Attanasio v Zulfi & Sons Pty Ltd [2007] NSWSC 678

New South Wales Supreme Court

CITATION : Attanasio v Zulfi & Sons Pty Ltd [2007] NSWSC 678

HEARING DATE(S) : 12/06/07

JUDGMENT DATE : 29 June 2007

JUDGMENT OF : Gzell J

DECISION : Declaration of valid rescission by plaintiff, order for return of deposit and order as to costs. Cross-claim dismissed with costs.

CATCHWORDS : CONTRACTS - General Contractual Principles - Construction and Interpretation of Contracts - Lot and car space purchased off plan - Either party might rescind if alteration of position, dimensions or area greater than 5% - Further clause enabling purchaser to rescind after registration of strata plan if amendments or additions adversely affected use of property other than minor - Change in location of car space from one floor to another and one wall to another - Whether first right of rescission limited to changes in physical structure and second right limited to changes in draft strata plan - Whether plaintiff entitled to rescind before registration of strata plan - Whether first defendant terminated the contract for the plaintiff's repudiation

LEGISLATION CITED : Conveyancing Act 1919

CASES CITED : Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310

Luigi Attanasio - Plaintiff PARTIES : Zulfi & Sons Pty Ltd - First Defendant Vero Insurance Ltd - Second Defendant

FILE NUMBER(S) : SC 2301/07

COUNSEL : Mr R Marshall - Plaintiff Mr T Davie - Defendant

SOLICITORS : Richardson Legal Solicitors - Plaintiff Dominic Stamfords - First Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

GZELL J

FRIDAY 29 JUNE 2007

2301/07 LUIGI ATTANASIO v ZULFI & SONS PTY LTD & ANOR JUDGMENT 1 Luigi Attanasio, the plaintiff, entered into a contract for sale of land with Zulfi & Sons Pty Ltd, the first defendant. The land Mr Attanasio was to acquire was a proposed residential lot in a draft strata plan annexed to the contract for sale. It was a term of the contract that the draft strata plan be amended to position the car space with respect to the residential lot in a specified area of the basement carpark. By letter of 9 March 2007 received on 12 March 2007, the solicitors for Zulfi forwarded to Mr Attanasio's solicitors a revised draft strata plan. It positioned the car space for Mr Attanasio's lot in a position other than that specified. On 21 March 2007, Mr Attanasio gave a notice of rescission of the contract for sale. 2 Mr Attanasio seeks a declaration that he validly rescinded the contract for sale and an order that Zulfi and the second defendant, Vero Insurance Ltd, return the deposit power guarantee issued by Vero in substitution for a deposit. If Mr Attanasio is not entitled to that relief, he seeks relief from forfeiture of the deposit power guarantee under the Conveyancing Act 1919, s 55(2A). 3 By its defence, Zulfi claims that it was an implied term of the contract that Mr Attanasio would exercise his rights and powers in good faith and that, in breach of that implied term, Mr Attanasio purported to exercise the right to rescind, not in good faith, fairly or reasonably for the purpose for which it was given and the rescission was ineffective. By its cross-claim, Zulfi seeks an order that Mr Attanasio wrongfully rescinded the contract and an order that Zulfi validly terminated it on 16 April 2007. Zulfi also claims damages and an order that Vero encash the guarantee. 4 Lot 20 was the land to be acquired by Mr Attanasio. The car space with respect to it was shown adjacent to the southern wall of level 1 of the basement car park. By cl 72 of the special conditions, Zulfi agreed that it should be repositioned on the western side of level 2 of the basement car park. On 25 October 2006, the solicitors for Zulfi forwarded a revised draft strata plan to the solicitors for Mr Attanasio informing them that lot 20 had become lot 19 and repositioning the car space for lot 19 on the western wall of level 2 of the basement car park. 5 The further revised draft strata plan forwarded by Zulfi's solicitors on 9 March 2007, placed the car space with respect to lot 19 on the eastern wall of level 1 of the basement car park. 6 By letter dated 23 March 2007, the solicitors for Zulfi forwarded to the solicitors for Mr Attanasio a further amendment of the draft strata plan returning the car space for lot 19 to the position specified under cover of their letter of 25 October 2005. 7 By letter dated 16 April 2007, the solicitors for Zulfi asserted that Mr Attanasio had repudiated the contract and, on the basis of that repudiation, Zulfi terminated it. 8 The parties agreed that lot 19 had not been sold, car spaces were demarked by lines on the floor of the basement car park and strata plan had been lodged for registration, but had not yet been registered. 9 In giving his notice of rescission of 21 March 2007, consequent upon the change of position of the car space in the draft strata plan, Mr Attanasio purported to act under cl 34 of the special conditions which was in the following terms: " 34. Building construction 34.1 The Vendor will appoint a reputable builder and other consultants to carry out the development and cause the Building to be constructed prior to completion; in a proper and workmanlike manner substantially in accordance with he plan displayed at the Agent's office and as shown on the vendor's website, the draft strata plan, the requirements of all competent authorities and the schedule of finishes. 34.2 If the position dimensions or area of the Property as shown in the Draft Strata Plan are substantially different from the position dimensions or area of the Property the Purchaser must not make any objection requisition or claim in respect of such discrepancy unless the discrepancy is other than minor. A minor discrepancy means a variation of the position dimensions or area of Property of not more than five percent. If the discrepancy is more than minor either party may by notice in writing to the other rescind this contract and the provisions of clause 19 of this contract shall apply whereupon neither party shall have any claim against the other in damages or otherwise. 34.3 The right of the Purchaser to rescind this contract pursuant to clause 34.2 must be exercised within ten days from the date the vendor's solicitor notifies the Purchaser's solicitor of the changes in the positions, dimensions or area of the Property. 34.4 The Purchaser cannot require the issue of a building certificate pursuant to section 149A of the Environmental Planning and Assessment Act 1979, as amended as a condition precedent to completion." 10 The term "Draft Strata Plan" was defined in cl 30.2 of the special conditions to mean the draft strata plan annexed to the contract for sale as amended from time to time. The term "Property" was defined to mean the Property described in the particulars of sale. They defined the term as the land, the improvements, all fixtures and the inclusions, but not the exclusions. The improvements were defined to include a home unit and a car space. 11 It was submitted that because the car space in the draft strata plan annexed to the contract and the car space in the draft strata plan forwarded under cover of the letter of 9 March 2007 were not in the position specified in cl 72, it could not be said that the car space had been moved form the position where it was contracted to be. I do not think that is the correct comparison. 12 While the use of the term property in cl 34.2 is problematical, the provision does envisage that the draft strata plan may be amended from time to time. The comparison of position, dimensions and area of a home unit and car space on a revised draft strata plan must, in my view, in the case of the first revision, be with the property as shown in the draft strata plan annexed to the contract and in the case of any subsequent revision, be with the property as shown in the immediately preceding revision of the plan. It would make no sense to hark back to the property described in the contract if revised draft strata plans had altered the position, dimensions or area of the property. 13 Thus the revised draft strata plan forwarded by the solicitors for Zulfi by letter dated 9 March 2007 was within the definition of draft strata plan for the purposes of cl 34.2 and the property was as specified in the previous revised draft strata plan sent under cover of the letter of 25 October 2006. The position of the car space with respect to lot 19 was different from its position in that immediately preceding revision. 14 It was submitted that this interpretation of cl 34.2 means that the first revised draft strata plan sent under cover of the letter of 25 October 2006, enlivened the operation of cl 34.2 if given its ordinary meaning. And so it did. But neither Mr Attanasio nor Zulfi could take advantage of that provision because of the agreement in cl 72 that the change in position be made. 15 For the purposes of cl 34.2, it is impossible to apply five per cent to the change in position of the car space as specified in the revised draft strata plan of 9 March 2007 from the property as defined in the revised draft strata plan of 25 October 2006. But on any view of it, the change was substantial. It was from one basement level to another and from the west wall to the east wall. The change in position was not, in my view, a minor discrepancy within the meaning of cl 34.2. 16 If the ordinary meaning of cl 34.2 is its correct interpretation, I am of the view that Mr Attanasio was entitled to rescind the contract for sale as he did. 17 The matter is complicated, however, by cl 35 of the special conditions which is in the following terms: " 35. Strata Plan 35.1 Registration of Strata Plan (a) Completion of this contract is subject to and conditional on registration of the Strata Plan and the Vendor agrees to use all reasonable endeavours to procure the registration of the Strata Plan substantially in the form of the Draft Strata plan; (b) the Property sold pursuant to this contract is a proposed lot to be created by the Strata Plan. 35.2 Subject to clause 35.4, the Purchaser must not make any objection, requisition or claim in respect of any discrepancy between Draft Strata Plan and the Strata Plan registered by the LPI. 35.3 Alterations to the Strata Plan The Purchaser acknowledges that the: (a) Vendor may make alterations to the Development which the Vendor considers necessary; (b) Draft Strata Plan is provisional and subject to final approval by the Council, LPI, and/or any other Authority; (c) Vendor reserves the right in its absolute and uncontrolled discretion and without reference to the Purchaser to vary or add to the draft Strata Plan in any manner. In particular but without limiting the generality of the foregoing an subject to clause 35.4 hereto the Vendor may alter at any time prior to registration of the Strata Plan, the: (i) total number of lots; (ii) numbering of lots and the carspaces; (iii) inclusion of unit numbers; (iv) dimensions and area of lots and/or Common Property, the position of lots, carspaces and the unit entitlement of lots; (v) granting of an Interest; an (vi) merger or subdivision (not being the subject lot) of lots. (d) unit entitlement of the Property is not yet finally determined, but will be approximately as disclosed in the schedule, if any, to the draft Strata Plan. (e) Vendor reserves the right to alter the unit entitlement of the Property as soon as possible after the unit allocation has been finalised. 35.4 Rescission (a) Subject to clause 35.3(b), if at any time there are any amendments or additions to the Draft Strata Plan not disclosed in this contract which detrimentally affect the use of the Property which is other than minor the Purchaser can rescind, in which event printed clause 19 will apply. (b) For the Purposes of clause 35.4(a), only a reduction in area of the Property of five percent or more will be treated as more than minor. (c) Subject to clause 35.4(b), the right of rescission under clause 35.4(b) must, if exercised, be exercised (notwithstanding printed clause 19.1.1) by serving notice within 14 days after the Purchaser's solicitor receives written notice from the Vendor's solicitor that the Strata Plan has been registered. (d) If the right of rescission conferred by clause 35.4(a) is not exercised in accordance with clause 35.4(c), the right of rescission shall lapse and this contract shall remain binding in all respects. (e) Subject to clause 35.4(a), the Purchaser cannot make a claim, objection or requisition or rescind or terminate in respect of any matter referred to in clause 35.3. 35.5 Date for Registration Subject to clause 35.6, if the Strata Plan is not registered as a Strata Plan at the LPI within twenty four (24) months of the date of this Contract, either party may rescind in which event printed clause 19 will apply. 35.6 Notwithstanding anything herein contained the Vendor may extend the Date for Registration by another six (6) months by providing written notice to the Purchaser that the Vendor or its builders have been delayed by reason of: (a) any Unforeseen Event; or (b) any civil commotion, combination of workmen or strikes or lock-outs affecting the progress of the works or affecting the manufacture or supply of materials for the construction of the Development Site or the Property; or (c) in consequence of proceedings being taken or threatened by or disputes with adjoining or neighbouring owners of resident; or (d) by reason of authorities delaying the issue of any necessary approvals permits or certificates and which delay is beyond the reasonable control of the vendor; or (e) by reason of compliance with any changed or unforeseen requirement condition or order of any authority; or (f) any matter or thing or cause of whatsoever nature beyond the control of the Vendor. Should the Purchaser not dissent from the notification within ten (10) days after service of such notice the time for completion of the Vendor's works shall be deemed to be extended by the period claimed in the notification. If the Purchaser shall dissent from that notification within ten (10) days of such service the time for completion of the Vendor's works shall be determined by an Arbitrator appointed by the agreement between the parties and in default of agreement within fourteen (14) days from the date of the notification by an Arbitrator appointed by the President for the time being of the Law Society of New South Wales. The costs of the arbitration shall be borne equally by the parties. Either party may request the appointment of such Arbitrator. 35.7 Finishes (a) Before completion the Vendor must, subject to clause 35.7 (b): (i) cause the Property and the Common Property to be finished in a good and tradesman like manner in accordance with the Schedule of Finishes and fittings; and (ii) cause to be installed in the Property and the Common Property the items as specified in the Schedule of Finishes and Fittings. (b) Without notice to the Purchaser the Vendor may change: (i) any finish or fittings specified in the Schedule of Finishes and fittings to another finish or fittings of equivalent or higher quality; and (ii) any item to be installed in the Property or the Common Property specified in the Schedule of Finishes and fittings to another item of equivalent or higher quality. The Purchaser may not make an objection, claim or requisition, delay completion, rescind or terminate this contract because of any change to the Property and/or the Common Property and/or the Schedule of Finishes and Fittings in accordance with this clause 35. 35.8 Warranties (a) The Vendor must deliver to the Purchaser on or within a reasonable time after completion or otherwise assign or procure for the benefit of the Purchaser any manufacturer's or other warranty applicable to any fixtures, fittings or plant (including electrical appliances) installed by or on behalf of the Vendor in the Property, together with any warranties in respect of the workmanship involved in their installation, which are reasonably obtainable by the Vendor. (b) The Purchaser may not make any objection, claim or requisition, delay completion, rescind or terminate this contract because of anything in connection with clause 35.8 including, without limitation, the fact that there is no such warranty in existence at completion. 35.9 No Limitation The Vendor's rights under this clause 35 are in addition to and are not limited or prejudiced by clause 34 or any other provision of this contract." 18 It is odd that in addition to the right to rescind under cl 34.2 there is a further right to rescind under cl 35.4(a). A right to rescind under cl 34.2 arises if there is more than a five percent alteration of position, dimensions or area. The right to rescind under cl 35.4(a) arises if there are amendments or additions that detrimentally affect the use of the property and are other than minor. If the amendment is a reduction in area, it must exceed five percent to be other than minor in terms of cl 35.4(b). 19 One difference between the rescission rights is that cl 35.4(a) can only be invoked in terms of cl 35.4(c) after the strata plan is registered. The other difference is that cl 34.2 can be exercised by either party whereas cl 35.4(a) enables the purchaser to rescind. 20 It was submitted on behalf of Zulfi that the right to rescind under cl 34.2, if given its ordinary meaning, could be exercised either before or after registration of the strata plan. I do not agree with that submission. 21 Clause cl 34.1 can only be invoked before the strata plan is registered. That is because it relates to differences in the draft strata plan and the draft strata plan ceases to exist upon registration. The plan is then no longer a draft. The draft strata plan annexed to the contract for sale and each revised draft strata plan forwarded by the solicitors for Zulfi to the solicitors for Mr Attanasio contained the prominent display of the words "PRELIMINARY PLAN ONLY". The strata plan lodged for registration did not contain those words. 22 Clause 35.3(c)(ii) enabled Zulfi, in its absolute and uncontrolled discretion, to vary the numbering of lots and car spaces. It was submitted that it would be an illogical and non-commercial construction of the contract if that untrammelled right could give rise to rescission under cl 34.2. Courts will endeavour to avoid a construction that makes commercial nonsense, or is shown to be commercially inconvenient (Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313-314). 23 It was submitted that this consequence is avoided if cl 34.2, in accordance with the heading to the provision, is confined to alterations in the physical configuration of the property and cl 35.4(a) is confined to changes in the draft strata plan. It was submitted that this approach avoids the consequence that the limitation on the right to rescind under cl 35 is rendered otiose by cl 34; that it was consistent with cl 35.9 that provides that the rights under that clause are in addition to and not limited or prejudiced by cl 34: and it was consistent with cl 72 being subject to cl 35. It was submitted that the absence of reference in cl 72 to it being subject to cl 34 meant that cl 34 did not apply to alterations in the position of car spaces. 24 I reject these submissions. Clause 34 is headed building construction because cl 34.1 provides for the construction of the building. There is nothing in the wording of cl 34.2, nor its position in the entire context of the agreement for sale, that limits the right to alterations in the structure of the building and excludes alterations in the strata plan. Indeed, it is explicit that cl 34.2 is enlivened if there are alterations in a revised draft strata plan. Clause 35.4(a) is not the exclusive right to rescind for changes in the draft strata plan. Again, the heading to cl 35 is dictated by cl 35.1 dealing with registration of the strata plan. Nor is cl 35 confined to alterations in the strata plan. Clause 35.7 relates to changes in the physical composition of the building. 25 Clause 35.4(a) is not rendered otiose by cl 34.2 if given its ordinary English meaning. Nor is there a problem with cl 35.9. Each provision has work to do. Clause 34.2 governs the situation prior to registration of the strata plan. Clause 35.4(a) governs the situation after registration in terms of cl 35.4(c). The right to rescind cannot be exercised until a purchaser has notice of registration of the strata plan. 26 Nor is there an inconsistency in the absence of reference to cl 34 in cl 72. For the reasons already discussed, neither Mr Attanasio nor Zulfi could take advantage of cl 34.2 upon a revision of the draft strata plan in accordance with cl 72. 27 Nor do I see any non-commercial result in construing cl 34.2 according to its ordinary language. The contract sets a tight margin from the contractual obligation to provide a residential lot and car space in accordance with the draft strata plan annexed to the contract. Any variation in position, dimensions or area in excess of five percent enables either party to rescind the contract. What was important was that Zulfi should construct and Mr Attanasio should acquire a lot and car space to a tolerance of five percent from that which was specified in the contract for sale. 28 In my view, subject to the issue of lack of good faith, Mr Attanasio was entitled to rescind. 29 Mr Attanasio was cross-examined. It was put to him that he could have contacted the solicitors for Zulfi on receipt of the letter of 9 March 2007 to enable the car space to be put back in its previous position. It was submitted that when the car space was put back to its previous position under cover of the letter of 23 March 2007, Mr Attanasio could have withdrawn his notice of rescission, but he did not do so. 30 Mr Attanasio agreed that he could have written to ask that the car space be put back in its previous position but said there was not enough time. He was confined to 10 days and his solicitor was on holiday and Mr Attanasio could not get in touch him. On the last day, which was a Friday, there was no other course open to him but to rescind. 31 Mr Attanasio denied that he had changed his mind and did not want to proceed with the purchase. Mr Attanasio had put the residential lot on the market with a real estate agent but had not received an offer at the price he wanted. The property was on the market for only a couple weeks. 32 The change in position of the car space was an important matter to Mr Attanasio. Hence the inclusion in the contract for sale of cl 72. Mr Attanasio said his decision to rescind was mainly made because they changed his car space. 33 On that evidence I am not prepared to find that Mr Attanasio exercised his right to rescind not in good faith, fairly and reasonably and for the purpose for which it was given. 34 I make the declaration in paragraph 1 of the amended statement of claim and the order in paragraph 2 thereof. I order Zulfi to pay Mr Attanasio's costs. I dismiss the cross-claim. I order Zulfi to pay Mr Attanasio's costs thereof.