Supreme Court New South Wales Medium Neutral Citation: Victorsen v Easy Living Holdings Pty Ltd [2019] NSWSC 1721 Hearing dates: 25 – 26 November 2019 Date of orders: 05 December 2019 Decision date: 05 December 2019 Jurisdiction: Equity Before: Darke J Decision: Plaintiffs held to be entitled to rescind contract. Order made for first defendant to refund the deposit paid by the plaintiffs. Catchwords: LAND LAW – contract for sale of land – claim for rescission pursuant to the rule in Flight v Booth (1834) 1 Bing (NC) 370 – plaintiffs entered into a contract to purchase a proposed lot in an unregistered plan of subdivision – where contract promised that the lot would contain an outdoor area covered by lawn – where defendant changed the location of the on-site stormwater detention tank – tank now built under outdoor area in such a way as to preclude a lawn – all access grates for tank located on the lot – whether material and substantial discrepancy between the subject matter of the contract and the property available to be conveyed – material and substantial discrepancy established – plaintiffs establish entitlement to rescind Legislation Cited: Competition and Consumer Act 2010 (Cth), Schedule 2 ('Australian Consumer Law'), ss 4, 18 Conveyancing Act 1919 (NSW), s 88K Strata Schemes Management Act 2015 (NSW), s 122 Cases Cited: Flight v Booth (1834) 1 Bing (NC) 370; (1834) 131 ER 1160 Higgins v Statewide Developments Pty Ltd (2010) 14 BPR 27,293; [2010] NSWSC 183 Liberty Grove (Concord) Pty Ltd v Yeo (2006) 12 BPR 98,210; [2006] NSWSC 1373 Torr v Harpur (1940) SR (NSW) 585 Vella v Ayshan [2008] NSWSC 84 Zabeel Pty Ltd v Tinsonaz Pty Ltd (1992) 5 BPR 97,414 Category: Principal judgment Parties: Ana Victorsen (First Plaintiff) Trent Monro Victorsen (Second Plaintiff) Easy Living Holdings Pty Ltd (First Defendant) RM Legal Sydney Pty Ltd (Second Defendant) Representation: Counsel: Mr B Phillips (Plaintiffs) Mr A Kaylinger (First Defendant) Solicitors: Dettmann Longworth Lawyers (Plaintiffs) TKF Lawyers (First Defendant) File Number(s): 2017/386750 Publication restriction: None Judgment Introduction 1. These proceedings concern a contract for the sale of land entered into on 19 June 2017 between the plaintiffs (Mr and Mrs Victorsen) as purchasers, and the first defendant (Easy Living Holdings Pty Ltd) as vendor. The contract may be described as an "off-the-plan" contract. The property the subject of the contract was described as Unit 9/321 Port Hacking Rd, Miranda, being Lot 9 in an Unregistered Plan (being part of Lot 10 and Lot 38 in DP 5802). The property forms part of a nine townhouse development that was in the course of construction at the time the contract was entered into. 2. The relevant strata plan was registered on 18 September 2017, and a Final Occupation Certificate in respect of the development was issued on 1 December 2017. 3. However, the plaintiffs claim that they are entitled to rescind the contract. Declaratory relief is claimed accordingly. The plaintiffs primarily invoke the principles that derive from Flight v Booth (1834) 1 Bing (NC) 370; (1834) 131 ER 1160 to the effect that a purchaser can rescind a contract for the sale of land where there is a material and substantial discrepancy between the subject matter of the sale and that which the vendor can convey (see, for example, Torr v Harpur (1940) SR (NSW) 585 at 589-591). In the alternative, the plaintiffs contend that rescission is available pursuant to the Australian Consumer Law (contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth)) as a consequence of alleged misleading or deceptive conduct on the part of the first defendant. 4. In brief, the plaintiffs claim that the property as built is materially and substantially different from that which the first defendant promised to convey, or represented that it would convey, in that: 1. an outdoor area intended to be covered by a lawn is adversely affected by the construction beneath it of an on-site stormwater detention tank (an OSD tank); 2. the main bathroom has not been constructed in accordance with the requirements of the contract in that the bath tub is not located in the correct position, and that in various respects the bathroom has not been constructed in a proper and workmanlike manner; and 3. the kitchen has not been constructed in accordance with the requirements of the contract in that it does not contain a pantry. 1. Insofar as the Australian Consumer Law claim is concerned, the plaintiffs allege that the first defendant engaged in misleading or deceptive conduct by making certain representations (alleged to be with respect to future matters) about the outdoor area, the main bathroom, and the kitchen. 2. The first defendant denies that the plaintiffs are entitled to rescind the contract, whether on the basis of the principles derived from Flight v Booth (supra), or pursuant to the Australian Consumer Law. By its cross-claim, the first defendant seeks specific performance of the contract. 3. The plaintiffs also brought a claim for damages against a second defendant which had acted as the plaintiffs' solicitors on the purchase, but this claim was settled in September 2018. In these circumstances, the first defendant will henceforth be referred to simply as the defendant. Pre-contractual dealings between the parties 1. In June 2017 Mr and Mrs Victorsen were looking to purchase a new place for them to live with their son, who was then about 18 months old. After noticing some advertising signs at the townhouse development site, they contacted the selling agent, Mr Peter Green from Laing & Simmons, Miranda. Arrangements were made for an inspection to occur on 10 June 2017. 2. The nine townhouse development was then in the course of construction. A Construction Certificate had been obtained in February 2017. The development site was a consolidation of two parcels (Lots 10 and 38 in DP 5802). The site is located between The Kingsway and Port Hacking Road, and has frontages to each. 3. Mrs Victorsen deposed that on 10 June 2017 she and her husband met Mr Green on the site. She deposed that Mr Green provided a brochure and a floor plan, and also a schedule of finishes. Mrs Victorsen deposed that shortly after the commencement of their inspection of the townhouses, Mr Green introduced them to Mr Steve Daccour, who was described by Mr Green as "the owner and builder". Mr Estephan Daccour (who goes by the name Steve) is a director of the defendant. 4. Mrs Victorsen deposed: One of the houses we looked through was described as being number one, and was the one closest to Kingsway. It was the one described in the floor plan we had been given. Number one had a space for a garden at the front (that is, between the house and Kingsway). However, we were told that it had "already been sold". We also looked through the houses nearer to the centre of the block. However, I didn't think they were right for our family because they were a bit too small and didn't have any outside area where our son would be able to play (he was about 18 months' old at the time). I therefore said to Steve: These ones are too small. Steve then had a conversation with Trent and I as follows: Steven Daccour: I'll show you my biggest and best one. Mrs Victorsen: We need a yard so our son will be able to play somewhere. Mr Daccour: Take the front one. That's the best one. You'll have some grass for your son at the front and on the side. Plenty of room for him to kick a ball around. Steve then showed us the house closest to Port Hacking Road, which Steve referred to as being number nine. 1. I interpose that the townhouse closest to Port Hacking Road is the property that became the subject of the contract later entered into by the parties. It may be referred to as Unit 9. 2. Mrs Victorsen further deposed: Number nine was in a similar state of construction to the other houses. The stairs to the upstairs had not been completed so we could not get a good look at that area. Downstairs, there was no flooring laid yet and work did not seem to have started on the kitchen. Steve and Peter showed us an area out the front of number nine, between the house and Port Hacking Road. At that stage it was just bare dirt and did not have any sort of fence around it. Steve said to us: "The front yard will be the same as number one. You'll have a grassed area at the front and on the side." Trent said to Steve: We want to put a cubbyhouse in for our son. Will there be room for a cubbyhouse? Steve replied: Yes, there'll be plenty of room for a cubbyhouse and grass for him to run around on. Steve paced out five metres from the front of the house, held up his arms and said: This is where the yard will go to. During the inspection, Steve or Peter said in relation to the bathroom: There will be a shower and a bathtub. Also during the inspection, we had a conversation about what would be in the kitchens. The conversation was as follows: Mrs Victorsen: They're all going to have a pantry? Mr Daccour: Yes. Mrs Victorsen: Room for a double fridge? Mr Daccour: Yes. Mrs Victorsen: Dishwasher? Mr Daccour: Yes. I remember that Trent and Peter had a conversation about the asking price for number nine, but I wasn't really part of that conversation and can't remember what Peter said the asking price was. Number nine seemed like a perfect fit for our family and I was interested in buying it. Trent also seemed to be interested. 1. Mr Victorsen gave evidence about the inspection in broadly similar terms. He deposed: At the start of the inspection we went through the house closest to Kingsway which was described as number one. However, Peter or Steve told us that it had already been sold. We then went through the houses towards the middle of the block. They were a bit smaller than I thought we would want and had no yard other than a small strip down the side of each house. I didn't think they were suitable for my family because we needed more of a yard for Will. While we were going through them, Ana said to Steve: These ones are a bit small for us. Steve replied: "Let me show you number nine." He then took us to the house that was described as number nine, which was the one closest to Port Hacking Road. He said to us, "This is the best one." Number nine was similar to number one in that it had a space between the house and the road for a yard. That space was just a bare patch of earth at the time, but we had a conversation about it as follows: Mr Daccour: There's going to be grass here. Mr or Mrs Victorsen: How far out does it go? Mr Daccour: Five metres. Steve then paced out an area five metres from the end of the house and five metres wide. He stood on one corner of the area and Ana stood on the other corner. The area that had been marked out seemed just right for Will. I therefore said: We have plans to put a cubbyhouse in the front yard. We could get a crane and just drop it in. We also had a conversation about the bathroom. I can't remember if that occurred while we were in the bathroom for number nine or for one of the other houses. During the conversation, Ana or I said: Will they have a bath? We have a young boy, we need a bath. Steve replied: "Yes." I spoke to Peter Green about the asking price for number nine. I can't remember the exact figure he gave me but it was just over $1.3 million. Number nine seemed just right for my family and the asking price was within our budget, so I was interested in making an offer to buy it. 1. In response, Mr Daccour deposed that he did not recall any conversation regarding the yard and it containing grass as alleged by Mr Victorsen. Mr Daccour further deposed that he did not recall there being any discussion about a pantry as alleged by Mrs Victorsen. I note in passing that Mr Daccour said in cross-examination that he could not remember any conversations with the plaintiffs on 10 June 2017, and referred to "whatever is in the affidavit". 2. After the inspection on 10 June 2017 Mr Green sent an email to the plaintiffs in the following terms: We appreciated you making the time to inspect the townhouse site in Miranda. Sorry it was all a bit awkward and muddy. It was also good that you had a chance to meet with Steve, so you can see how passionate and involved he is with his projects. Attached are floor plans for all the townhouse [sic] at 321 Port Hacking Rd Miranda. The numbering is planning to change as Steve is [sic] arranged for an actual sub-division of the two developments so what you see as #9 (the one at the front that you liked) will now be #1, and so they will be numbered from 1 to 5. As you will see #9 has an extra study area upstairs, as well as a full bath & shower in the main bathroom. I will arrange for you to inspect one of the finished townhouses at 25-27 Attunga Rd Yowie Bay to allow you to see a finished property with similar finishes and design. We will aim for late morning on Wednesday but I will confirm before then. WE [sic] did give you a schedule of finishes in the pack today, but there is still some flexibility with this. Otherwise I have also attached some photos from Attunga Rd to give you an idea of the look of the townhouses. The reference to the Attunga Road property is a reference to another development that had been undertaken by the defendant. 1. The floor plan provided to the plaintiffs in respect of Unit 9 depicted a three bedroom townhouse built over three levels (ground floor, first floor and basement). The plan contained measurements of some of the rooms and spaces. The outdoor area at the front was referred to as "Unit 9 POS". The Court was informed that "POS" stood for private outdoor space. The space was shown in green on the plan. The main bathroom on the first floor was shown as containing a bathtub that extended across the width of the room adjacent to the external wall. The plan contained a disclaimer concerning the accuracy of the information contained within it. 2. Mrs Victorsen deposed that she printed out and looked at the floor plan a day or so after it was received, and thought that the information contained in it (and Mr Green's email) was consistent with what she and her husband had been told at the inspection. She deposed that she remained interested in purchasing Unit 9. Mr Victorsen gave evidence in similar terms. 3. Mr and Mrs Victorsen inspected the Attunga Road development with Mr Green on 14 June 2017. Following that inspection, Mr Green sent an email to the plaintiffs in the following terms: Thanks again for coming over to have a look through Attunga Rd, by way of an [sic] guide to the final finished product at 321 Port Hacking Rd. So if you are looking to come back with a final offer, as stated in my text today and price of $1,312,500 would secure you #1/321 Port Hacking Rd, while also allowing you at this early stage of construction to vary the final flooring finishes, etc. A conditional deposit of $3,281.25 would take the property off the market, followed by preparation and signing a conditional contract for sale with a 5-10 day cooling off period to have the contract legally reviewed followed by payment of the balance of a 5% deposit. We have a policy of submitting offers in writing to the owners, so if you are looking to proceed please email me your offer, with any other specific terms or conditions? The reference to "#1" is a reference to Unit 9. As mentioned in Mr Green's email of 10 June 2017, it was proposed that Unit 9 be re-numbered to Unit 1. 1. The plaintiffs inspected Unit 9 again early in the morning of 16 June 2017. Both deposed that they were not on that occasion told anything new or different about the property. After that inspection the plaintiffs sent an email to Mr Green in the following terms: We hereby submit a formal offer of $1,310,000 unit 1 321 Port Hacking Rd, Miranda Please provide us with steps in proceeding with this. Thanks 1. Mr Green replied to the email later that morning. Mr Green's email included the following: Congratulations! The builder/owners are prepared to accept your offer of $1,310,000 on their brand new/under construction townhouse in Miranda, this is conditional on you being able to secure the property with a 0.25% cooling off deposit & exchange with a signed contract under 5-10 day cooling off conditions as soon as possible. As mentioned on the current strata plan the townhouse is shown as 9/321 Port Hacking Rd, but this will change to 1/321 Port Hacking Rd. A draft contract (attached) has been provided for you to forward on to onto [sic] your solicitor/conveyance [sic] and to pass onto your finance people if requested. … As discussed, to secure the property we can exchange under cooling off conditions. This would require a 0.25% deposit of $3,275.00 payable when you sign the contract or can be paid by EFT to the account below, which would come off the final 10% (or 5% would be acceptable) deposit on full unconditional exchange. … 1. Later on 16 June 2017, the plaintiffs paid the holding deposit of $3,275. 2. Contracts were exchanged in respect of Unit 9 on 19 June 2019. The contract for sale 1. The contract took the form of the Law Society/Real Estate Institute standard form, 2005 Edition, supplemented by Special Conditions. 2. As already mentioned, the land the subject of the contract was described as Unit 9/321 Port Hacking Road, Miranda, being Lot 9 in an Unregistered Plan (being part of Lot 10 and Lot 38 in DP 5802). The improvements were described as a Townhouse. Specific inclusions were described as "built-in wardrobes" and "see schedule of finishes". The latter is presumably a reference to the Interior Finishes Schedule that formed part of the contract. Relevantly, that Schedule provided for a particular type of bathtub with dimensions of 1575mm (L), 760mm (W) and 580mm (H). 3. The purchase price under the contract was $1,310,000. A 10% deposit of $131,000 was stated to be payable, although it seems that the defendant was prepared to accept payment of a deposit of only 5% of the price. 4. The completion date was governed by Special Condition 22. In essence, completion was not to take place until 14 days after the vendor provided the purchaser with a copy of the Final Occupation Certificate. 5. By Special Condition 1, the vendor was obliged to proceed with due expedition to achieve registration at the Land Titles Office of a proposed draft strata plan. A draft strata plan drawing was annexed to the contract. 6. Special Condition 8 relevantly provided: The Vendor shall complete construction of the building in a proper and workmanlike manner. Any defects or faults due to faulty material or workmanship which may appear in the property hereby sold and which are notified in writing to the Vendor prior to the expiration of three (3) months of the date of completion shall be made good by the Vendor at his own cost PROVIDED THAT this shall not apply to nor include normal maintenance wear and tear and minor shrinkage or minor settlement cracks. … AND FURTHER PROVIDED THAT the Purchaser shall not be entitled to delay the completion by reason of any such defects or faults. This Clause shall not be deemed to merge on completion. 1. Special Condition 9 provided: Notwithstanding any other provisions of the Contract the Purchaser shall not be entitled to make any objection, requisition or claim for compensation in respect of:- (a) any minor variations (being a reduction of 5% or less) as regards to the subject lot or lots hereby sold which may be required by any statutory authority or by the Registrar General. (b) any minor alteration (being a reduction of 5% or less) which may be required by any statutory authority or by the Registrar General in the number, size, location or unit entitlement of any lot or lots in the strata scheme or in or to the common property; and (c) any easement for support, shelter or service in favour of or against a lot proprietor or a lot and all ancillary rights thereto by virtue of the Strata Management Act 1996 or any easement or restriction affecting the subject property required to be created by any relevant statutory authority or authorities as a condition of the approval of the authority and/or those authorities to the said strata plan PROVIDED THAT such easement or restriction does not detrimentally affect the use and enjoyment by the Purchaser of the lot or lots hereby sold. PROVIDED HOWEVER that if any such alteration, variation or discrepancy is other than minor the Purchaser or his Solicitor shall elect within 14 days of the Purchaser or his Solicitor being informed of the date of registration and the registration number of the said Strata Plan whether to complete the Contract on the terms set out herein or whether to cancel the Contract and in the latter case notwithstanding any other provisions herein contained the Purchaser shall accept a refund of the deposit paid by him hereunder in full satisfaction of all actions, rights, claims and demands which he may have against the Vendor hereunder. Should the purchaser or his Solicitor not so elect to cancel the Contract herein within the said period of 14 days then he shall be deemed to have waived such right of cancellation and accepted the said Strata Plan as so registered. The purchaser shall not be entitled to rescind or make any objection, requisition or claim for compensation in the event that the unit size area or dimensions, variation or alteration to the unit actually increases the area size of the unit being sold. 1. Special Condition 14 provided: The Purchaser acknowledges that a drainage diagram for the property in its completed state is not available. The Vendor warrants that all water, sewerage and drainage work has been or will be carried out with the approval of the relevant authority and this warranty shall not merge on completion. 1. Special Condition 16 relevantly provided: The purchaser represents and warrants that: (a) the purchaser was not induced to enter into this contract by and did not rely on any representations or warranties by, the Vendor, the Vendor's agent or persons on behalf of the Vendor or the Vendor [sic] about the subject matter of this contract (including representations or warranties about the construction, nature or the fitness or suitability for any purpose of the property or about any financial return or income to be derived from the property) except those representations and warranties set out in this contract… Post-contractual dealings between the parties 1. It appears that Mrs Victorsen attended Mr Green's office on 28 June 2017, at which time flooring finishes and carpet colours were discussed. 2. On 18 September 2017 (co-incidentally the day the strata plan was registered), the plaintiffs contacted Mr Green and asked whether they would be able to have another look at the property. Mr Green suggested that Friday 22 September 2017 may be suitable. 3. Mr Victorsen deposed that he (but not Mrs Victorsen) attended the property on that day. He said that to the best of his recollection he went there to look at the newly laid carpet. Mr Victorsen deposed that Mr Daccour was present at the time of this visit. Mr Victorsen says that on this occasion he noticed that there was no bathtub in the bathroom. He said that whilst he was concerned about that, he did not make any immediate complaint to Mr Daccour because he seemed to be getting on well with Mr Daccour at that time. However, Mr Victorsen says that he reported the matter to his wife. 4. Mrs Victorsen deposed that she immediately contacted the conveyancing solicitor about the absence of a bath, and asked the solicitor to find out what was going on. This exchange seems to have led the solicitor to send an email to the defendant's solicitor which stated that the plaintiffs offered to accept a $500 reduction in the purchase price on account of the lack of a bath. The plaintiffs deny that this offer was made with their authority. Indeed, the making of the offer formed the basis of the claim the plaintiffs brought against their solicitor (which was settled in 2018). 5. For some reason, the email containing the offer was not adduced in evidence by either party. However, the precise terms of the offer seem to me to be of little significance in circumstances where it had not been accepted by the defendant by 26 September 2017 when the plaintiffs, during another visit to the property, made it plain to Mr Daccour that a bath was required. 6. At that time, the bathroom had been constructed so as to accommodate only a shower. Mr Daccour gave evidence to the effect that, for structural reasons, the bathroom had to be narrower than planned, with the consequence that the intended bath (1,575mm long) could not fit across it. Mr Daccour deposed that at some time prior to 22 September 2017 he told either Mr Green or Mr Victorsen about the problem, and said that either a smaller bath could go in or the area could instead be used as a shower. Mr Victorsen denied that he had any such conversation with Mr Daccour (or Mr Green) and denied that a choice was given between a smaller bath and a shower. 7. I am prepared to accept Mr Victorsen's denials in preference to Mr Daccour's evidence on this matter. Accordingly, I do not accept that any agreement was made with the plaintiffs to the effect that it was sufficient if the bathroom included only a shower. Mr Daccour's evidence was expressed in rather tentative terms. He could not firmly state that he raised the matter directly with Mr Victorsen, and his affidavit contains no account of any response from Mr Victorsen. Insofar as Mr Daccour suggested that he may have raised the matter via Mr Green, he was not called to give evidence. Moreover, Mr Daccour's recollection of the events of 2017 appeared to me to be rather poor. I note further that Mr Daccour suggested that he only started constructing the bathroom as a shower after the price reduction offer was made on 22 September 2017. As shown by a number of answers he gave in cross-examination, it is very unlikely that the bathroom could have been completed in the time between the making of the offer and the plaintiffs' visit to the property on 26 September 2017. At one point in his cross-examination Mr Daccour gave answers to the effect that after he received the offer he "kept going with the job" and "continued with the construction of the bathroom". 8. The evidence is clear that on 26 September 2017 either or both of the plaintiffs said "Where is the bathtub?". This evidence suggests that they continued to expect that a bathtub would be installed. The evidence is prima facie inconsistent with the plaintiffs having agreed to accept a bathroom without a bath. I do not accept the evidence given by Mr Daccour in his affidavit and in his cross-examination that the plaintiffs kept changing their position on the bathtub issue. As parents of a young child, they had good reason to want a bath to be installed. 9. The likelihood is that the defendant, constrained by the width of the bathroom, proceeded to construct it so as to accommodate only a shower but changed course after the plaintiffs insisted on 26 September 2017 that a bath remained a requirement. 10. When Mr and Mrs Victorsen attended the property on 26 September 2017 they were met by Mr Daccour and his son, Elias Daccour. It is common ground that on this occasion Mrs Victorsen said to Mr Daccour: Where's the pantry? Mrs Victorsen deposed that Mr Daccour responded by saying: Where do you want me to put it? Tell me and I will put it in somewhere. According to Mr Victorsen Mr Daccour said: There's no pantry in the plans. 1. Mr Daccour deposed that he said: What pantry? The architectural plans and schedule of finishes do not show a pantry to be installed in the kitchen; not in this property. Elias Daccour deposed that his father said: What? That wasn't part of the plans? 1. Whilst Mrs Victorsen denied in cross-examination that Mr Daccour said "What pantry?" I think she is mistaken about that. It seems that no pantry was shown on the floor plan for Unit 9 that was given to the plaintiffs, or indeed on any other relevant plan or drawing. Mrs Victorsen maintained that a pantry was shown on a brochure that was provided by Mr Green. (Mr Victorsen also said something to that effect in cross-examination.) That may well be so, although it is difficult to confidently identify the existence of a pantry from the photographs in the brochure. In any case, Mrs Victorsen conceded in cross-examination that she did not rely on the brochure. 2. I am prepared to accept that Mrs Victorsen said something to Mr Daccour about a pantry during the course of the inspection of the townhouses on 10 June 2017, but I am not satisfied that Mr Daccour made any clear statement or gave any assurance that a pantry would be installed in the kitchen of Unit 9. I note that Mr Victorsen did not include in his affidavit any discussion on that occasion about a pantry, and it is telling that on 18 October 2017 he sent a text message to Mr Daccour about the pantry which suggests a recognition that the plaintiffs "should have spoken from the start" about the pantry. In cross-examination Mr Victorsen agreed that it was never mentioned to him "that there was actually going to be a pantry". I do not think that the defendant was obliged to construct a pantry in Unit 9. 3. As noted earlier, it is clear that on 26 September 2017 either or both of the plaintiffs said "Where's the bath?". It is likely that, so confronted, Mr Daccour spoke about the reduced size of the bathroom and may have referred to the offer to reduce the purchase price on account of the lack of a bath. However, for the reasons set out earlier, I do not accept that the plaintiffs ever agreed that it was sufficient if the bathroom included only a shower. I therefore do not accept the evidence given by Mr Daccour and Elias Daccour that Mr Daccour spoke about an agreement that there be no bath. It seems reasonably clear from the evidence that the discussion ended with Mr Daccour agreeing to fix the problem by installing a bath. 4. Mr Daccour deposed that on 26 September 2017 he showed the plaintiffs the "beginning" of the OSD tank excavation, and told them that the position of the OSD tank had to be shifted into the courtyard of Unit 9. Mr Daccour deposed that Mr Victorsen said: That's quite good. Compensates for the other hick ups [sic]. Mr Daccour deposed that there was further discussion about what the contract provided for, and the possibility of installing artificial grass or a timber deck on top of the tank. Elias Daccour also deposed that there was a conversation about the OSD tank in which Mr Victorsen spoke of possibly installing artificial grass or a timber deck on top of the tank. Both Mr and Mrs Victorsen deny that there was any conversation about the OSD tank on 26 September 2017. 1. I prefer those denials to the evidence given by Mr Daccour and Elias Daccour on this matter. Again, Mr Daccour's recollection of the events appeared poor. In cross-examination, he initially said that it was his recollection that there was "not yet" a hole in the ground on 26 September 2017. After professing his inability to remember exactly, Mr Daccour then said there was a hole in the ground at that time. In addition, it is implausible that Mr Victorsen would regard the shifting of an OSD tank into the courtyard of the property as a good thing that would make up for other deficiencies. It further strikes me as unlikely that there was any discussion at that stage about what might go above the tank. Neither Mr Daccour's version of the discussion, nor that of his son, includes details about the impact that the new location of the OSD tank might have in terms of the surface of the courtyard. (The landscape plan approved for the purposes of the Development Consent shows that the surface was to be turf. The landscape plan approved for the purposes of the Construction Certificate describes the area as "Lawn Area".) I am unable to accept the evidence given by Elias Daccour in cross-examination to the effect that his father "went through with and explained to them the heights and the position and what has changed and that what was happening". It could be expected that had such a conversation occurred it would have been set forth in the affidavits, given the central importance of the OSD tank to these proceedings. The likelihood of such a conversation is further diminished when one has regard to a number of answers given by Mr Daccour in cross-examination to the effect that the shift in the location of the OSD tank was only a minor matter. Mr Daccour said that the tank: had only been shifted "maybe one metres [sic] or whatever, its towards the yard"; was always supposed to be under this courtyard; and "its not a big deal". 2. On 16 October 2017 Mr Daccour sent a photograph of a bath to Mr Victorsen by text message. Mr Victorsen responded with the message: Looks fine, thank you. It is likely that, as stated by Elias Daccour, the bathtub was installed on or shortly after 16 October 2017. 1. Based on some other text messages that passed between Mr Victorsen and Mr Daccour on 18 October 2017, it appears likely that Mr Victorsen visited the property and met with Mr Daccour on that day. It may be inferred from text messages exchanged later on 18 October 2017 that the topic of the pantry was discussed, and that Mr Victorsen was content to not further pursue that matter. 2. It is also likely that the topic of the bathroom was discussed on 18 October 2017. The evidence of both Mr Victorsen and Mr Daccour suggests that Mr Victorsen expressed dissatisfaction with aspects of the bathtub installation, including that the tub was not placed flush with the wall, and had been placed on top of a "lip" that separated the former shower area from the rest of the bathroom. I do not accept Mr Daccour's evidence that Mr Victorsen nonetheless expressed acceptance of the bathroom or that it would be acceptable if a mixer for the bath was installed. 3. I should add that I do not accept Mr Daccour's evidence that on 18 October 2017 he had a conversation with Mr Victorsen in which he asked Mr Victorsen whether he had worked out what he wanted to do regarding the yard, and Mr Victorsen said that he would have to get back to Mr Daccour "on the artificial turf or deck". I accept Mr Victorsen's denial of such a conversation, and his denial that he had ever said that he would make a choice between artificial turf or a deck. Whilst the possibility of artificial grass was raised by Mr Victorsen at about this time, I do not think there was any earlier discussion about it, and I do not think that Mr Victorsen ever suggested a deck or said that he would entertain the possibility of a deck. The suggestion of a deck seems most likely to have been first made to Mr Daccour by a building certifier, Mr Joe Masri, in about late-November 2017. It appears that at about that time, the defendant proceeded to have a timber deck constructed over the top of the OSD tank. 4. Mr Victorsen attended the property again on about 24 October 2017. He went there in order to arrange a quote for the installation of some awnings. Mr Victorsen deposed: While I was there, I noted that there was some reo (that is, reinforcing mesh) on the ground where the garden for number nine was supposed to go. It looked like they were going to pour concrete in that location, and at a level where you couldn't put soil and lawn over the top without making it higher than the adjacent tiled area. Mrs Victorsen deposed that on about 24 October 2017 she had a conversation with her husband about what he had seen at the property, and that she understood from the conversation that there was a potential problem with the front yard. 1. Mr Victorsen deposed that after speaking to a friend who installs artificial turf, he sent a text message to Mr Daccour in the following terms: Hey Steve is there any chance you can leave the front 70mm or so below the tile so I can get fake grass put in. 1. Mr Victorsen further deposed that after receiving no response from Mr Daccour, he became worried about whether there would be enough room even for artificial grass. At that point, Mr Victorsen arranged for another friend, a building certifier, to inspect the property and provide a report. 2. The certifier, Mr Trenton Jones, carried out an inspection on 17 November 2017. By that time, the OSD tank had been fully installed. The evidence (including the photographic evidence at Exhibit A pages 594-5) shows that the tank was constructed almost entirely under the Unit 9 outdoor area, and at a level above that of the adjacent tiled area at the front of the townhouse. In addition, four metal access grates have been incorporated into the concrete roof of the tank. On the stormwater plans approved for the purposes of the Development Consent, and later for the Construction Certificate, the OSD tank is located only partly beneath the outdoor area, and the all access grates are located outside the boundaries of Unit 9. Notwithstanding those differences, a consulting engineer, Mr Botros, certified on 25 October 2017 that the stormwater system complied with the conditions of the Development Consent and proposed stormwater design. 3. Mrs Victorsen deposed that, following his inspection on 17 November 2017, Mr Jones showed her and her husband some photographs he had taken, and it was then that she discovered "that where there was meant to be a garden for our son to play in, the developer had installed an onsite stormwater detention pit". 4. Mr Victorsen deposed that during a telephone conversation with Mr Daccour on 17 November 2017 he said to Mr Daccour words to the following effect: We no longer have a grassed area. Rather, we have a concreted area with a water retention pit. This was not discussed at any point with us, nor did we agree to this. We were to have a grassed area for our son to play on. Not a concrete water retention pit in our front yard. That part of Mr Victorsen's affidavit was not contradicted by Mr Daccour. I accept that a conversation occurred as deposed to by Mr Victorsen. 1. There is evidence that the defendant's initial response to the situation was to offer to enter into a Deed of Mutual Rescission with a full refund of the deposit. That suggestion was made by the defendant's solicitor on 20 November 2017. The plaintiffs' solicitor responded by stating that the plaintiffs would agree to a Deed of Mutual Rescission, but only on the basis that the defendant reimburse the plaintiffs the sum of $7,664 spent on blinds as well as release the deposit and any interest earned upon it. It appears that the defendant was not agreeable to that, and no agreement was reached. (The plaintiffs abandoned a claim that a binding settlement agreement had been reached.) 2. As noted earlier, a timber deck has been constructed over the top of the OSD tank. The deck has been built above its access grates in such a way that it can be fairly readily removed so as to allow access. A Final Occupation Certificate was issued on 1 December 2017. The certificate was served upon the plaintiffs, and the defendant pressed for completion of the contract. On 5 January 2018 the defendant served a Notice to Complete, calling for completion by 20 January 2018. The plaintiffs declined to proceed to completion. As stated at the outset, the plaintiffs claim that they have a right to rescind the contract. Do the plaintiffs have an entitlement to rescind? 1. I will deal first with the contention that a right of rescission arises from the principles that derive from Flight v Booth (supra). Those principles were not a matter of dispute between the parties. The statement of what is often referred to as the rule in Flight v Booth was made in that case by Tindall CJ in the following terms: In this state of discrepancy between the decided cases, we think it is, at all events, a safe rule to adopt, that where the misdescription, although not proceeding from fraud, is in a material and substantial point, so far affecting the subject-matter of the contract that it may reasonably be supposed, that, but for such misdescription, the purchaser might never have entered into the contract at all, in such case the contract is avoided altogether, and the purchaser is not bound to resort to the clause of compensation. Under such a state of facts, the purchaser may be considered as not having purchased the thing which was really the subject of the sale… 1. The manner in which the principle operates as part of the law relating to contracts for the sale of land is illustrated by the authorities collected by White J (as his Honour then was) in Vella v Ayshan [2008] NSWSC 84 at [73]-[75] where his Honour stated: [73] However, there is the more fundamental question of what is the subject matter of the contract. It is of first importance that the contract is one for the sale of land. As Walsh JA (as his Honour then was) said in Beard v Drummoyne Municipal Council (1969) 71 SR (NSW) 250 at 265: "... apart from any relevant special provision, a purchaser [of land] may have a right to rescind, or at his option to go on with the contract, extending to deficiencies between promise and performance which would not be, in the case of other contracts, such as to enable him to treat himself as discharged from the contract, but which would 'sound in damages'." [74] In Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1, Menzies J said (at 27-28): "Williams on Vendor and Purchaser, 4th ed. (1936), at pp. 34-37 sets out the chief duties of a vendor at common law: 1. To show a good title to the property sold; 2. To produce land corresponding substantially in all respects with the description contained in the contract and available to be transferred to the purchaser in fulfilment of the contract; and 3. To hand over to the purchaser on completion all deeds and other muniments of title relating solely to the property purchased. This case concerns the second of these duties. At common law, any difference, however trivial, between the land described in the contract and the land produced constituted a defect which entitled the purchaser to rescind. Where there was only a slight difference, the Courts of Equity began to interfere and introduced the principle of compensation for deficiency: see Erskine L.C. in Halsey v. Grant (1806) 13 Ves. Jun. 73 at 76-9; [1806] EngR 290; 33 ER 222 at 223-224. Unless the deficiency was so substantial as to give the purchaser something entirely different from what he had contracted, equity would order specific performance on giving compensation for the deficiency." [75] In Batey v Gifford (1997) 42 NSWLR 710, Handley JA said (at 716) that: "The vendor's obligation at law under a contract for the sale of real estate by description was similar to that of a seller under a contract for the sale of goods by description. The description was an essential term of the contract and the purchaser could reject the goods if there was any difference, other than trifling, between the goods tendered and the contractual description." See also Dainford Ltd v Lam (1985) 3 NSWLR 255 at 265-266; Tarval Pty Ltd v Stevens & Ors (1990) NSW ConvR 55-552. 1. As noted by his Honour at [81], "substantial" in this context does not mean large; it means of substance rather than merely nominal. 2. In Higgins v Statewide Developments Pty Ltd (2010) 14 BPR 27,293; [2010] NSWSC 183 Barrett J (as his Honour then was) stated at [45] that the principle is concerned with a "discrepancy between the subject matter of the contract for sale and what is available to be conveyed in satisfaction of the vendor's obligation". Questions sometimes arise, and did so in that case, as to whether particular provisions of the contract cut down or oust the operation of the principle. However, as Barrett J stated (at [46]), the principle will not be ousted except by very clear words or very clear implication. It was not submitted by the defendant in the present case that the principle was ousted by any provision of the contract with the plaintiffs. The thrust of the defendant's primary submission on this issue was that any discrepancy between that which was promised by the contract and that which the defendant could convey was merely nominal, not substantial. 3. The starting point in applying these principles is the ascertainment of the subject matter of the contract; that is to say, the identification of that which the vendor has promised to convey. 4. The plaintiffs submitted, primarily by reference to Special Condition 8, that the defendant promised to convey a lot in a strata development that included a building constructed in accordance with the approved plans for the development. Special Condition 8 (set out above at [29]) obliges the defendant to construct "the building" and to do so in a proper and workmanlike manner. It was submitted that in the absence of any definition in the contract of "the building", the concept should be construed as a reference to the approved Development Consent plans and the approved Construction Certificate plans, read where appropriate with the schedule of finishes that was attached to the contract. The defendant did not submit that some other construction should be preferred. 5. In my opinion, the construction advanced by the plaintiff is broadly correct. The contract was an "off-the-plan" contract for the sale of a lot in a proposed strata development that was in the course of construction. The contract was entered into after the relevant Development Consent had been obtained and after the necessary Construction Certificate had been obtained. The defendant was obliged to proceed towards registration of the draft strata plan (see cl 28 and Special Condition 1), and was plainly bound to construct "the building" accordingly. In the absence of more precise prescription of the attributes of "the building", the obligation ought be taken to be one to construct the building described in the approved plans. I note, however, that Special Condition 9 contemplates that circumstances may arise which require changes to be made to the size of the lot. To that extent, the parties appear to have intended that a departure from the approved plans would be allowed. No suggestion was made that any circumstances of that nature had arisen. It follows that the defendant's promise to convey Unit 9 included an obligation to build the building in accordance with the approved plans. 6. The approved Development Consent and Construction Certificate landscape plans provided for the Unit 9 outdoor area to be a turfed area or an area covered by lawn. The approved stormwater plans further provided for an OSD tank that would be partly beneath the outdoor area (presumably at a depth that would allow turf or lawn on the surface above it), the access grates for which would all be outside the boundaries of Unit 9. 7. However, it appears from Mr Daccour's evidence that in late-August 2017, after the contract had been entered into, the defendant was advised by its plumbing contractor that there was a problem with the plans insofar as the location of the OSD tank was concerned. The contractor advised that the proposed location of the tank would hinder the servicing of the sewerage junction near the front of the site. This advice appears to have led to steps being undertaken by the defendant to construct the OSD tank in a different location, as described above at [56]. 8. The plaintiffs submitted that in this respect there is clearly a difference between what the defendant is able to provide and what the defendant promised to provide. It was put that the difference is not confined to the lack of a grassed area. 9. The plaintiff submitted, by reference to the registered strata plan, that save to the extent to which the OSD tank lies more than 3m below the level of the adjacent tiled area, the tank has been entirely constructed within the boundaries of Unit 9. Thus, part of the infrastructure intended for the use and benefit of all lot owners has been located within one particular lot. The plaintiffs noted that all of the access grates were located in the Unit 9 outdoor area, and pointed to evidence about the need for access grates to provide not only a means of access for maintenance purposes, but also to provide natural ventilation for gases that can be generated within the tank. It was submitted that these circumstances led to the conclusion that the location of the tank gave rise to what may be described as a quasi-easement (including for access) over Unit 9 in favour of the other lot owners or the Owners Corporation (cf Liberty Grove (Concord) Pty Ltd v Yeo (2006) 12 BPR 98,210; [2006] NSWSC 1373 at [20]-[27]). 10. The plaintiffs submitted that a number of practical consequences flowed, including the need for the owners of Unit 9 to agree upon the terms of use and access or else face the prospect of the imposition of an easement pursuant to s 88K of the Conveyancing Act 1919 (NSW). It was noted that if the defendant had taken steps to have a suitable easement created, it is likely to have given rise to a right of rescission in favour of the plaintiffs under Special Condition 9(c) of the contract, but the defendant has acted to avoid that likelihood, and by claiming specific performance seeks to pass on to the plaintiffs and other owners the burden of dealing with the issue. 11. The defendant did not really take issue with the thrust of those submissions, although it was noted that part of the OSD tank was always going to be located within the boundaries of Unit 9, and it was put that the plaintiffs' case about easements fell outside the pleadings. Rather, the focus of the defendant's submissions was that the evidence did not show that the existence of a grassed outdoor area was of such significance to the plaintiffs that it can be supposed that they would not have entered into the contract had they known that there would actually be no grass in that outdoor area. It was put that the plaintiffs were more concerned about the size of the space, not its grassy character. This submission was said to be supported by the terms of Mr Victorsen's text message sent on about 24 October 2017 about the possibility of artificial grass being put in. The defendant submitted that even if a right of rescission pursuant to Flight v Booth principles had arisen the plaintiffs, after becoming aware of the new location of OSD tank, elected against rescinding the contract. In this regard, the defendant again invoked Mr Victorsen's text message as evidence of an affirmation of the contract. It was put that the plaintiffs showed an intention to have artificial grass installed as opposed to electing to rescind. 12. In my opinion, the plaintiffs have established that they have a right of rescission in accordance with the principles derived from Flight v Booth (supra). This right arises from the discrepancy between what the defendant promised in relation to the outdoor area of the property and what the defendant is in a position to convey in that regard. As stated earlier, the defendant's promise to convey Unit 9 included an obligation to build "the building" in accordance with the approved plans. That in turn included the provision of an outdoor area for Unit 9 that would be turfed or covered by lawn. The change in the location of the OSD tank, away from that shown in plans, has the consequence that the defendant is unable to provide the outdoor area as promised. A timber deck has been built above the OSD tank in order to cover it. Even if it were feasible to somehow install a lawn above the tank, the outdoor area would be markedly different from that which was promised due to its increased height. 13. In addition, the plaintiffs' contentions concerning the practical consequences that flow from the change in location of the tank are in my view well made. It is clear that access to the tank via one or perhaps more of the access grates will be required from time to time. There are no arrangements in place to govern that access, although it may be that in certain circumstances the Owners Corporation could have rights of access in accordance with s 122 of the Strata Schemes Management Act 2015 (NSW). It can be expected that access arrangements (possibly by way of easements) will need to be established in due course. These practical consequences stand quite apart from the effects which the tank and its access grates may have upon the general amenity of the outdoor area. 14. I should add that I do not think that the argument based on these practical consequences is beyond the plaintiffs' pleaded case. The Statement of Claim contains an allegation that the defendant's inability to provide the outdoor area as promised gave rise to a general law right of rescission. The pleading, read as a whole, should be understood as invoking the principles derived from Flight v Booth (supra). Of course, it was incumbent upon the plaintiffs to provide particulars of their case in this regard. In my view, the service, six months prior to the hearing, of the report of Mr McDonald which refers to these practical consequences, was sufficient particularisation of this aspect of the plaintiffs' case. 15. The discrepancy in respect of the OSD tank is objectively a matter of substance in the sense of being substantial rather than merely nominal. Instead of a turfed or grassed area (at the level of the adjacent tiled area) there is a raised timber deck. The deck sits on top of the concrete roof of the OSD tank in which there are four access grates. What the defendant proposes to convey is very different from that which it promised. That is particularly so in the context of a contract for the sale of a townhouse where outdoor space is not abundant. This is a case where the discrepancy or deficiency between the vendor's promise and performance is so substantial as to give the purchasers something entirely different from that which they contracted to acquire. Moreover, it is my opinion that the discrepancy is one that should be regarded as being material and substantial to the plaintiffs as purchasers (cf Zabeel Pty Ltd v Tinsonaz Pty Ltd (1992) 5 BPR 97,414 at 9-10). 16. I do not accept the defendant's submission that the plaintiffs were really only concerned about the size of the outdoor area and not whether it was to be a grassy area. I generally accept the evidence given by the plaintiffs, including their evidence about what occurred during the inspection on 10 June 2017. That evidence shows that the plaintiffs were desirous of having an outdoor area suitable for their young child to play in. Mr Daccour sought to cater for that desire by drawing attention to the fact that Unit 9 was to have a good sized grassy area where a child could kick a ball around. It is likely that this and other similar statements made by Mr Daccour materially contributed to the plaintiffs' interest in acquiring Unit 9. Further, I think that Mr Victorsen's reaction to the OSD tank in October and November 2017 is instructive. He was evidently concerned about the level of the tank, and whether it would still be possible to have grass in the outdoor area. Mr Victorsen was prepared to consider the possibility of artificial grass, but I think it likely that this was being considered only because of the problem that had emerged. The text message Mr Victorsen sent on about 24 October 2017 should be viewed in that light. In any case, artificial grass can still be regarded as a type of grass, and it is a playing surface most unlike a timber deck. Mr Victorsen became worried when Mr Daccour did not respond to his text message, to the point that he asked a building certifier friend to carry out an inspection. Finally, Mr Victorsen spoke to Mr Daccour on 17 November 2017 in terms that showed that the lack of a grassed area was a matter of importance to the plaintiff. 17. Taking into account all the circumstances, I have concluded that had the plaintiffs been made aware prior to the contract that rather than a turfed or grassed area the outdoor area of the property would be as it has actually been constructed, it may reasonably be supposed that they would not have entered into the contract at all. The plaintiffs thus became entitled to rescind the contract. 18. I do not accept the submission that this right was lost due to an election to affirm the contract. Mr Victorsen's conduct in October 2017, including his text message about artificial grass, cannot be regarded as showing an intention to proceed with the contract notwithstanding the new location of the OSD tank. Mr Victorsen's conduct really goes no further than an attempt to see if the problem that had arisen might be able to be accommodated. Moreover, the plaintiffs were not bound to elect immediately upon becoming aware of the new location of the OSD tank, and in any event the time for completion had not yet arrived. 19. In these circumstances, it is appropriate for the Court to declare that the plaintiffs are entitled to rescind the contract for sale, and declare that the plaintiffs, by these proceedings, have elected to rescind the contract accordingly. The Court will further order that the defendant return the deposit paid by the plaintiffs, together with any interest earned thereon. It follows that the defendant's claim for specific performance must be refused, and its Cross-Claim (including the claim for damages) must be dismissed. The substantial nature of the deficiency between promise and performance means that the Court would not order specific performance against the plaintiffs even upon the giving by the vendor of compensation. I note in that regard, however, that at no stage has the defendant indicated that it is willing to give compensation. Other matters 1. The above conclusions are sufficient to dispose of the proceedings. It is not necessary to consider any discrepancy between what the defendant promised and what the defendant was able to give in relation to the bathroom. Had it been necessary to do so, I would have concluded that there was a discrepancy insofar as the bath was not able to be placed in the position shown in the approved plans (across the width of the bathroom adjacent to the exterior wall). However, in circumstances where a bath of the requisite size is able to be properly placed in the bathroom, the discrepancy would add little to the plaintiffs' case based on the OSD tank. The same can be said in relation to the complaints that are made in relation to the quality of what has been built in the bathroom. These are matters that, as far as the evidence goes, appear readily capable of rectification and would be covered by the terms of Special Condition 8 (referred to above at [29]). 2. It is also unnecessary to consider the plaintiffs' alternative claim for rescission pursuant to the provisions of the Australian Consumer Law. I will refrain from expressing a concluded view on this claim, which in some respects was not fully argued, but will make the following observations: 1. the case rests upon alleged representations with respect to future matters said to have been relied upon by the plaintiffs in entering into the contract for sale; 2. the alleged representations are concerned with the attributes that the property would have once the building was complete, notably in relation to the existence of a grassed outdoor area and a bath in the bathroom; 3. insofar as the representations were not embodied in the contract itself, the plaintiffs would face the (admittedly not insurmountable) difficulty that they warranted in Special Condition 16(a) of the contract that they had not been induced to enter into the contract by, and did not rely on, such representations; 4. insofar as the representations were embodied in the contract, they seem consistent with the approved plans that were adduced in evidence; 5. those plans, presumably having been prepared by qualified consultants or contractors retained by the defendants, and approved by the relevant Council for the purposes of the development, amount to some evidence that the defendant had reasonable grounds for the making of the representations that were embodied in the contract, so as to overcome the deeming effect of s 4(2) of the Australian Consumer Law; and 6. the plaintiffs did not otherwise allege that the representations were misleading or deceptive or likely to mislead or deceive within the meaning of s 18 of the Australian Consumer Law. Conclusion 1. The Court will make declarations and orders as described in [81] above. There seems to be no reason why costs should not follow the event. Accordingly, the Court will also order that the first defendant/cross-claimant pay the plaintiffs'/cross-defendants' costs of the proceedings. ********** Amendments 09 December 2019 - Amendment to Cases Cited. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 December 2019