract and forfeit the deposit. The contract remains on foot, and the deposit remains with the vendor’s solicitor named in the contract, who holds it as stakeholder. In these circumstances I can discern no warrant for the order sought by the plaintiff. The deposit should remain where it is pending the completion of the contract, or the contract coming to an end in some other way. The deposit will in the meantime serve its central purpose as an amount paid by the purchaser in earnest of performance of the contract (see Brien v Dwyer (1978) 141 CLR 378 at 385-6, 398 and 406).

The Court will order that the proceedings be dismissed. There seems to be no reason why costs should not follow the event in accordance with the usual rule (see Uniform Civil Procedure Rules 2005, r 42.1), so the Court will also order that the plaintiff pay the defendant’s costs of the proceedings.